In the referenced article appearing in enterprise times, the author has an interesting approach to the question of the accounts payable (AP) department and how to extract more value outside of reducing cost. The point is that a happy and stable supply chain has inherent value.
We share this view, especially as the ongoing convergence across the systemic cash cycle technology becomes more visible and viable. We covered this most recently in a report on B2B payables.
Back to the enterprise times article:
“…an AP function ‘on top of its game’ will likely have the supplier’s interests as much up front and center as those of the purchasing enterprise (both AP and the actual buyers). Trust matters. When buyers and suppliers have mutual trust and recognized self-interests which complement and work with each other, the impact magnifies. In effect AP, and especially with automated AP, acts as a lubricant – not as sand in the oil.”
The author goes on to pose a series of questions that an organization can answer to determine how supplier-friendly its AP operations really are. This is actually a useful exercise if one is seeking more than the typical ROI calculus for AP investment (for one reason). These questions include things (among others) such as:
- Is it easy to onboard new, possibly alternative, suppliers?
- Are AP staff (and buyers) aware of, and have access to information about, contractual terms and supplier incentives – for example bulk purchase discounts and/or reductions for prompt payment?
- Is there a complete view – for finance, as well as buyers and AP – of the overall payments and due payments situation?
So a holistic view across the cash cycle is a useful way to better manage working capital, and having AP better informed as a key cog in that financial management wheel has intrinsic value to a more efficient and effectively functioning process. The author even goes on the compare AP with CRM, such that AP and purchasing should be as symbiotic as sales and sales management. The piece is a good, quick read with bullet pointed insights.
“Few medium or large enterprise marketing and sales organizations believe they can operate without CRM. For constructive and responsive AP, a similar approach to CRM is needed – automated AP where the supplier is as much at the center as the purchasing enterprise.“
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
