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Transforming Accounts Payable Into a Profit Center

Laurent Charpentier

Companies exist for one goal, to turn a profit. At first glance, it's a simple equation. Try to spend as little as possible while generating as much revenue as you can. Typically accepted business models, therefore, divide operations into two categories: cost centers and profit centers.

It’s a good question whether this binary split is a true reflection of business reality. Perhaps it’s time to question common wisdom, because with the right tools it’s entirely possible to reshuffle the categories and turn an alleged burden (cost center) into a benefit (profit center). One such tool is business process automation.

An area that is particularly ripe for transformation is accounts payable. Historically this function is the last place where businesses will look to cast off old thinking and discover a hidden profit center.

Transforming accounts payable into profit center
Illustrated by Ryan Mason. © 2017 Nvoicepay

There are three key areas where AP automation has the potential to transform accounts payable and add value to companies of many sizes:

1. Decision-making: Smarter financial decisions thanks to real-time data intelligence

First, AP automation in the cloud improves real-time visibility into daily accounting operations that creates financial intelligence. Accounts payable data becomes more accurate and readily available. Having access to aggregate and live accounting data enables companies to practice data-driven management in their everyday affairs, down to using a simple utility bill or vendor receipts to discover bigger trends. It’s a competitive advantage that previously only large companies with large IT budgets could afford.

According to the Aberdeen Group’s 2015 AP/AR Benchmark Survey, 42 percent of finance leaders identify automation as a key step to improving overall financial management. Now, real-time analytics and interactive dashboards create a new, holistic approach to accounting and AP, resulting in a direct and positive impact on the bottom line.

Since such tools are finally affordable and easy enough to use, frontline staff and back office employees alike can see key metrics and make better decisions that impact the company's bottom line.

Some companies have even created a tiered access system so junior and senior accounting personnel can drill down or zoom back up to the level of granularity they need to do their jobs better. VPs and CFOs, for instance, can use AP Intelligence to focus on cash forecasting and to schedule payments for optimum cash management, on the fly.

One prime example is Falcon Holdings, a large Texas-based franchise holder and operator of more than 300 restaurants across 15 states. As CFO Giovanna Koning explains, it used to take Falcon days or weeks to manually go through thousands of invoices arriving in the mail or by courier. “We had 300 FedEx envelopes piling up on a table every week. Now, invoices are submitted electronically or scanned and then processed within hours. Some of our frontline people approve AP-related documents on their smartphone as if they were doing online banking.”

Also, real-time data in the cloud gives companies a greater level of end-to-end control over the invoice processing cycle and improves transparency. Going paperless helps the supply chain become even more automated, so the departments or divisions within a company can centralize, track and share information. Comprehensive, accurate historical and current data leads to improved business processes. Says Falcon CFO Koning: “Faster cycle time and better visibility gives me and everyone else live information on costs. We live and breathe our sales comp numbers for each day, so AP automation gives us a tangible competitive advantage.”

Research among our customers backs up this “costs to profits” scenario. If you add up all the labor savings, reduced printing and shipping cost, improved security, ability to retrieve documents quickly, and other factors, organizations can save up to several thousands of dollars every day.

2. Invoice processing: Higher volumes processed faster

As businesses grow, so does their accounts payable function. More suppliers, more vendors, more paperwork to handle. Typically, this type of growth hits the bottom line through higher invoice processing costs and reduced productivity.

With AP automation in the cloud, though, companies can scale their accounts payable function for less. It lets them capture invoices and other documents, extract relevant data from multichannel sources and power an electronic workflow. Companies can now stop wasting time and money looking for lost invoices while cutting the invoice cycle from 20 or 30 days to just a few days. This whopping gain in productivity enables companies to avoid late payment penalties and capture all possible discounts from suppliers.

Cutting invoice cycle time and capturing early payment discounts generates even more savings. Employees can focus their resources on strategic tasks instead of shuffling or hunting for paper.

3. Improved and strengthened relationships with vendors

Finally, AP automation helps turn accounting into a live network of partners who thrive when secure and traceable information flows freely. Accounts payable is no longer about exchanging invoices and waiting for payment, but about building ongoing relationships and communication. As companies avoid late payment penalties, they reduce their suppliers’ tense calls. Instead, they can build relationships around trust and negotiate better terms and discounts. In fact, Falcon is now providing AP smarts to all its contract partners free of charge because it saves so much and adds so much to the bottom line.

Automation doesn’t take people out of the equation, but gives the accounting department the tools to stay on top of the purchasing process, PO matching and lets them organize everything per purchase and per vendor. It empowers employees to focus on high-value activities such as discount and cash management and robust engagement with partners and suppliers. By improving the AP process, companies can build and maintain mutually beneficial relationships with their vendors, one invoice at a time.

That’s why the path to more profitability starts with how we look at and deal with every single invoice.


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