Making accounts payable pay

Many organisations continue to treat accounts payable as if it were a teller window through which money is slid back and forth as parties struggle to communicate through inefficient microphones. Constrained by this old-fashioned view, such companies can't see the department's use beyond simple cash transactions.

Then there are the organisations that are beginning to see accounts payable as both a window to the outside world and a multi-functional automated kiosk - capable of bringing together and aligning team members, suppliers and internal functions.

These are the companies that see the potential of accounts payable to harness technologies and systems to help it hit new levels of efficiency - without closing kiosk windows and extending the time to wait in line. These are the companies that look to accounts payable initiatives to capitalise on opportunities to improve working capital management, reduce supply risk and eliminate exposure to non-compliance and fraud.

These companies have realised that automation and visible processes are central to driving new levels of performance.

At its most basic level, automation can improve invoice processing efficiency by well over 50 per cent, whilst providing a clearer perspective into purchase order liabilities. But its ability to help companies improve both working capital and supplier management is perhaps more important. Still, the strategies that companies choose will differ based on their organisational maturity and priorities.

Basware typically observes that companies fall into one of three stages of accounts payable sophistication - Foundational, Building and Leading.

Organisations at the Foundational stage of maturity are often looking to put into place accounts payable processes and technology that enable them to gain greater visibility and control of spending and liabilities. Foundational technology and processes can centralise invoice handling and help reduce unintentional late payments. It can also enable organisations to create a shared services model for the entire accounts payable process, improve invoice handling and, ultimately, working capital management. Many organisations at the Foundational stage look at technology as a means of doing more with fewer resources, freeing team members to focus on higher value activities.

As organisations move to the Building stage of accounts payable sophistication, invoice-automation technology and process programmes can provide the means to centralise control of the accounts payable process. While companies at the Building stage will often already have limited invoice automation programmes in place, they might lack the ability to gain an integrated perspective of their processes.

But more encompassing invoice automation tools will improve visibility across a broad set of systems, processes and payables activity, allowing more effective supply management and reducing business risk. Optimal purchase-to-pay processes and strategies - for example working capital management and cash flow management - can be put in place while business risk can be reduced by organising payables liabilities. Better supplier relationships can also be achieved, through greater flexibility in the payables process - for example discounting.

With a common invoice automation approach, Building organisations can standardise processes regionally and globally. This enables finance and procurement leaders to use common metrics to measure performance despite possible underlying localised or cultural differences, such as payment terms in different regions.

Companies at the Leading level of accounts payable maturity are looking to maintain or put in place the highest levels of accounts payable performance. Many Leading companies turn to advanced invoice automation capabilities to solve very specific needs and challenges, especially when they have previously put in place core management capabilities.

The best invoice-automation platforms can provide visibility to drive process improvement, accountability, internal performance management and allow the means to bring together procurement and finance leaders to quickly react to rapidly changing external market conditions, such as the deterioration of the credit markets.

Performance can then be continuously benchmarked. Advanced and highly flexible working-capital management strategies can be put in place as can processes to respond to evolving local regulatory and tax requirements. Risk can also be reduced by closely monitoring supplier activities to predict bankruptcies and supply disruptions.

With the right technology and process underpinnings, accounts payable can transform and extend its role and overall mission - helping organisations to perform better even in tough economic climates. While old-fashioned transactional teller windows might have their place inside banks and government agencies, stakeholders and customers should not be waiting in line and taking a number. Accounts payable is surely most effective when serving as both a window to the outside world and as a multi-functional self-service kiosk.

Until recently, it was generally (though quietly) acceptable for organisations to merely pen a 'to do' list of projects to increase overall efficiency and productivity in areas such as accounts payable. But in the midst of a recession, the time for list-making is over. Taking finance and procurement to the next level of accounts payable performance and maturity is now essential to achieve new levels of savings and shareholder value.

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