Automation within the procure-to-pay (“P2P”) process has driven enterprise performance for some time; however, it is only over the last few years that there has been a significant uptick in automation initiatives that include B2B payments. In fact, our recently published research report on the topic, “The State of B2B Payments 2015: Emerging Business Value,” highlights the momentum of ePayments in the marketplace as well as many of the gains that accounts payable (“AP”) departments can achieve from streamlining and automating their B2B payment process. The full report can be downloaded here.
While adopting a new electronic payment (“ePayment”) solution can represent a fundamental shift in the way businesses have historically paid their suppliers (namely, via check), by replacing age-old, paper-based methods with automated solutions, AP groups can gain speed, accuracy, efficiency, and visibility from the change. But this year’s report also highlights the benefits and opportunities that exist for another key stakeholder—Treasury.
While Treasury generally has a good view into how sales, payroll, and taxes impact overall working capital, they frequently lack a view into the supplier payment process. When AP’s impact on cash outflows is examined, it becomes clear that the two teams should be closely linked. Additionally, an AP team with ePayment capabilities presents Treasury with a potentially significant opportunity to improve cash and liquidity management. Automating the B2B payment process can drive cost out and help businesses manage their supplier payments more effectively while unlocking new ways for Treasury teams to optimize their working capital.
How AP and Treasury Can Work Together
One of the key things to understand about enterprises with manual processes is that their departments tend to operate as functional silos. For example, AP runs its invoice approval and payment processes, while Treasury examines opportunities to maximize the enterprise’s cash on hand and gain the greatest return on investment for the organization’s working capital. These two teams almost never collaborate in enterprises with scant automation.
To conceive of why these teams should work together, it is first imperative to understand that AP is fundamentally a cash distribution function. Consider that supplier payments are frequently the single largest non-payroll source of cash outflows for many businesses. Since Treasury’s responsibilities center on managing cash, having visibility into supplier payments (amounts and timing) provides valuable information for Treasury to better manage its own operations.
One of Treasury’s key responsibilities is short- and medium-term financial planning, which is offered to executives as a picture into whether the enterprise will have enough capital to fund operations. Collaborating more closely with AP gives Treasury access to supplier payment data, which provides additional data points to use for financial planning. Because AP sits atop one of the biggest sources of cash outflows, this additional data can enrichen Treasury’s cash forecasts tremendously, and provide a better view into the organization’s cash situation.
Conversely, AP gains visibility into the wider enterprise’s cash management strategy. This allows AP to schedule payments in accordance with working capital goals, and align its payments with the overall cash management strategy more closely. The end result thus is a nuanced supplier payment strategy that takes more factors into account than the payment due date.
Final Thoughts
Heightened volatility and increased business risk have combined with tight and uncertain credit markets to ensure that having cash and maintaining direct access to it will remain a priority. Combining ePayments with an automated AP process has the dual benefit of driving significant process efficiencies across the AP function, while also enabling Finance and Treasury professionals to gain greater visibility into cash flows and develop proactive strategies to optimize working capital. AP groups that leverage technology put themselves in a better position to collaborate with and support treasury in their efforts to manage cash. More to the point, however, is that Treasury can gain major benefits from the type of nuanced supplier payment strategy that is achievable with an ePayment solution.
Download Ardent’s “State of B2B Payments 2015” report now and learn more about how Treasury can benefit from B2B payment automation in additional to gaining a picture of the payment industry today.
Check out these related articles for more:
B2B Payments 2015: How do ePayments Impact DPO?
B2B Payments 2015: The Top 3 Payment Challenges Facing Accounts Payable
B2B Payments 2015: The Importance of Payment Visibility
Ardent’s Chief Research Officer Discusses New “State of B2B Payments 2015” Report (Video)
B2B Payments 2015: The Emerging Business Value of Electronic Payments
Ardent’s “The State of B2B Payments 2015: Emerging Business Value” is Now Available
