Where does the most money flow out of an organization? No, it’s not fraud, theft, or even sales meetings. The simple answer is Accounts Payable (“AP”). Since AP pays all the bills of an enterprise, it is not surprising that more money flows out of it than any other part of the organization. Over the last two decades, a majority of CFOs have focused on playing a more active and visible role with external constituents, including investors, media, and analysts. But more quietly, they have also begun working aggressively to improve their enterprise’s financial operations by revamping and transforming the people, processes, and technologies currently in place, and instituting greater rigor around all aspects of the finance department. This broad-based financial transformation that began with a focus on the “front-facing” parts of the department like treasury and the corporate finance team has extended into the traditional “back-office” areas of finance including internal audit and AP.
These transformation efforts have resulted in finance leaders starting to pay more attention to the payments portion of the process, an area where paper checks were still the most common form of B2B payment. This intensified focus on payments has driven organizations to explore the plethora of payment vehicles available on the market. Not surprisingly, the attention paid to payments has in turn driven the volume of ePayments to approach nearly 60% of all B2B payments made today, as shown in Ardent Partners’ 2018 State of ePayables research report.
What has also changed over the past 5 years is that B2B payments have risen as a “new” and viable source of value for financial organizations across the globe, and, as more attention is paid to this aspect of the AP function, enterprises are realizing that they can take further advantage of the efficiencies created by automating the receipt and processing of invoices (e.g., eInvoicing and AP automation). The increased interest in payments has largely been driven through this reduction in paper on the front end of the AP process. Less paper has resulted in efficiency gains and increased visibility for the opening stages of the invoice management process. This means AP groups today have more opportunities than before to extract value from their B2B payments, particularly within the realm of early payment discounts.
By using ePayments more frequently, finance leaders are increasingly exposed to the potential gains and overall value that can be driven from an increase in the use of ePayments. The increased adoption of electronic payment solutions has opened finance and treasury’s eyes to and acceptance of B2B payment cards with rebates, dynamic discounting and supplier financing. This has resulted in payments being viewed differently than ever before. This function is now starting to become viewed as an area of strategic importance and not just a manual, labor-intensive function. AP and Treasury are now working more closely than ever before to maximize the cash flow of the organization.
Managing supplier payments can and should be integral to Treasury’s cash and liquidity management responsibilities. Properly managed supplier payments will show the strategic impact of Treasury and AP working together. Treasury needs to have a view on all enterprise cash. By collaborating and communicating with AP, it will achieve newfound visibility into supplier payments and a more nuanced view of the organizations’ cash position and how to maximize its value along with leveraging the ePayments and supply chain finance platforms that are available today, and are becoming more widely adopted every day.
Once upon a time, it made sense for enterprises to pay invoices with paper checks. This is no longer the case. Paper checks are not going to disappear overnight but as our research indicates, every year, more and more organizations are realizing the operational and efficiencies gains, not to mention the value generating potential that ePayment platforms bring to the table.
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