In Part 1, we looked at the differences between manual and automated expense and invoice entry. So how does automated entry make Accounts Payable more strategic? Here are just a few of the ways that immediately come to mind.
- AP can now work with Procurement and Sourcing to examine spending by vendor and by spending category. This will present significant opportunities to competitively bid areas of large spending. This type of effort typically yields 10% to 30% cost reduction for goods and services that are strategically sourced.
- AP can work with suppliers to discuss early payment discounts, like 2% Net 10 Days. This means that the supplier will agree to a 2% discount on their product or service in exchange for being paid in 10 days instead of 30. If you were to annualize a 2% discount for 20 days of working capital, it would equate to greater than 36% annual return on your money. Treasury loves this low-risk way to achieve stellar returns!
- For those suppliers who will not participate in the early-payment discount program, AP can negotiate extended payment terms. Meaning, if you won’t give us a discount to get paid early, we are going to take our time in paying you so that our Treasury Department can make money on that money.
These are just three simple examples… there are many more! If you are a leader within your Accounts Payable organization, don’t be afraid of automation. It will help you to provide meaningful and measurable value and financial impact to your organization while giving you the ability to do more work with the same number of people. Can you say “poised for growth”?