Automating Payables for the Mid-Market-Unlock Working Capital and Enable ePayments
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These expanded responsibilities are creating a tension between financial and strategic roles. At the same time, this intensifies the need for more data to inform decision-making. The survey also focused on identifying the challenges these executives face in adopting efficient solutions in these four areas. A range of industries were represented in the survey, with top respondents coming from manufacturing, nonprofit and financial services. This is supported by the fact that strategic planning ranks third as a priority for the finance department, outranked only by increasing cash flow and reducing costs.
But for CFOs, investing in strategic planning is a trade-off that can reflect either a cost or an opportunity. For instance, many CFOs are getting involved with operating metrics—a step beyond the financial metrics they have traditionally used. Yet, whether this is an efficient use. So, if strategic planning is a top priority, the finance function needs to invest in its people and in the technology necessary to support business processes, such as budgeting, forecasting and long-term planning. This planning effort is not only related to financial data, but also to the operational information that drives the business.
It starts with defining key business metrics and then tying these metrics to how they affect or drive bottom-line performance. The tension that the CFO is experiencing between priorities inside and outside of the finance function increases the need to streamline processes through technology, which, in turn, promotes more integration between finance, risk, treasury, and operations.
Another improvement focus is to consider core versus non-core finance activities, leveraging shared services for non-core processes, while leveraging technology and data analytics for core activities that help focus limited resources on delivering the highest value for the business. The challenge lies in providing parts to distributors through a seamless process that manages cash flow while reducing credit risk.
Distributors need reliability and the assurance that they are getting consistent pricing. Suppliers need to be paid on time. By learning from and collaborating with experienced internal experts, AP can better harness the power of innovative solutions to take the function to the next level while also ensuring that their digital approach aligns with the greater organization. For all of the talk about digitization, technology, and the next generation of accounts payable, the hard truth that most AP professionals still face daily is that manual day-to-day tasks sap time and energy and end up dominating the focus of the team.
Tasks such as invoice matching, supplier inquiries, cutting paper checks, and any manual- or paper-led processes within invoice and payment management, erode the potential value of AP by reducing the amount of staff time available for more strategic activities. These issues also create the perception among key stakeholders that AP is essentially 8. This view has long held AP teams back from greater prominence. As AP organizations continue their fight for relevance, the elimination of tactical tasks will be critical to achieving ultimate success.
However, the long-held perception of AP is finally changing for the better. In , AP groups are rarely first in line to receive budget increases and special project approvals. Invoice exceptions create a severe bottleneck in the overall AP process by forcing these staffers to hunt down additional information and resolve the issues.
Exceptions greatly diminish team productivity and they also inhibit AP staff from attacking more strategic activities. The longer it takes an invoice to be approved, the smaller the window is for AP to reap the rewards of an early payment discount. The lost time across the volume of invoices processed on a monthly basis adds up quickly. If AP wants to be considered a more strategic unit, it must prove its worth… which cannot happen if exceptions are slowing down the staff.
As with the above bullet, AP is less likely to see an expansion in staff, budget, or overall resources if it is not viewed as a well-oiled and well-run machine. Invoice that regard will leave an AP operation susceptible to being left behind when the next generation of industry automation tools sweep in and open a new era of business operations.
As such, the challenges facing a typical AP department are largely tactical in scope, linked directly to the everyday issues that AP staff face in processing invoices, handling payments, and managing cash.
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AP Broadens its Value The AP function has been relegated to the back office in many organizations, a typical reaction to an outdated perception of what the unit can bring to the greater enterprise. Ardent Partners research points to the continued evolution of AP and with it, an expansion of its reach into a broader scope of duties. The specific areas managed or supported by a percentage of AP departments generally fall under the greater financial operations umbrella see Figure 3 on next page or map directly to procurement.
Exceptions will also serve to paint a picture of the function as generally unreliable and as an organization that will be unable to take great advantage of any new investment or support. As with any discussion regarding the strategic relevance of this unit, the longer it takes to approve an invoice and the more it costs to do so , the fewer positive attributes will be associated with AP. AP staff, via ePayables solutions or their own investigation, can detect possible fraud that is hidden amongst the steady stream of supplier transactions processed each month.
Supplier verification, transaction patterns, checking for duplicate payments, rounded invoice figures, etc.
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Compliance initiatives can help raise awareness of the policies and procedures that should guide employee actions and behavior while also mitigating against fraudulent activities. AP is positioned to be a perfect ally for compliance and risk management teams, and can assist in enforcing policies, identifying potential red flags, and escalating issues internally.
With the proper tools, resources, and data, helping to prevent fraud is another source of value for AP. This figure shows AP and procurement departments, in general, continue to develop a more collaborative partnership. The proper management of these systems ensures that both procurement and AP Given the many areas listed in Figure 3 and the relatively high percentage of AP groups involved with them, there is one clear fact to glean: the contemporary AP function is dynamic in nature and can support operations and impact performance in a variety of ways.
