UK 2024/25 Budget: The Impact on AP and How Basware Can Help

On October 30, the UK government announced its Autumn 2024 budget, outlining several significant changes that will impact businesses across the country. Here are the highlights that will affect our industry and your business.

New budget plans require companies to pay higher national insurance contributions and increase the legal minimum wage

From April 2025, Employers' National Insurance contributions will increase, by 1.2 percentage points to 15%. Additionally, the secondary threshold will be reduced from £9,100 to £5,000 per year, meaning employers will have to make contributions for all employees earning over £5,000.

In addition, the National Living Wage (NLW) and National Minimum Wage (NMW) will both rise significantly.

These increases aim to balance the national accounts and provide better support for the workforce. However, the rise in costs for employers will likely result in tighter financial management. Companies will need to make tough staffing decisions – potentially freezing recruitment for new roles, as well as the backfilling of existing vacancies in the short term.

This combined with a likely slower than expected reduction in UK interest rates adds pressure for businesses

The Bank of England cut interest rates for the first time on August 1 2024, to stimulate growth and ease financial pressures.

The Budget’s fiscal measures could negatively impact falling inflation which creates a complex environment that would slow the much-needed reduction in interest rates, adding to investment challenges.

These changes will especially affect AP departments in the UK

The upcoming changes will particularly impact Accounts Payable (AP) departments in the UK, where high attrition rates, increasing workloads, and tightening regulations, due to new electronic invoicing mandates, are already significant challenges. These departments will need to adapt to the new requirements while managing their existing pressures, making it crucial for them to find efficient solutions to handle the increased workload and compliance demands.

The ability to streamline processes and enhance operational efficiency will be paramount for AP departments to navigate these changes successfully. Implementing automated systems and leveraging modern technologies will help mitigate the increased administrative burden. Moreover, fostering a robust support system for employees and ensuring regulatory compliance will be essential to maintain smooth operations during these transitions.

Basware can help

Basware’s AP automation solutions will help you to mitigate rising operational costs, enabling you to enhance efficiency and control, easing financial pressures in a challenging economic environment.

• Do more with less: Automating manual AP processes will help combat cost increases by enabling you to boost output without upping your headcount.
• Support your smaller suppliers: Using data to understand the impact on cash flow and identifying where you can support the supplier community is essential. Processing invoices faster and paying early or on time, is a great example of this. This control over the invoice process can provide some respite to key suppliers or smaller suppliers who may appreciate assistance by receiving timely payments.
• Prevent late payment charges: Enhanced control and oversight of invoices will help you steer clear of overdue payments and their costly fees, which may have doubled compared to last year due to their connection with Bank of England rates. For customers, capitalising on this scenario to prolong the enforcement of late payment fees can enhance liquidity.
• Target Working Capital improvements: You will leverage your AP data beyond just efficiency increases, targeting Working Capital improvements by paying invoices early, recovering lost profits due to erroneous payments, or identifying missed credits.

To learn more, contact us.