The accounts payable (AP) team’s ability to add value to the strategic objectives of the business is greatly enhanced through technology. Leveraging technology enables AP to process invoices and payments in a more efficient and accurate manner while exercising greater control in the outflow of cash. Automation also captures real-time invoice and payment data, which allows for more accurate forecasting and analysis of cash flow. This more accurate forecasting and cash flow analysis can lead directly into a much improved situation for working capital optimization.
How AP Automation Can Help Optimize Working Capital
Establishing a working capital focus throughout various operational processes, including AP, takes diligence and a well-designed and detailed strategy. Enterprises must understand that the right capabilities must be in place in order to successfully execute an optimization strategy. One of the most utilized mechanisms is process automation, which can be key mechanisms that many organizations use today to optimize working capital, and that many others plan to adopt over the coming year.
Many enterprises have also begun to realize that getting their suppliers onto an AP platform and enabling them to submit eInvoices and accept electronic payments is an important part of improving the management of working capital. On-boarding suppliers is a crucial first step in removing paper and automating the transactions between a buyer and seller, thereby drastically improving connectivity, control, and visibility into payables. It’s not only process automation that can assist with optimizing working capital, however, as payment automation technologies can also help with cash management.
Payment Technologies that Optimize Working Capital
Commercial card products and payment automation are the most popular mechanisms currently being used by enterprises to manage their working capital. These solutions allow organizations to have more control and visibility into the payment process. For example, purchasing cards (“p-cards”) offer lower processing costs and greater spend visibility than paper checks, and have the literal extra bonus of paying buyers a percentage of card volume via a rebate program.
Using a p-card can save time by eliminating the need for a purchase requisition or purchase order. P-cards can also aid in the management of cash by offering short-term credit to the buyer while paying the supplier immediately without the need for an invoice. Other commercial card products such as “cardless” payment accounts or single-use accounts offer similar benefits.
Final Thoughts
Automating the accounts payable workflow can offer multiple benefits to the enterprise. Beyond the obvious advantages in cost savings from standardized workflows as well as less manual intervention, the visibility into data inherent in an automated solution can also immensely simplify Treasury’s working capital optimization goals. Greater visibility into the invoice-approval process means Treasury can have a much better handle on the enterprise’s cash situation because there’s less need to check in with AP on the status of individual invoices. At the end of the day, however, it’s the collaboration that results from this increased visibility which can really improve an enterprise’s working capital optimization.
Check out these related articles for more on working capital:
How Virtual Payment Cards Can Help Optimize Working Capital
Three Technologies that Speed Access to Working Capital
Is Your AP Operation in a Position to Optimize Working Capital?
Supply-Chain Finance: Saving Money and Providing Long-Term Market Opportunity
