For those of you straddling the P2P line or just interested in the “second P,” I’d like to call your attention to Ardent Partners’ research director, Vishal Patel’s site, Payables Place, as a resource for you to read the latest news, research, and analysis of the ePayables or AP Automation marketplace. Below is but one example of the high-quality articles that Vishal is regularly publishing.
As we think about the entire ePayables Framework (i.e., Receive, Process and Pay), it is during the “Pay” phase of the process that AP can work closely with treasury and finance to develop more sophisticated payment strategies and implement processes to optimize working capital (it should be noted that the efficiency and accuracy of the first two phases also play a big part).
We traditionally see the AP and Treasury functions operating in silos with little or no collaboration and poor visibility into each other’s data, activities, and requirements. One reason for this is that when AP uses a largely paper-based system, it is very difficult to find and use information that is highly relevant to treasury; as a result, treasury is forced to forecast cash flows based on partial, inaccurate, and/or out-of-date data.
The good news? This is changing – organizations are beginning to see the need for collaboration and information sharing throughout the organization and one of the most effective ways to elevate this (and promote visibility) is through process automation. It is only after the AP process is migrated off paper and onto an automated platform that captures and records data accurately (allowing for better reporting and analysis) that significant improvements within AP can be seen.
Automation also allows the AP function to become more strategic in its work with treasury as opposed to the traditional back office tactical function. To better understand how AP can collaborate with and support the objectives of the treasury, let’s take a look at what treasury is most concerned today:
- Conserving liquidity
- Establishing greater control over the timing of cash outflows
- Ensuring process efficiency
- Determining the best use of enterprise cash
Given the above objectives, we’ve created the following list of ways in which AP can support treasury by improving collaboration and having a real impact on cash management:
- Take advantage of automated solutions to improve efficiency, effectiveness, and accuracy: eInvoicing, self-service supplier portals, scan and capture services/solutions for suppliers still submitting paper, etc.
- Continuously improve process efficiency. Strive to reduce invoice cycle times, increase the percentage of invoices processed straight-through, increase the percentage of eInvoices, etc.
- Ensure real-time, accurate invoice/payment data and forecasting: What payment liabilities are coming due and which ones offer early payment discounts?
Enterprises that enjoy strong collaboration between AP and treasury are then better equipped to take advantage of supply chain finance solutions such as those offered by Syncada and its banking partners like U.S. Bank and dynamic discounting solutions such as those offered by ADP or Taulia.
The value of AP and the benefits of automation and improved collaboration have been proven strategies in the market; here is one great example from an interview conducted for a recent report:
“Due to the [automation] changes made in AP, we have been able to introduce more efficiency and impact key financial metrics. As a result of our AP initiative we were able to improve DPO by 5 days representing $9MM in unlocked working capital per day” - Director of Finance at a large food and beverage manufacturer