There will be many lessons learned from the coronavirus pandemic and over the coming weeks and months we will cover and discuss their impact on accounts payable, the financial supply chain and overall business operations. But, now is the time to face today’s challenges and ensure that AP’s resources are focused on the most important activities to help their organizations weather the current ongoing crisis as well as position themselves to thrive and add strategic value. The new agenda focus on three steps that include ensuring business continuity, building resilience, and supporting the recovery when it eventually comes (and it will!). This week we will take a look at the first step: Ensure Continuity.
New Agenda Step One: Ensure Continuity
The first and most pressing need begins with ensuring that the business can maintain operations (i.e., business continuity). While no company has ever gone out of business because it processed and paid invoices poorly, AP is frequently the largest single non-payroll source of cash outflows within the organization. In periods of uncertainty, businesses, like people, revert to their more basic instincts; CFOs, and other finance leaders as a result, tend to manage more conservatively. For most enterprises, this will mean that cash, the lifeblood of any business, is king once again. To date, government programs in the U.S. and abroad have provided a significant boost to global economies, but they may be masking deeper economic problems driven by the huge spike in global unemployment and the evisceration of certain industries. It is too soon to make predictions as to where the economy will be in 2021; and, the objectively disruptive events of the last few months makes it almost impossible to predict what will happen next quarter, much less next month. Early indications showed the credit markets tightening but governments around the globe have been pumping money into the economy through programs designed for both businesses and workers and, for now, the decade plus period of “very cheap” money seems to be holding steady. However, with massive uncertainty looming in the future, along with many country GDP’s being impacted negatively, ‘cheap cash’ may not be available forever.
To better support cash management strategies, it is critical for AP leaders to have clear lines of communication with the CFO and other financial leaders like the controller and treasurer. This does not mean that AP needs to have a standing daily call with the CFO, but it does mean that they need to understand what the current cash management plan is, who is driving it, and what is needed to execute it. They must also be ready and able to provide accurate and timely data and intelligence to the cash management decision-makers. With fluid workplace locations, establishing new communication protocols to ensure that AP leadership is in lock-step with overall objectives will be important. In addition, communication and collaboration with the AP unit must also be fostered.
Of course, there are finance departments that do not recognize the role that AP can play in business continuity and overall liquidity management. In these situations, it will be incumbent upon AP leaders to push out key invoice and B2B payment information, even if they are not ready to operationalize a new payment strategy. The stakes are simply too high for long-overlooked AP teams to sit idly by. AP must rise to the occasion, get proactive, and step-in to provide much needed information, strategies, and advice on how AP can contribute to helping enterprises maintain business continuity. Next week we will take a look at the steps AP needs to build resilience and be in a strong position to support the inevitable, yes inevitable, recovery. If you are interested in learning more, be sure to download my latest research report, The State of ePayables 2020: Ensuring Continuity, Building Resiliency, and Rising to the Challenge (click to get your copy), available for download now.
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