Editor’s Note: Today’s article is a sneak peek into the findings from Ardent Partners’ latest AP research report, “ePayables 2016: Eyes on Prize,” available for download here. Throughout June and July, CPO Rising will feature several articles highlighting key discussion points from the new report.
The modern enterprise generates multiple data streams throughout the business. The organizations that can harness the power of this extensive data stand to benefit once this raw information is transformed into actionable intelligence. Eighty-one percent (81%) of companies in Ardent Partners’ new ePayables 2016: Eyes on the Prize research study (click here to download) perceive data as valuable, citing it as “critical” or “important” to their corporate projects and programs. Data can be leveraged to support major enterprise tasks and support more educated decision-making.
The finance function uses different types of data for a variety of tasks, but the most broadly applicable information is sourced from accounts payable (“AP”). AP collects extensive operational and financial data—on supplier invoices and upcoming supplier payments—that has wide applicability throughout the enterprise, and can be leveraged in a variety of ways to bolster results outside AP’s traditional sphere of influence.
AP occupies a unique position within the enterprise, as every transaction flows through AP at some level. As a result, AP has remarkable insight into the financial and operational health of the greater enterprise. Procurement, for example, can use AP’s invoice data to support its supplier rationalization and supplier performance management activities; treasury, meanwhile, can use AP’s data about upcoming supplier payments to create richer and more nuanced cash forecasts and execute more-informed working capital optimization decisions.
The top usages of AP’s data, as detailed in Ardent Partners’ “ePayables 2016: Eyes on the Prize” research study (click here to download), are strategic in nature. The main use of AP’s data—handling invoice exceptions (71%)—may seem tactical at the surface, but as AP becomes more adept at handling these exceptions, they have more time to focus on strategic, value-add activities. This is borne out by the fact that AP’s data is heavily-leveraged to improve collaboration between finance and procurement (67%), which proves that AP is valuable beyond processing invoices and ensuring on-time payments. Closer collaboration between finance and procurement can also lead to more efficient processes and increased data visibility. As finance and procurement work more closely together, the two functions have deeper stores of intelligence that can make processes more efficient, such as procurement using invoice data for supplier rationalization or AP/finance using contract data to improve discount capture.
AP’s data can also be leveraged in forecasting, budgeting, and planning, which involves insight into upcoming supplier payments—frequently the largest single non-payroll source of cash outflows in the enterprise. Greater insight into upcoming supplier payments provides numerous financial data points that can result in more nuanced forecasts and a deeper understanding of the enterprise’s near-term cash position. This can result in the development of better payment strategies (57%) and a more concrete understanding of the impact of cash (57%). Not using AP’s extensive financial data in these areas, which is a significant value-add for finance/treasury, is a clearly anachronistic sign of an earlier time when AP was a solely back-office function that was marginalized, irrelevant, and without standing.
Final Thoughts
Whether it is used to enhance supplier management, develop better payment strategies, or craft richer cash forecasts, AP’s data has broad applicability in the enterprise. Enterprises that recognize this, and leverage AP’s data effectively and efficiently, can benefit enormously from AP’s unique position in the enterprise. There is extensive financial and operational intelligence locked within the invoicing and payment process—intelligence that can raise AP’s profile in the enterprise. Once AP can unlock that intelligence, and provide it to the stakeholders that will make the most use of it, the function can expect to achieve new heights and show, once again, that knowledge is power.
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