In the 2020s, the accounts payable (“AP”) profession will continue to gain momentum and impact business operations and results in an increasingly strategic way. The global uncertainty that pervades today’s market indicates the very real threat of a deep economic downturn. In response, the CFO’s new “hierarchy of needs” has placed a laser focus on business continuity and ensuring the liquidity needed to fund ongoing operations. Against the backdrop of a global pandemic, this renewed focus on liquidity and cash management has pulled AP into the limelight with an urgency never before seen.
As we continue to navigate these disruptive days, it is clear that some of an enterprise’s best opportunities (and most critical priorities) will play to the strengths and expertise of its AP department. This means that AP must work deliberately and aggressively to support the larger enterprise – pushing to help ensure its continuity and build its resilience. This decade, accounts payable must rise to the challenge.
The impact of the worldwide crisis on AP and all other business functions has included the physical disruption that has required entire departments (and companies) to work from home, the mental disruption of facing broad-reaching furloughs and layoffs, and the financial disruption driven by the massive downswing in a majority of markets and industries. And, while the perception of AP continues to evolve from that of a back office role-player to one that sits in a strategic hub of efficiency and intelligence, the current market challenges present an extraordinary opportunity for AP departments to shine. The AP leaders who utilize smart strategies to address short-term enterprise needs (like optimizing working capital and positively impacting cash positions) while pressing forward on longer-term initiatives (like driving a digital transformation and enabling more intelligent supplier relationship management) position themselves and their organizations to play an increasingly strategic role when the recovery inevitably begins.
It has been a very difficult time for my team. They are not used to working from home. Many are scared and distracted. At the same time, we are busier than ever.” ~ EVP, Fortune 100 Company (Pharmaceutical Industry)
And, while the recovery is a “not if, but when” event, at this writing, when the recovery commences remains highly uncertain, particularly given new Ardent Partners research that shows that essentially every business has been negatively impacted by the current pandemic.
As industry after industry was shut down, many CFOs and treasurers moved quickly to slow the flow of all payments. After reducing payroll via workforce reductions, the leaders in hard-hit industries next focused on managing supplier/vendor payments. To ensure business continuity, many CFOs sent notice to all of their suppliers that they would be unilaterally extending payment terms. Others have attempted to take a more nuanced approach by developing a multi-pronged payment strategy that prioritizes payments based upon the strategic nature of each supplier relationship. Still, a third group of CFOs (from industries that have seen business increase as a result of the pandemic), have been notably visible, announcing that they would prepay many invoices to ensure that their suppliers are able to survive. In each scenario, AP teams have been fundamental to the execution of a critical enterprise strategy.
Once business operations return to some level of normalcy, executives will develop a short-term plan to defend their bottom-line while they also plan for the future. In a recession, when sales, growth, and investments are more limited, enterprise executives focus their attention on controlling the things that are, in fact, within their control – what they spend, where, and with whom. Procurement teams have already begun sharpening their sourcing tools as they plan to accelerate competitive sourcing activity in the second half of 2020. In support of greater sourcing volumes, AP can provide intelligence regarding incumbent supplier performance to help sourcing teams make better decisions. They can also help streamline the onboarding of what is potentially a large number of new suppliers.
AP’s ability to rise to these and other new challenges will be determined by its ability to function as a value-driver and successfully support the enterprise through the three phases. ePayables solutions will be an important aspect for most, helping AP teams drive incredible impact during these times of organizational need. More than ever, AP must work to scale to new heights and rise to the challenges of this new decade!
Speaking of Rising to the challenge, Join Bob Cohen and I later this month when we present the Five Game-Changing Strategies for Top Results.
