5 Ways to Turn Accounts Payable into an Asset

By Armie Duterte

Traditionally, Accounts Payable (A/P) has been viewed as a processing machine to code and pay invoices. In an economic environment where margins are tight and cash is king, A/P often is one of the last areas to find opportunities.

Here are some ways to look at the function differently to unlock A/P’s hidden value.

  1. Providing both quantitative and qualitative data.
    • Do supplier invoices contain all of the required information? If this is a recurring issue, is this indicative of the way that the supplier runs their business? The supplier may need to be re-educated with regard to the company’s requirements and processes.
    • Are there consistent invoice accuracy issues? Perhaps the end-to-end processes need to be re-evaluated or the supplier needs to be re-educated to improve process efficiency.
    • How well does the supplier work with A/P personnel? Does the supplier complain and demand payment outside of the agreed payment terms? If the supplier is not willing to comply and is not helpful in resolving the issue, then this can be another indicator that the supplier is at risk for other issues. Companies may wish to assess whether the supplier is still willing and able to meet its obligations under the current agreement and is aligned with the company’s requirements or goals.
  2. Strengthening collaboration between suppliers, procurement, A/P and operational business users can reduce risk.
    By leveraging the combined efforts of all functions, not only can risk factors be identified early in suppliers, but mitigation plans can be put in place before disasters happen. For suppliers who are struggling, yet strategic to the company, getting in front of a potential problem could mean the difference between keeping or losing a competitive advantage.
  3. Reviewing payment terms and methods to identify cash opportunities.
    Electronic payment methods are generally less expensive than generating checks and therefore could result in savings just by paying invoices differently. In addition, taking advantage of discounts by paying early, not only results in cash savings, but can help to strengthen relationships with suppliers.
  4. Empowering A/P to increase supplier enablement through supplier portals and invoice automation promotes supplier self-sufficiency, increases A/P efficiency, streamlines and accelerates invoice throughput.
    A/P can reduce the number of lower value-added activities that are performed by enabling suppliers to answer their own inquiries with a supplier portal. Through a portal, suppliers can view the status of invoices, as well as provide supplemental information that may be needed to resolve issues. Companies and suppliers can take advantage of technology that allows suppliers to submit electronic invoices and eliminate the need to submit and process paper invoices. Electronic invoicing not only automates processing, but improves process compliance, reduces error rates, and increases processed volume.
  5. Shifting A/P to be more proactive than reactive.
    To ensure that processing delays do not occur, suppliers can be educated in the company’s processes prior to the time that an invoice needs to be submitted for payment. The supplier can collaborate with the company so that the invoice submission methods (e.g., EDI, email) used by both parties work together optimally. In addition to ensuring that invoices are correct and accurate, A/P can work with suppliers to provide reporting to support accruals that the company makes.

A/P doesn’t need to be a weak link in the procure-to-pay process. A/P organizations can take a leadership role in gathering information about suppliers and use a holistic approach to take advantage of opportunities that exist in this area.

Armie Duterte is a consultant at Accretive Solutions. She is a finance professional with extensive FP&A experience in large and small high-tech companies. Armie also has experience as a Senior Strategic Sourcing manager and has implemented projects to improve the procure-to-pay process.