After attending the P2P Certification Training through the Institute of Finance & Management (IOFM) last week, I realized there were a lot of assumptions I had about the accounts payable (AP) function that were flat-out wrong. Here’s my quick list of what I thought I knew about accounts payable:
Accounts payable is invoice entry
Judy Bicking, a 30-year veteran Global Shared Services Manager at Johnson & Johnson, led the training and her manta is “Accounts payable is not invoice entry. Accounts payable is about mining data off the invoice and using that data to help make strategic cash decisions.” Accounts payable is the frontline for fraud prevention, elimination of maverick spending through spend management and maximizing supplier discount opportunities. All of these functions require much deeper analytical skill than just invoice entry and bring direct business value.
Accounts payable is a where businesses spend money, not save money
The AP department is a strategic function in the organization. Accounts Payable is about cash management. Gartner cites that simply paying your invoices on time is like getting 35% interest! Now imagine the impact of taking advantage of supplier discounts, p-card savings and VAT tax reimbursements! The AP department is about analysis and strategy — not a cost center.
Every invoice is the same
Obviously not every invoice would be the exact same, but they all follow a similar path: order goods, receive goods, receive invoice, pay invoice … right? Well, things tend to be more complicated than that scenario. Accounts payable has to investigate many other questions before they can submit payment: Were the correct, if any, goods received? Was there a PO with the invoice? Who needs to be a part of the chain of approval? Wait, is there a duplicate version? Not every invoice needs a PO, but every invoice can, and should, be turned into a PO-like process. It’s possible to automate and simplify the process, but that it takes you to strategically review the process and streamline as much as possible.
So what? Why does it matter how we view the AP department? Giving this strategic department the proper tools to execute their important activities can result in a huge payoff!
Spend and discount management strategies help reduce goods and services costs as well as overhead processing costs. With spend analysis, you’ll see reduced risk by only dealing with reliable vendors that provide quality goods and services while only accepting authorized purchases to eliminate maverick spending.
There’s a lot more to the activities of an AP department than many believe, and the importance those functions is often overlooked. Putting an automated solution in place brings efficiency and visibility to the process — showing you where money is being lost while helping stop it from happening again.
Read our eBook about addressing the top pains of your AP team.