ePayables Primer Part 2 – The Opportunities
We started building this ePayables Primer last week with a look at some (but, not all) of the key challenges facing the average accounts payable organization and the industry as a whole. Part one is found here. Today we continue with a look at some of the largest opportunities that sit within reasonable reach of the average or typical accounts payable group. The interesting thing about most of these opportunities is that they don’t require any unusual or extraordinary amount of effort, investment, or leadership. With some good coaching, a reasonable level of IT investment, and something that qualifies as slightly more than just ‘a passing’ executive focus, an accounts payable department mired in paper with antiquated systems and processes (this describes most AP departments today) can leap into the modern age and never look back. Here are a few primary opportunities that can be realized by an investment in ePayables in the near-term:
Improve invoice processing efficiencies – Process efficiencies are a basic opportunity and/or fundamental value driver in most enterprise-level process automation initiatives. Increasing the number of invoices processed per AP staffer after an ePayables deployment is a certainty. However, the velocity and overall reach of this improvement is anything but certain. An ability to reduce headcount by deploying staff to other areas within AP, finance, or the enterprise is an opportunity to impact the bottom-line.
Improve customer service – For an AP staffer that is processing thousands of paper-based invoices each month to be able to respond on the fly to an inquiry from a supplier about the payment status of a recent invoice or an inquiry from procurement about a certain supplier’s overall invoicing performance or an inquiry from the business seeking validation on recent demand for certain items would be the proverbial accomplishment of finding three needles in a haystack. This has nothing to do with the capabilities of the staffer and everything to do with an unyielding volume of paper. The value of a quick and accurate response depends on the nature of the inquiry. But, there is a real opportunity to improve.
Improve the visibility into line item and supplier detail to gain better alignment and engagement with procurement – Several important aspects of supplier performance management (“SPM”) revolve around invoice accuracy, pricing being one major component. Contractual agreements with tiered pricing (based on volume, as an example) can add a layer of complexity to the pricing for a specific order or the pricing across an aggregate series of orders over some period of time. Invoicing in industries with heavy (and varied) discounting and rebates can also be challenging. Even the straightforward categories can and do prove “difficult” to accurately invoice (Sidebar: more on this audit report, which found that Office Depot sold products without ‘the application of an approved market basket discount’ resulting in a $2.5 million dollar repayment, in a future article). Sometimes, the best of all invoicing intentions can go astray. Having visibility (and thereby having a better chance to catch these errors and catch them sooner) into this area is important to procurement (from an SPM and savings tracking perspective) but also to finance and to the bottom-line.
Improve visibility into invoice payment terms to gain better alignment and engagement with treasury – Extending DPO (Days Payable Outstanding) improves a company’s cash positions, which in turn can net an improvement on the bottom-line (increasing yield on working capital, reducing interest expense, etc.). Extending DPO can also signal an increase in market power that some equity analysts and investors prize. Visibility into payment terms can help treasury set a proactive payment strategy that yields the greatest benefit to the enterprise.
Improve the ability to close the period’s books in an accurate and timely manner to gain better alignment and engagement with accounting – Dream on Mr. Steven J Betts in the year 2002, accounting is not sexy. It wasn’t then, it isn’t now, and it won’t be tomorrow. But it is important… to all public companies and their investor communities (among others). Miss a 10Q or 10K filing deadline and watch the investor community sprint for the door. What AP does at period end can trickle up and into the view of the CFO and the CEO.
CFO engagement – I believe the CFO should care about all of the opportunities noted above. There continues to be a very real opportunity for many AP leaders to engage the CFO and to do so soon.
AP Challenges? Check; AP Opportunities? Check;
Next week? Some recommendations on how and where to start. Stay Tuned!
