Editor’s Note: Today’s article is a sneak peek into the findings from Ardent Partners’ latest AP research report, “ePayables 2016: Eyes on Prize,” available for download here. Throughout June and July, CPO Rising will feature several articles highlighting key discussion points from the new report.
Perception is one of the most important facets of a successful business. For business stakeholders, being perceived as valuable to the enterprise means the function will receive more investments and resources for enhancements such as technology and automation. The opposite is also true: business units or functions that have poor internal perceptions often linger without key improvements. It is because of this dichotomy that ensuring a favorable perception of the department is, or should be, at the top of every functional leader’s list.
Such is the case with accounts payable (“AP”), which in many enterprises is perceived to possess little usefulness beyond processing supplier invoices and ensuring prompt payment. As a result, this function is consistently marginalized as a tactically-focused group that can only offer enterprise benefits in the form of cost and process efficiencies. The tactical perception of AP persists despite the broad-based transformation occurring in the industry today, which has resulted in technological advances that streamline AP significantly and more AP teams considered of strategic importance throughout the marketplace.
If perception is reality – as the old axiom says – then AP must work to alter the enterprise’s perception that the function has only tactical value. The reality is that AP’s data has significant value to the enterprise given that it is a critical lynchpin in the supplier payments process and collects thousands of crucial operational and financial data points through its regular day-to-day operations. This extensive data collection imbues the AP team with the ability to act as an intelligence hub, which can provide data and insights regarding supplier rationalization, cash forecasting, supplier performance management, and working capital optimization.
Leading AP teams have successfully made the case for greater investment and resource enhancements by proving that the function can provide enterprise value far beyond invoices and payments. Leading AP teams have proven this reality—that AP can be and often is strategically important—through increasing collaboration with functional partners such as treasury and procurement as well as aligning department objectives with enterprise goals in a way that places AP within the larger context of organizational success.
To affect the change in perception necessary to receive budget for improvements, AP must build strong internal relationships with stakeholders that can advocate for investment in the function. These groups include treasury and procurement, for whom AP is an ideal collaborative partner. Working with treasury, AP can help develop nuanced cash management strategies and rich cash forecasts to allow for increased profitability in the short-term and a clearer gaze into future liquidity needs. For procurement, AP can provide invoice data that can show levels of contract compliance, assist with supplier rationalization, and improve insight into spend under management. These collaborations often take the form of direct visibility into and access to AP’s data, as well as open lines of communication, which allows the function to serve as a source of vital intelligence that can inform a wide array of enterprise decisions.
Executives must be shown AP can help drive improved results outside its departmental purview, which is accomplished through the collaboration discussed above. Only once AP has effectively shown that it can serve as a source of intelligence will executives be open to investing further in the function. This is not an overnight process, but, with 67% of AP teams being viewed as strategically valuable, the environment is better than ever for AP to act in such a way that they prove their value to the enterprise. Only then will executive perception of AP begin to change.
AP has a perception problem that has consigned the function to the back office, where it is mired in the manual approaches of the past. The time is ripe for accounts payable to prove, beyond a doubt, its strategic impact on the greater organization through the delivery of intelligence, insights, and driving process efficiencies that can extend the value of tactical measures far beyond their current state.
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