Editor’s note: On April 16, Ardent Partners will host a complimentary webinar (sponsored by Concur) focused on the top trends in accounts payable for the year ahead (register at this link). Ahead of that presentation, run by Andrew Bartolini, Ardent’s chief research officer, and Christopher Dwyer, research director, we’re running a short series on the four biggest accounts payable trends in 2015. Today’s article, third in the series, details the trend toward accounts payable having a stronger role in working capital optimization.
The relationship between treasury and accounts payable (AP) has always been linked, but not collaborative, despite the fact that the two teams inherently have complimentary goals. Much like the increasing collaboration between procurement and AP, which also could share that designation, the situation between the treasury and AP teams has improved tremendously over the past few years. This improvement can be tied, at least partially, to the greater levels of automation in the AP workflow, which has also led to enhanced visibility into the invoice approval workflow.
It’s most likely because of this enhanced visibility—and increased automation—that AP has taken on a more strategic role in the enterprise in general, and in working capital optimization in particular. In fact, 57% of respondents to Ardent’s ePayables survey expect the AP team’s involvement in working capital optimization, an area where AP can have a strong strategic impact, to increase over the next year or more. This is by and large an important shift in the strategic importance of the AP team, which in organizations with manual processes is viewed as little more than the place invoices go for approval.
This is an unfortunate misconception about AP, one that thankfully has been demolished as the AP function has become more automated over the past few years and subsequently taken on a more strategic role. When AP is inducted into the rest of the enterprise as a strategic partner, the increased visibility into the invoice approval process allows for greater control over payment scheduling—including whether or when to capture an early payment discount.
This information about invoice status sent back to treasury can inform working capital decisions, as up-to-date invoice data can improve cash flow predictions and allow treasury to make more-informed decisions about the enterprise’s working capital. This is helped along by the increasing levels of automation in the AP function, which is critical if the accounts payable team is going to have the ability to share information with other strategic partners in the enterprise and become a hub of value.
The AP team can have a significant impact on the working capital optimization strategy of the enterprise, provided that the AP team is able to offer up the type of transparent financial data that’s possible with a technologically updated invoice approval workflow. AP teams looking for a new strategic focus in the enterprise should definitely work more closely with treasury, assuming of course that the invoice approval process is mostly or fully automated and can provide the type of financial data that can help treasury better optimize the enterprise’s working capital.
Check out these articles for more information:
Accounts Payable: Top Trends for 2015 (Webinar)
AP’s Top Trends in 2015: The Increasing Automation of Accounts Payable
AP’s Top Trends for 2015: A Stronger AP/Procurement Partnership
