Ending the Accounts Receivable and Accounts Payable Tug-Of-War

The Better Half Of Remittances - PaymentsJournal

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The historical relationship between accounts payable (A/P) and accounts receivable (A/R) could be described as an endless tug-of-war. And, as automation has become more commonplace, this conflict has intensified. A/P departments first gained better access to new automation and technology and moved more quickly to adopt those technologies. This left A/R teams in reactionary mode — responding “on the fly” to changing A/P requirements.

But after years of conflict, a solution may finally be in sight. Explore the strained relationship between A/P and A/R as well as the potential impact of automation moving forward.

Why this relationship is strained

A/P departments use third-party systems to automate invoice receipt and improve their overall processes. For A/P teams, there are more than 100 systems that they can implement in the U.S. alone. With so many different A/P automation systems, A/R departments are experiencing difficulties integrating their processes with every single one.

In addition, because A/P departments have so many platform options, they are consequently requesting new and different ways to receive bills from A/R departments that better map to their technology. However, these new A/P systems do not automatically connect with current A/R technology, causing numerous headaches.

Essentially, A/R departments are left to manually complete tasks, like payment information application, that accommodate all the differences between A/P automation systems, and they lose valuable time in the process. These discrepancies result in a negative impact on a company’s overall efficiency, performance and employee job satisfaction.

The A/R automation movement

Automation has proven to be a saving grace for many business departments, and finance is no exception. Thanks to new technology, A/R departments are finally catching up to their A/P counterparts. New options for A/R automation are helping those teams manage the numerous A/P platforms in the market by improving efficiency, accelerating payments processing and allowing A/R teams to focus on more strategic tasks — rather than repetitive, manual activities.

For example, A/R departments have the ability to now automatically post invoices directly into A/P platforms, eliminating a cumbersome, manual process. This also allows for increased visibility into the payments process, as each invoice can be easily tracked and monitored for payment, achieving more timely and accurate data on both sides.

Paving the way for growth

 More than 80 percent of executives rate working capital as either very or extremely important to their company’s success – and it’s easy to see why. According to research from CB Insights, lack of cash is the second most common reason businesses close their doors. By decreasing the chance of anything getting lost in translation between A/P and A/R, and allowing for better compatibility between the two departments, A/R automation platforms can help get suppliers the cash they need. In fact, 45 percent of multi-franchise owners believe an automated system could help them rake in receivables 2-3 times faster.

Not only can such speed keep businesses up and running, but it may also help fuel growth later on. Often touted as the lifeblood of business, innovation can help a company soar to new heights. However, without the resources needed to spark such innovation, creativity can quickly come to a halt. That’s where automation can help make all the difference.

Becoming enamored with day-to-day priorities is a challenge all businesses face, especially those with uneven cash flow. While focusing on the present is important, it may lead to missed opportunities for future growth. Automation could make such concerns a thing of the past. Rather than waiting for revenue to turn into cash flow, businesses can leverage the power of automation to create a steady stream of resources. This consistency can go a long way toward equipping companies with the confidence needed to rapidly reinvest in their business.

While A/P automation got a head start on A/R, today the receivables world is catching up. And fast. Smart A/R teams are actively looking for the most viable solutions to seamlessly integrate A/P and A/R, ultimately ending the struggle between the two.

About the author

Ed Jordan is the Chief Financial Officer at Billtrust and leads the Finance and Administration functions. He has more than 35 years’ experience working as Chief Financial Officer at both public and private companies. Ed began his career at Deloitte and has served as CFO at Flarion Technologies (sold to Qualcomm), was co-founder and CFO of ITXC Corporation (sold to TATA Communications), and was CFO of Dialogic Corporation (sold to Intel). Ed also has extensive experience in the International technology markets with a specific emphasis on the market in Brazil. Most recently, he served as CEO of JAGTAG, a mobile technology company.

Ed’s accomplishments include guiding private companies through private and public equity offerings, and acquisitions and the development of financial strategies for growth.

In 2000, Ed was named “CFO of the Year” by The New Jersey Technology Council, and in 2017 he was named their “Hall of Fame Award” recipient. Ed is a certified public accountant and received his B.S. in Accounting from Lehigh University

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