Ideally, all departments in a business should be able to work together collaboratively to accomplish the overall goals of the company. In reality, things often don’t work so smoothly. Purchasing and Accounts Payable are an example of two departments that don’t always work together as well as they should; when they don’t, both time and money is wasted.

Historically, when difficulties have been encountered between purchasing and Accounts Payable, they have been in the following areas:

  • Errors in data transmission or documenting
  • Purchases that were made but never recorded
  • Lack of uniformity in documentation or procedures
  • Negotiated discounts lost because of late payments
  • Departmental roles that overlap but conflict

Nearly all of the above problems can be solved with the introduction of Accounts Payable Automation.

The Integration of Procurement and Accounts Payable

With the help of AP Automation, all purchasing can be done electronically from the generation of each purchase order to its final payment. This is the basis of a procure-to-pay system, and it works effectively to streamline the functions of both the purchasing and Accounts Payable departments, combining each financial transaction into a seamless series of computerized steps.

Electronic invoicing standardizes the way these functions are handled, eliminating human error by making use of computerized processes. Instead of each paper document being manually reviewed for discrepancies – a system which is slow and fraught with mistakes – electronic data is formulated for each supplier, archived and compared to previous transactions. Both purchasing and accounts payable have access to the same electronic information, allowing them to work together to achieve common budgetary goals. Because the E-invoicing information is in real-time, discrepancies can be quickly corrected at either end.

How Dynamic Discounting Helps with Integration

Dynamic discounting is the genius of the procure-to-pay system. With dynamic discounting, invoice discounts are taken on a sliding scale instead of within a static ten-day window. This is only possible because the Accounts Payable Automation stands firm as an intermediary between the buyer and the supplier. Payments are made to the intermediary instead of directly to the supplier.

This allows for both the buyer and supplier to get what they want the most. The supplier gets an early payment on his invoice, and the buyer can extend payments on invoices to align them with the working capital that is available.

How does this encourage integration? Instead of discounts being negotiated by one department and then lost by the other with late payments, all negotiated discounts can be efficiently handled from the outset by a single entity – the computer mind. Invoice discounting becomes less of a daily struggle and more of an automatic event, calibrated electronically in the computer database.

The bonus for procurement and Accounts Payable is that more working capital is freed up to use for other vital things in both departments, such as new products or additional employees. Instead of being focused on goals that will only serve their own department, they can spend more of their time concentrating on how they can work together to fulfill the stated goals of their company.