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Is Your AP Department Stuck in the Sand?

AP Department Stuck in the Sand?

Golf is a humbling game. No two courses are alike and, even during a good round, one bad hole can ruin your score.

Just think of all the hazards you face on a golf course: trees, out-of-bounds markers, thick rough, water hazards, and sand traps.

It reminds me of the challenges facing accounts payable organizations dealing with an invoice process built around paper. That course is designed with narrow fairways, sand traps on every turn, and water surrounding every green. There’s no way you’ll break 100.

So how can you shape your game in AP to navigate that course? Easy. You need the right “clubs”, and a commitment to eliminating the paper.

As paper invoices are the source of most errors and exceptions, processing delays, and phone calls from suppliers regarding payment status, getting rid of the paper can eliminate these problems. Automation tools (the “clubs”) that employ business rules to detect invoice problems up front promote straight-through processing, and shift the burden of fixing problem invoices to your suppliers where it belongs.

There are other advantages of invoice automation that often are overlooked. Take compliance, for example. The ability to enforce compliance to company policies, preferred vendors, and negotiated prices is typically outside the scope of AP. But an invoice automation system that can handle the processing of electronic purchase orders, order confirmations and advance ship notices along with  invoices, and support invoicing against contracts, improves your ability to enforce compliance and manage spend.

Invoice automation can also improve the way you manage cash. To an organization that takes weeks to process an invoice, an early payment discount is a diamond in the rough. Organizations that have automated their invoice process shrink the cycle times to a few days.  Now those discount diamonds are in the middle of the fairway, giving you a clear shot to some big green: $2 million to $3 million in early payment discounts for every $1 billion of spend.

That’s a discussion you should have with your treasurer. Many are obsessed with delaying payments to preserve float, but today the earnings on cash balances are dismal. Early payment discounts, however, deliver double-digit cash returns, with no risk. And no sand traps.

About the author
Chris Rauen
Chris Rauen

Chris is responsible for marketing programs at Ariba that educate finance, procurement, supply chain, and other business professionals on the transformational potential of the Ariba Network and Ariba Financial solutions. Before joining Ariba, Chri... Read More >>>

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