The Benefits of ePayments? They’re Not Just for AP Anymore
By Andrew Bartolini, Chief Research Officer, Ardent Partners
Automation within the P2P process has been a driver of enterprise performance for many years; however, it is only over the last few years that there has been a significant uptick in automation initiatives that include B2B payments. In fact, our recently published research report on the topic, “The State of B2B Payments 2015: Emerging Business Value,” highlights the momentum of ePayments in the marketplace as well as many of the gains that accounts payable (“AP”) departments can achieve from streamlining and automating their B2B payment process.
While adopting a new ePayment solution can represent a fundamental shift in the way businesses have historically paid their suppliers (namely, via check), by replacing age-old, paper-based methods with automated solutions, AP groups can gain speed, accuracy, efficiency, and visibility from the change. But this year’s report also highlight the benefits and opportunities that exist for another key stakeholder - Treasury.
While Treasury generally has a good view into how sales, payroll, and taxes impact the overall working capital position, they frequently lack a view into the supplier payment process. When AP’s impact on cash outflows is examined, it becomes clear that the two teams should be closely linked. And, an AP team with ePayment capabilities presents Treasury with a potentially significant opportunity to improve cash and liquidity management. Automating the B2B payment process can drive cost out and help businesses manage their supplier payments more effectively while unlocking new ways for Treasury teams to optimize their working capital.
How AP and Treasury Can Work Together
One of the key things to understand about enterprises with manual processes is that their departments tend to operate as functional silos. For example, AP runs its invoice approval and payment processes, while Treasury examines opportunities to maximize the enterprise’s cash on hand and gain the greatest return on the organization’s cash. These two teams almost never collaborate in enterprises with scant automation.
To understand why these teams should work together, it is first important to understand that AP is fundamentally a cash distribution function. Consider that supplier payments are, frequently, the single largest non-payroll source of cash outflows for many businesses. Since Treasury’s responsibilities center on managing cash, having visibility into supplier payments (amounts and timing) provides valuable information for Treasury to better manage its own operations.
One of Treasury’s key responsibilities is short- and medium-term financial planning, which is offered to executives as a picture into whether the enterprise will have enough capital to fund operations. Collaborating more closely with AP gives Treasury access to supplier payment data, which provides additional data points to use in cash management. Because AP sits atop one of the biggest sources of cash outflows, this additional data can enrich Treasury’s cash forecasts and provide a better view into the organization’s cash positions.
Conversely, AP gains visibility into the wider enterprise’s cash management strategy. This allows AP to schedule payments in accordance with working capital goals, and align its payments with the overall cash management strategy more closely. The end result thus is a supplier payment strategy that is aligned with the larger business.
Heightened volatility and increased business risk have combined with tight and uncertain credit markets to ensure that having cash and maintaining direct access to it will remain a priority. Combining ePayments with an automated AP process has the dual benefit of driving significant process efficiencies across the AP function, while also enabling Finance and Treasury professionals to gain greater visibility into cash flows and develop proactive strategies to optimize working capital. AP groups that leverage technology put themselves in a better position to collaborate with and support treasury in their efforts to manage cash. More to the point, however, is that Treasury can gain major benefits from the type of nuanced supplier payment strategy that is achievable with an ePayment solution.
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Andrew Bartolini is a globally recognized expert in accounts payable, sourcing, procurement, and supply management. Andrew focuses his research and efforts on helping enterprises develop and execute strategies to achieve operational excellence within their finance and procurement departments.
He actively covers the technology marketplace as well as trends in sourcing, procurement, supply management and accounts payable and has been published or quoted in
leading business publications including The Wall Street Journal, Business Week, Investor’s Business Daily, Forbes, and Fortune, as well as the major trade publications focused on accounts payable and supply management.