Accounts payable has traditionally been the quintessential back-office function: the cost-center in the sub-basement with the lousy office furniture and the coffee pot that doesn’t work that well.
But accounts payable has seen its star rise in recent years as more senior executives recognize the ability of fully automated accounts payable departments to drive strategic objectives such as cash flow analysis and liquidity management. Most controllers now rank accounts payable as strategic, and of vital importance to the business, per the Institute of Finance and Management (IOFM).
For starters, the enhanced visibility provided by fully automating accounts payable empowers senior management to make better informed decisions for managing finance operations and working capital. Decision-makers have ready access to the information they need to determine when to release cash. And organizations can gauge spending against budget, and quickly identify “maverick spending.”
Additionally, the accelerated invoice cycle times provided through full automation enables buyers to capture additional early–payment discounts – a top priority of accounts payable professionals surveyed by IOFM. With early-payment discounts, buyers offer payment terms on a sliding scale: the earlier the supplier selects to be paid, the bigger the discount. Once a buyer approves an invoice, the supplier is presented with options on when they want to be paid. The sooner the payment, the bigger the discount; the longer the time until payment, the smaller the discount. Even the standard early-payment discount of 2 percent 10, Net 30 works out to a 36 percent return on capital.
Paying invoices on time also strengthens a buyer’s relationships with its suppliers, potentially resulting in lower cost-of-goods during contract negotiations.
What’s more, paying suppliers electronically enables buyers to earn incremental revenue based on spending with a card. In some cases, businesses are earning millions of dollars annually from cards, more than offsetting any upfront costs associated with automating accounts payable processing.
All this transforms accounts payable into a profit center, and a strategic partner to the organization.
Let Nexus show you how to take accounts payable from the back-office to the corner office.