Transformative technologies such as enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) systems have brought productivity advancements that have dramatically improved business performance.
The finance function has reaped benefits from these advances, but there is much more to come. The next wave of transformation is upon us and involves transactions between trading partners. This will elevate the status of an often neglected area of finance: accounts payable (AP).
Traditionally focused on paying the bills, the AP function is on the cusp of its own advancement. Forward-thinking organizations already have automated invoice and payment processing, but that's just the beginning. The ability for invoices to process themselves creates new opportunities for AP staff to provide valuable support to their supply chain, procurement and treasury counterparts.
By digitizing AP, you not only speed up invoice and payment processing, but also free up staff to be more involved in upfront processes that deliver measurable business benefits. Instead of data entry and document matching responsibilities, AP becomes the focal point for key financial operations involving supplier management, contract compliance, working capital management, and more.
This is because automation can complete many AP tasks that were previously handled manually. Converting electronic purchase orders into electronic invoices is now a long-proven business practice that can easily be expanded to encompass more complicated transactions; for example, creating invoices from a contract or a service sheet. For lower-dollar recurring transactions, e-catalogs further streamline order and invoice processing.
When it comes to payments, there are many electronic payment options that eliminate paper checks and ensure timely payments to suppliers. But now AP can do more than execute the payment. They may oversee the management of payment terms and working capital management programs. If done effectively, this can extend days payable outstanding (DPO) while reducing the costs of goods and services and increasing short-term cash returns.
Supplier management is another area of opportunity for AP. With a supplier portal, suppliers can easily establish an account for electronic transactions by entering their contact information, shipping details, bank account numbers, certifications, tax data, sustainability ratings and other key information. The AP team can support this effort to transition suppliers from paper to digital processing while proactively managing supplier risk and supporting sustainability goals.
As automation handles more and more AP processing functions, AP staff have more time for data analysis and reporting across many dimensions. Additionally, these capabilities will be more valuable when combined with enabling technologies such as cloud computing, artificial intelligence (ai), and machine learning (ML).
While all of this serves to reduce the cost of doing business, the driver of this transformation will not just be cost savings. Equally important is the new business potential that these new capabilities make possible. That includes more time in AP dedicated to managing supplier performance and risk, developing real-time forecasts of outstanding accounts payable, the ability to support treasury efforts to manage working capital and cash flow. of cash, and the recognition of acquisitions as an indispensable business partner.
