Before I begin, I want to invite you to take the survey for my upcoming report – ePayables 2013: AP’s New Dawn. The report will provide a view into where AP groups stand currently regarding technology, processes and strategies. It will also uncover key strategies that leading organizations have used to significantly improve AP performance and position AP to provide significant value to the enterprise and other groups such as treasury and procurement. The report publishes in April and is free to survey participants.

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AP’s Impact on Cash Management

When we think about the entire procure-to-pay process, it is during the “Pay” phase of the process that accounts payable (“AP”) can add significant value by working closely with treasury and finance to develop more sophisticated payment strategies and implement processes to optimize working capital (however, it should be noted that the efficiency and accuracy of the first two phases also play a big part in AP’s ability to add value).

We used to see the AP and treasury functions operate in silos with little to no collaboration and very poor visibility into each other’s data, processes, and requirements. A major reason for the poor visibility was the simple fact that AP would be operating in a fully paper-based system, making it all but impossible to extract key information that would be helpful to treasury. This would often force treasury to forecast cash flow based on inaccurate and out of date data. A major reason for the lack of collaboration was that treasury could glean no value from AP and therefore assumed any involvement with AP would be time poorly spent.

This is changing.

Organizations are beginning to see the need for collaboration and information sharing throughout the larger enterprise. One of the most effective ways to elevate the level of date/process/requirements visibility is through automation – in the AP world, this means ePayables. It is only after AP has migrated off paper to an automated solution that can capture and record data accurately and enables quality reporting and analysis that significant improvements within AP can be seen. ePayables automation allows the AP function to become more strategic as opposed to the traditional back office tactical function.

To better understand how AP can collaborate with and support the treasuries objectives, let’s take a look at what treasury departments typically prioritize (especially in this economy):

• Conserving liquidity
• Establishing greater control over the timing of cash outflows
• Ensuring process efficiency
• Optimizing the use of enterprise cash

Given these fairly typical priorities, we believe that the bullets below are ways that AP can support treasury in its objectives, improve collaboration with it, and ultimately have a real impact on cash management:

• Take advantage of automated solutions (“ePayables) to improve efficiency, effectiveness and accuracy (e.g., eInvoicing, self-service supplier portals, and data capture and workflow for suppliers still submitting paper)
• Continuously improving process efficiency – reduce invoice cycle times, increase the percentage of invoices processed straight-through, and increase the percentage of invoices received electronically, etc.
• Ensure real-time, accurate invoice/payment data and forecasting – e.g., unprocessed financial liabilities, invoices coming due, discounts coming due

I guess you could say that an efficient, automated AP department is literally “money in the bank.”

Tagged in: Cash Management, ePayables, P2P, Source-to-Settle