Editor’s Note: Ardent Partners recently published our annual AP-themed report, The State of ePayables 2017: The Convergence of Cash, Suppliers, and Intelligence. Today’s article is part of an on-going series focused on the report’s key findings. If you would like to get the full report, it is available for download here (registration required).
Historically, the Accounts Payable (“AP”) unit has operated in a business silo. But over the last few years we have seen a dramatic shift in the position and role that AP has within the organization. The objectives of today’s AP departments continue to grow and expand in scope and drive. With business processes and functions converging around shared value and shared interests, AP sits in an exciting position to impact the business processes, relationships, and results for an organization. For most AP groups one of the essential elements for the success of their department lies in improving the amount of collaboration with the other key stakeholders within the organization. Working with groups like procurement for sourcing and spend management improvements, or treasury for enhanced cash management, will go a long way in turning their department into a Best-in-Class and in positioning their organizations for ultimate success.
Collaboration with Procurement
The level and quality of AP and procurement collaboration varies dramatically among enterprises in the marketplace today, which means that more agile organizations are effectively using their procure-to-pay operations as a competitive weapon to gain an advantage over their rivals. Organizations that lack a seamless P2P process typically see an erosion of value as they move across the entire process. Those that are more successful combining processes, systems, and organizations report a series of benefits that includes:
- An ability to optimize working capital across the P2P process by developing proactive payment strategies and pursuing dynamic discounting opportunities.
- Improved supplier relationships. This is aided by an ability to pay suppliers on time (or early) and accurately as well as better data to support improved inquiry response times.
- More accurate spend data via invoices and payments; and in turn, better identification of sourcing opportunities through more accurate spend data via invoices and payments.
- Improved contract compliance and the reduction of maverick spend by linking invoices and payments to contracts.
- Better success with supplier enablement by leveraging a ‘one-time’ on-boarding process for procurement and AP requirements.
Treasury & Cash Management
In many ways, the goals of the AP and treasury departments are quite similar. Both groups want to maximize their strategic value to the organization and drive cost savings as well. There are significant possibilities for AP to have a major impact on treasury’s working capital goals and improve the financial performance of the enterprise. Improving internal process efficiencies, like eliminating paper invoices through automation, is a great way to take cost out of the business and to provide better visibility into the data needed for treasury’s cash forecasting.
AP is slowly becoming a more value-added department within the wider enterprise, and most savvy organizations rightly see the AP team playing a larger role in finance-related tasks through the supplier payment activity that AP goes through every day. With its role as one of the largest cash distribution functions within most organizations, AP is in a position that treasury should be collaborating with if they want their organization to remain competitive in an increasingly challenging business world.
The potential P2P performance gap that can exist between competitors warrants the attention of the CFO and the CPO as well as other procurement and AP leaders. For the average AP organization, the immediate opportunities are to drive efficiencies quickly, to become more operationally effective, to expand the scope of those operations for the greatest possible impact, and to ultimately become more strategically aligned with the greater business. Tighter collaboration with key partners across the organizational spectrum is a critical element in the success of an enterprise function. For AP in particular, collaborating with functions like procurement and treasury will put the unit in the best position to provide strategic value to the enterprise.
Download the new report here, and learn more about how collaboration with key stakeholders has put AP in a position to become a more value-added department within the wider organization.