Accounts Payable Automation & Procurement
Successful businesses stay in business by keeping a close watch on their cash flows. One prime way of doing this is by the integration of treasury and accounts payable departments. A savvy organization will forge a working relationship between its treasury and accounts payable departments including AP automation.
Procure-to-Pay
Procure-to-Pay (P2P) is the term for the procurement of goods or services needed to manufacture a business’s product or service and the process for paying suppliers. In most companies, any department can make a purchase for what it needs; these purchases are all handled by the purchasing department, usually via purchase orders. When the approved purchase orders are sent to the contractual suppliers, the suppliers send the ordered goods or provide the requested service. Invoice payment is handled by accounts payable (AP); how AP handles these invoices has a profound effect on both the supplier relationship and the company’s bottom line, as well as cash flow. Manual systems are slow, inefficient, and not able to take advantage of dynamic discounting and strategic planning. Accounts payable automation can turn around the majority of invoices in a matter of days, as opposed to weeks or months, and enable the company to negotiate dynamic discounts at contract time.
Melding Treasury with AP/P2P
Supplier payments make up the largest expense a company has, and it just makes sense to have, treasury, working closely with the area charged with paying the bills, accounts payables. This relationship can lead to better management of supplier payments and better overall cash flow.
Data Mining for Better Management
Within the processing of purchase orders and invoices lies a wealth of information – purchasing habits, supplier turnaround times, supplier responsibility, suppliers who give dynamic discounting and other useful bits of data. Treasury and AP/P2P departments who mine their invoice/purchase order databases for information put themselves into position for making better strategic decisions, and for negotiating better contracts with suppliers. With this wealth of information, organizations can forecast trends while evaluating which suppliers they need to keep and which ones they need to replace.
Managing the largest cash outflow for a business can be easily accomplished with the abundance of information that is available through AP/P2P departments. The successful companies in today’s environment have taken advantage of this resource, by tightening their purchasing expenditures and improving their relationships with their suppliers – a win-win situation for everybody involved; which makes it a procurement matter.