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 new four-part series focused on how the role of the Accounts Payable professional has changed over the last 15 years. If you would like to get the full report, it is available for download here (registration required).
Historically viewed as a back-office function, executives have started to take a hard look at Accounts Payable (AP) operations and realized the untapped source of cost savings and process efficiencies. As more enterprises realize the inefficiencies of the manual, paper-based AP process, many are looking into AP automation solutions as a way to streamline invoicing and payment approval workflows. Automated solutions not only help to speed up the process, but they also help reduce costs and provide more timely and accurate financial data and reporting that can be utilized. Increased levels of process automation along with more robust data and visibility into the overall AP process mean AP teams are now in a better position for success than ever before and are poised to transform into a more strategic department.
Beyond transactional efficiency, AP can serve as a hub for, and provide insights and knowledge to help key decision-makers within the organization. This new opportunity will help move the modern AP professional “beyond the basics” of their function. In fact the very future of the AP function hinges on its ability to transform itself into a more strategic unit, and serve as a convergence point within the organization. There are three major areas that are directly linked to AP processes and appear to be the most accessible and prominent ones for AP to pursue in order to reach this level within the organization. The first major area that we will discuss today is cash management.
The Treasurer utilizes the entire finance organization in order to help improve internal processes and optimize working capital. One of Treasury’s biggest opportunities to help impact cash and financial performance lies within the AP department. Even the most immature AP unit should have an objective of improving the organization’s cash management. Ardent Partners research has shown that it is the Best-in-Class AP departments that are the most strategically involved in the strategies that influence cash management. Below are four of the main strategies that show how.
- Driving visibility into the total opportunity of early pay discount across all invoices. The Best-in-Class also look to enact plans that would control the capture of early pay discounts, which should help improve cash flow.
- Enhancing enterprise disbursement procedures to optimize how funds leave the organization and the payment method. This will also enhance the visibility into the full AP cycle.
- Balancing both the cash and accrual reports, which should create more strategic planning and interactions between finance executives. This is a good strategy for the AP department to work more directly with the C-level suite and change the executives’ perception of AP into a more value-added department.
- Generating pure intelligence into corporate cash. From invoices, payments, purchase orders, and various disbursements, the AP department is one of the largest cash distribution functions within an organization. This puts AP in an important position (maybe more than any other) to help create a better and clearer understanding of the company’s total finances.
In many ways, the goals of AP and Treasury are not so different. Both groups should be focusing on maximizing their strategic value to the organization and of course driving cost savings. It is possible for AP to have a major impact helping to improve the financial performance of the enterprise. Smart organizations are already seeing the important role AP can play in finance-related tasks. But for the rest of AP professionals who are still trying to get to the next level of performance, it is critical that plans begin to train and educate the staff on the new technologies available, and on the new roles that they will play once the convergence points hit the function. Taking control of their destiny by executing with precision and pursuing responsibility in this key area of cash management allows the modern AP team to be a more strategic and value-added part of the organization.
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.