Every year, Ardent Partners publishes several benchmark studies into the accounts payable (“AP”) marketplace. One of those is the annual research effort into the state of business-to-business (“B2B”) payments, called “The State of B2B Payments 2015: Emerging Business Value” this year, which Ardent is proud to announce is now available. The report captures the perspectives, experience, and accomplishments of more than 200 AP and finance leaders, as well as examining the trends affecting the marketplace and offering recommendations for improvement. The full report is available for download here.
One of the key focuses of the 2015 state of B2B payments report is that electronic payments (“ePayments”) have several major advantages when compared against paper checks, including across-the-board increased visibility into supplier payments. Visibility into payments and the like is critical in the modern business world, particularly because more executives are now looking to internal data as a way to drive nuanced decision making. Visibility into payment data can be a huge competitive advantage for the enterprise in a marketplace where it remains critical that internal departments run as efficiently as possible.
Payment Visibility Matters
The most important thing to understand about AP is that, when reduced to its essence, the function is tasked with distributing cash to suppliers. This may seem like an oversimplification, but consider that supplier payments are arguably the single largest non-payroll source of cash outflows in the entire enterprise. This is especially true in enterprises that produce physical goods, and only slightly less so for those that create software.
As a result of this position, the payment data that AP controls can provide a tremendous amount of useful financial intelligence. Without visibility into this data, however, AP becomes something of a “black hole” in the enterprise’s cash management strategy. Invoices go in, payments come out … but no one really understands what happens in the middle or can even view the data that AP collects.
AP functioning as a “black hole” can mean that other internal stakeholders, such as Treasury, miss mission-critical financial data. Without information on current or upcoming supplier payments, Treasury’s cash forecasts may not include a completely accurate picture of the enterprise’s cash position. This could result in executives making financial decisions that do not take every aspect of the enterprise’s monetary health into account. While this may not have a deleterious effect on the organization at large, the fact remains that supplier payment data adds a level of detail that can help make more nuanced business decisions.
Not Just an AP Problem
Because of the importance of payment visibility to the enterprise at large, its lack is not just a problem for accounts payable. Insight into upcoming supplier payments certainly helps AP plan its payment scheduling better, but this insight can also help with making AP more important in overall cash management decisions and more strategically valuable as a result. Treasury’s cash forecasts become richer with supplier payment data, and the two teams—AP and Treasury—could use payment visibility as a way to develop a nuanced supplier payment strategy that puts AP in a key position to influence working capital decisions.
Treasury is not the only team, outside of AP, that benefits from increased visibility into payments. Deeper visibility into supplier payments helps procurement know whether suppliers have been paid as agreed, for example, as well as allows the internal audit team to better understand current liabilities and close out the books in a timely fashion. Moreover, payment visibility can help organizations decide which early payment discount opportunities to pursue and inform deeper operational reporting and analytics, decisions that, in aggregate, can have far-reaching implications.
Final Thoughts
The intelligence that visibility into payment data provides to the wider organization is crucial to moving AP to the “next level” of performance, and can inform every aspect of financial operations. This includes whether to pursue an early payment discount or not, as well as deeper reporting and analytics to improve financial performance. These are decisions that, in aggregate, can have a far-reaching financial impact on enterprises of all sizes and in all industries. It is thus for these reasons that payment visibility is a critical need, and organizations that do not currently possess a deep level of insight into payment data should make it a top priority to pursue.
Download the B2B Payments 2015 benchmark report here to find out more about the importance of payment visibility and the state of the B2B payments marketplace today!
Check out these related articles for more:
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
