Making Accounts Payable Agile

Making Accounts Payable Agile

Proactive, and not Reactive Accounts Payable

Lack of agility in handling accounts payable tasks is one of the primary impediments to companies achieving healthy cash flows and realizing savings. Intelligent Process Automation makes AP agile by introducing a natural streamlining of operations and proactive vendor invoicing.

For better cash flows, companies need to focus on removing the constraints that impede quick payments to vendors for purchases made. So, what are the common constraints that make Accounts Payable (AP) reactive and not proactive in managing funds and purchases? It usually comes down to the operational inefficiencies within the department — many question the need to change due process within a system that is working just fine — aren’t all payments being made eventually?

Proactive, and not Reactive Accounts Payable

This is the reactive tendency that most companies are accustomed to, not realizing there is real hidden value and savings in turning AP proactive. Proactive AP ensures better cash flows and sets your Finance & Accounting up for growth. The AP department is responsible for paying-off its company’s debt to creditors and suppliers on a regular basis. Your cash flow statement shows an increase or decrease in AP over the course of time, revealing whether you are buying in excess or staying within budget. An increase in AP means you are purchasing more products on credit than you can pay off. A decrease in AP implies you are paying off your prior debts rather than making more purchases, indicating you are well within your budget. Knowing where your company stands in terms of debts and payments will help you gain clarity on the state of your finances, and either plan or ‘not plan’ future initiatives. This is the very definition of being proactive and saves companies not only in late payment costs but also prepares management for a more sustained, measured capital expense management.

Companies and departments need to demonstrate Agile working conditions, processes, and systems if they are to become proactive.

What makes a department Agile?

Proactive, and not Reactive Accounts Payable

Planning, budgeting, finance are three customary corporate functions that need to be tweaked, revised, or discarded, based on changing market conditions. A dynamic marketplace may be cause for or lead to regulatory changes, a change in operational goals, competition, performance targets, and naturally, funding of on-going and future projects. Successful companies are receptive to change and ensure suitable accommodations are in place to manage it. If your seasoned vendor has decided to revise the base price of goods and services supplied to you, you also need to be prepared to adjust your purchasing plans to ensure you do not go over budget. For this, it helps that you have in place a centralized AP system that links your purchase department to vendors, tabulates price changes, and helps you easily calculate inventory costs based on the revisions. A central AP portal offers real-time visibility of inventory, purchases made, payments to be made, and your master vendor list for immediate reference and action. Evolving technology solutions such as Intelligent Process Automation (IPA) with suitable integration to an accounting software or other business applications enable a natural streamlining of the purchase-to-pay chain and help document every transaction for complete audit and compliance. IPA maps your accounts payable for ready reference, inference, and action.

The consistent end-to-end connectivity and communication between you and your suppliers is what makes your AP agile!

Intelligent Process Automation brings about agility in data-and-labor intensive processes.

Reaching out to vendors through a central AP network will help access and tabulate vendor information and price changes immediately. This in turn allows you to be attentive to pending payments and price changes, and respond promptly. This consistent and quick response to vendors is what makes your AP proactive.

Better Returns with Agile AP: A Success Story

Proactive AP encourages early payments, and helps you avail related discounts. In essence, these early payment discounts and consistent communication with vendors for the best deals using IPA are what will reward you with healthy cash flows.

Intelligent AP provides a more collaborative, organizational-level approach to payments processing, ensuring:

  • The Purchase Department budget is not exceeded
  • Budgeting priorities are revised as per vendor price changes within a set timeframe
  • No late payments or unplanned purchases will be made, thereby containing costs

Invest in Intelligent Process Automation; the rewards are cumulative as this manufacturing firm discovered after applying Intelligent Process Automation to centralize AP operations — Case Study.

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