Harnessing accounts payable data for intelligent business decisioning

To thrive in this age of the fluid and the unexpected, businesses, more than ever, need to closely monitor spend and effectively manage cash flows. The demands placed on finance teams are, consequentially growing. Business partners increasingly rely on their Account Payables departments for providing insightful, actionable analytic support to drive better working capital utilisation and cash flow planning. 

The Accounts Payable departments process all supplier transactions, which are high value payments and account for a substantial proportion of an organisation’s cost.  To access critical metrics, finance teams, however, often find themselves in a bind. While there’s no dearth of information, finance teams lack the tools to harness data in real-time for business insights. The data is resident across multiple spreadsheets making aggregation a tedious process, requiring several days to organize into reports for C-level executives to consume. This creates a misalignment between time-to-reporting cycles and the pace of business. 

As Accounts Payable departments assume the role of a value-added business partner, it’s no longer feasible to rely on spreadsheets to manage payables and cash flow. Automated payable systems with embedded analytic capabilities can help businesses improve data management and spend analysis. Accounts Payable and Invoice Automation solutions provide real-time visibility over the entire end-to-end payables processes — from sourcing to payments — enabling businesses to make informed decisions to optimize performance.  

Spend analytics offers a 360-degree view of spend – spanning payables, suppliers, and operations – enabling businesses to improve cash flow, contain costs and transform existing accounts payable practices. Armed with this information businesses can:

Optimize spend efficiency

Businesses can capture payables data in aggregate and analyse the data along a range of parameters — cost centre, location, and suppliers — to gain visibility into where purchase dollars are being spent.  

Businesses can track paid, overdue outstanding, and upcoming invoice positions to plan cash flow and their working capital requirements optimally.  

Accounts Payable departments can also identify out-of-budget spend and control maverick spend. A centralized view of spend enables businesses to effectively track variance between budget and spends across multiple departments and suppliers, enabling them to enforce enterprise-wide compliance.  

More importantly, accounts payable insights can help finance departments manage days payable outstanding. By reviewing current, upcoming, and urgent payments businesses can strengthen overall liquidity positions through the:  

• identification of higher working capital outflows due to invoice pre-payment and advances
• renegotiation of terms of payments in line with cash inflows
• extension of days payables outstanding without impacting the business
• ability to benchmark days payable outstanding with industry peers  

Boost operating efficiencies

Accounts Payable departments can make analysis an integral part of everyday operations — enhancing productivity and operating efficiency.  

With embedded analytics, businesses have an immediate view into the quantum of overdue payments and composition by age (bucket analysis) and vendors in each age category. A high number of outstanding invoices implies process delays that potentially impact the ability to capture early payment discounts or avoidable late fines.  The ability to track invoices through each stage of the processing cycle helps identify process bottlenecks and optimally design approval workflows for improved agility. For example, organizations with seasonal businesses such as eCommerce that receive a higher volume of invoices during festive seasons can appoint more approvers or reduce the number of approval hops to accelerate processing cycles. 

Businesses can also track other critical metrics such as exception rates, mismatches between purchase orders and invoices, and errors as a percentage of total invoices that result in duplicate payments or overpayments and take remedial action.

Additionally, businesses can lower processing costs by analysing payment instruments and fees incurred on invoice processing. Many accounts payable automation platforms, for instance, allow customers to execute payments across multiple payment “rails” including bank transfers, digital checks, and cards, to provide a one-stop-shop for visibility and control over payments.   A central view automatically encourages the use of low-cost payment modes and instruments that offer cashback and rebates and thereby lowers invoice processing costs.  

Strengthen supplier management

Embedded analytics can help AP teams track critical metrics that have a bearing on the supplier management process. A centralised view of all suppliers can help companies segment suppliers based on the volume of business generated and identify preferred suppliers. Supplier information related to pricing and days payments outstanding, also enable the finance team to identify duplicate spending, overspending or spend incurred with non-preferred suppliers. With easy-to-access supplier-related spending information, businesses can negotiate better payment terms leveraging historical trends, price-development patterns, and prior agreements 

Data-driven decision-making is table stakes for Accounts Payable. AP departments are sitting on mounds of data but in most organizations, it remains an unused asset. Investments in an Accounts Payable automation platform with analytics capabilities can significantly enhance business performance by unearthing opportunities to better manage cash flow, gain a better understanding of suppliers, and achieve cost reduction.