This breadth of responsibility has been an unheralded aspect of just how valuable the AP department can be in relation to greater financial management objectives. P2P technology not only enables more streamlined AP processes it also ensures that valuable financial data is in the hands of AP and procurement staffers who can transform it into enterprise intelligence. Automation of the B2B payments process has often been described as the gateway to the next frontier in an AP transformation and is finally beginning to get the attention it has deserved.
Invoice and payment processing are essentially two sides of the same coin; a unit that truly harnesses the power of both automation and rigor on the payment side of the house can drive financial value to the greater organization. The core aspects of AP, including invoice processing, tracking invoice-related metrics, and payment management, are what has driven the function to where it is today.
The Future of AP is Now! It is no longer good enough for AP departments to simply be proficient at invoice and payment processing, although it is a good start. In order for AP, or any other internal function, to thrive in a dynamically evolving world, it must serve a greater purpose than the relative sum of its parts. Through deeper analytics, seamless integration between core spend management and financial management systems i.
ERP, P2P, etc. How does AP fit into this future of business equation? Through the introduction of core efficiencies and streamlined operations, accounts payable staff can rely on fundamental automation and next-generation innovation to both drive holistic P2P processes and deliver actionable enterprise intelligence. Agile reporting dashboards help AP leaders pivot and transform simple reports into profound pieces of information that provide intelligence into corporate financial health, ongoing financial and supply risk, and future procurement opportunities.
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The future of AP is now. By developing the necessary acumen and technological prowess, while also harnessing the power of new innovations, the modern accounts payable function can transform its own operations to become a flexible hub of actionable enterprise intelligence. For more than 18 years, Andrew has focused his research and efforts on helping enterprises develop and execute strategies to achieve operational excellence within their finance and procurement departments.
Advisor to corporate executives and leading solution providers alike, Andrew is a sought-after presenter, having lectured and presented more than times in eight different countries. This assessment is further reinforced by stakeholder comments provided in the context of the public consultation on the Green Paper on payments.
This option would therefore be far less effective —under the current market situation — in accelerating the materialisation of benefits from standardisation in comparison with option 5.
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The possible involvement of ESOs could be revisited in the medium term if sufficient progress through option 5 is not achieved. While this option creates certainty regarding the timeframe and the comprehensiveness of take-up by all market actors, the main drawback of this option is that it removes the flexibility for market participants to jointly develop specific technical requirements that best serve the market as a whole.
It could therefore entail significantly higher adaptation costs for stakeholders than the previous options. In conclusion, this option is therefore less favourable than option 5. Card standardisation is a pre-requisite for a fully integrated cards market and for the resulting benefits which could be as high as EUR 25 billion.
Option 5 is the recommended option to achieve best progress on standardisation at this stage. It enjoys the support of most stakeholders, in particular consumers, merchants and public authorities. However, many banks and card schemes have preference for industry — driven standardisation as it is today option 4. The tables illustrate the efficiency and effectiveness of each option to reach these benefits and how they would impact stakeholders.
As an example for the impact of standardisation on proximity m-payments, one recent study estimates that the annual volume of NFC-based m-payments in will be While it is not excluded that pan-European initiatives emerge solely through market forces in the future, so far this has not happened and hence fragmentation is likely to persist over the short and mid-term in the absence of any additional impetus.
This option could create possible benefits in comparison to the baseline scenario in terms of addressing proximity m-payments standardisation at European level under the participation of all relevant stakeholders. At the same time, different than for card payments the required changes in the composition and tasks of the SEPA Council are substantial due to a number of stakeholder categories that are only relevant for mobile payments but not necessarily for other forms of payments e.
MNOs, handset manufacturers, operating system providers. Other costs related to this option are marginal. This option could create benefits versus the baseline option.
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The main benefit of this option versus option 9 SEPA governance framework lies in the considerable specific expertise of European Standardisation Organisations ESOs in the field of telecommunications and in running standardisation initiatives for mobile commerce. These organisations could be mandated by the Commission to work on specific standardisation issues. The Commission would acknowledge the standardisation work in the area of mobile payments which has been conducted in various private standardisation fora so far.
The costs for this option are marginal and comparable to the ones of option 9. Overall, this option is therefore more favourable than option 9. The market for proximity m-payments is just emerging and pan-European standardisation initiatives comprising all relevant market actors do not exist. Most current pilot projects are based on proprietary solutions.
Hence, there is even less of a market-proven basis for the setting of technical requirements available than it would be the case for payment cards. Under these circumstances, this option would create the significant risk to stifle innovation and is therefore discarded.
Option 10 is the recommended option to achieve progress on standardisation for m-payments. It is supported by merchants and non-bank PSPs, including mobile payment providers and technical providers. Most banks and card schemes expressed a preference for no changes option 8. After a gradual replacement of a number of national payment card schemes by the two major, international four-party payment card schemes - Visa and MasterCard - the European payment card landscape is dominated by these two market players.