Third of 8 blogs in the series. Read previous blog.
Let’s be honest. How many of you have ever been truly gung-ho about either renovating or building a new home? If you’re like my wife and me, when we were contemplating such a decision, deliberating over short-term and long-term goals was challenging. However, we both ultimately agreed that buying new rather than renovating was the optimum choice for us.
So, you may be asking why we chose to build a new home and how this story relates to payables.
When breaking all the reasons down, we ultimately accepted the fact that our current house was outdated and didn’t afford us the benefits of what a new house in the 21st century brings. And when compared in this sense, some accounts payable (AP) organizations are no different than older homes. Inefficiencies exist, there are outdated or disparate technologies, and a general reluctance of the key individuals to make further improvements.
However, if there’s an initiative to make changes around outdated processes and build a best-in-class payables organization, then actions can be taken to help realize set objectives. And by becoming more proactive and resolving issues with an unbroken process, the AP staff will bring even greater value to the enterprise.
Get started with executive buy-in
As per the previous post, a solid foundation where one platform manages payables as part of the larger source-to-settle process is imperative to bring greater efficiencies and transformative value in AP to the wider enterprise. Absolutely key to this foundation is first educating and securing executive leadership on your transformational goals for AP before proceeding with this endeavor.
And while finance and business leaders are also aware of opportunities lying in payables, they are generally unaware that the payables staff is in a unique position to deliver strategic value – especially within Treasury and Procurement. AP has for so long been known as a tactical functioning group, but this is no longer the case in today’s digital economy. So, get going. Suggest and organize a cross-functional meeting to discuss plans, set KPIs, and align goals.
Out with the old and in with the new
Once executive leadership is engaged and cross-functional collaboration is established, best-in-class organizations often take different paths for transforming their payables processes. However, a common thread by many is to focus on both short-term and long-term actions to get started. To name a few, some actions include:
- Track, rank, and publish results on key KPIs (short-term)
- Establish a net payment terms policy set to industry standards and company goals (short-term)
- Define and outline a strategies/goals with timelines to achieve (long-term)
- Implement and commit to set policies with penalties for noncompliance (long-term)
- Utilize enabling technology along with proper resourcing of project for success (long-term)
Change is good and necessary
A recent Ardent Partners report, ePayables 2015: Higher Ground,” states: “Accounts payable professionals are continually searching for the means to drive value to the greater organization, understanding that they have the experience, tools, and reach to move away from back-office processes and into new strategic corporate territory.”
I tend to agree.
Once the payables organization commits to transformation and running simple, there’s no turning back. No more will low-value activities such as manual invoice routing and processing, exception handling, status inquiries, and so on be a burden on the AP staff.
Instead, more strategic and value-added activities can be pursued, such as: driving suppliers to a networked payables process, collaborating with finance and treasury on supplier payment strategies for greater working capital opportunities, or possibly feeding back detailed invoice data to the procurement team for analysis and better spend management.
Just remember, don’t give up. Change can be hard, but benefits abound to transforming your payables from a back-office and tactical entity to one that strategically impacts the organization, ultimately drawing the attention of the CEO and CFO.
In the following blogs in this series, we will examine other opportunities more closely. So stay tuned. In the next post, we will take a look at improving your current investments rather than starting from scratch, by examining how a company can transition to e-invoicing to dramatically reduce exceptions and lay the foundation for future payables transformation.
Robert Banther is manager of Solutions Marketing with Ariba, an SAP company.
Learn more about how to take your payables to the next level of performance in Ardent Partners’ research report ePayables 2015: Higher Ground.