Transformative technologies such as enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM) systems have brought productivity breakthroughs that have dramatically improved business performance.
The finance function has reaped benefits from these advances but there’s much more to come. The next wave of transformation is upon us, and it involves transactions between business partners. That 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 breakthrough. Already, forward-thinking organizations have automated invoice and payment processing, but that’s just the start. The potential to have invoices 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 accelerate the processing of invoices and payments, you free up staff to become more involved in upstream processes that deliver measurable business benefits. In place of data entry and document matching responsibilities, AP becomes the focal point of key financial operations involving supplier management, contract compliance, working capital management, and more.
That’s because automation can complete many AP tasks that used to be handled manually. Flipping electronic purchase orders into e-invoices is now a long-proven business practice, and that can easily be expanded to embrace more complicated transactions; for example, creating invoices from a contract or service entry sheet. For recurring, lower dollar volume transactions, electronic catalogs further expedite order and invoice processing.
On the payment side, there are many electronic payment options that eliminate paper checks and ensure timely payments to suppliers. But now AP can do more than execute payment. They can oversee the management of payment terms and working capital management programs. Done effectively, this can extend Days Payable Outstanding (DPO) while lowering the costs of goods and services and increasing returns on short-term cash.
Supplier management is another area of opportunity for AP. With a supplier portal, suppliers can easily establish an account for transacting electronically 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 move suppliers from paper to digital processing and, at the same time, proactively manage supplier risk and support sustainability goals.
As automation handles more and more AP processing functions, AP staff has more time for data analysis and reporting across many dimensions. Furthermore, these capabilities will grow more valuable when combined with enabling technologies such as cloud computing, artificial intelligence (AI), and machine learning (ML).
While all this serves to drive down the cost of business operations, the driver of this transformation won’t be cost savings alone. Equally important is the new business potential these new capabilities make possible. That includes more time in AP devoted to the management of supplier performance and risk, development of real-time forecasts of outstanding payables, the ability to support treasury efforts to manage working capital and cash flow, and recognition from procurement as an indispensable business partner.
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- Source: https://nanonets.com/blog/future-proof-your-finance-function/
