The Insider’s Guide To Improving Payments And Cash Flow: Understanding Critical Dependencies

Alan Cohen and Scott Pezza

Part 5 of the Payments and Cash Flow Series.

For a payments or cash flow initiative to succeed, you must consider these components of a comprehensive plan:

Organizational will, covered earlier in this series, means that you have defined goals, target dates, and executive support to drive the program forward. That goes hand-in-hand with cross-functional alignment, which connects procurement, treasury, and shared services/accounts payable, through aligned scorecards.

Alignment is enforced by defined processes and governance, ensuring that not only is the strategy set but that there is ongoing monitoring and enforcement of policies. Finally, technology simplifies execution with an end-to-end platform rather than a series of point solutions for invoice management, discounting, supply chain financing, and payment.

Understanding critical dependencies

A successful payments or cash flow program requires that multiple aspects function well on their own to effectively deliver the anticipated benefits. To keep everything flowing in the right direction, you need to:

  • Buy right: Purchase orders should be created prior to funds being committed and employees should receive goods in a timely manner (same day or next day if practical). This eases approvals and creates a longer window to optimize the method and timing of payment.
  • Pay right: Pay early for discounts, or at maturity. Store and maintain bank account data outside of your company’s enterprise resource planning (ERP) application, and provide rich remittance details to help suppliers effectively apply payments—and cut down inbound inquiries.
  • Optimize working capital: Set goals for discount savings and cash flow improvement from terms extension, then create offers and prioritize suppliers accordingly.
  • Communicate internally: Beyond cross-functional alignment, you must educate your organization on program goals and expectations, so they can share that information in any conversation.
  • Enforce compliance and supplier adoption: Establish a strong compliance policy, and use a network model (rather than one-to-one connections) for supplier adoption.

For both the requirements and critical dependencies outlined above, you should:

  1. Assess your current state. This can be as simple as defining “red, yellow, green” status for each item to help prioritize what elements need improvement.
  1. Take action on the results. Develop an action plan to improve upon the red and yellow areas. Focus on the “quick wins” and continually validate the organization’s will to succeed.

How we can help

To help you implement the call to action, we have tools that elaborate on the key requirements and critical dependencies. With this information, you can assess your company’s current state and prioritize quick wins. To request these tools, send an email to: SAP_improve-cashflow@sap.com

Our complimentary Insider’s Guide to Improvement Payments and Cash Flow e-book is now available. You’ll learn how to build a business case, plan, and implement a new payments and cash flow program that can deliver measurable value to your organization.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | FacebookYouTube


Alan Cohen

About Alan Cohen

Alan Cohen is VP Payments & Financing Strategy, SAP Ariba. Alan has over 20 years of payments and working capital experience as a practitioner, consultant, and banker. In his current role, he leads the payments and financing strategy for SAP Ariba to help clients achieve improved business outcomes. Previously, at Coca-Cola Enterprises, Alan led the procure-to-pay transformation that encompassed sourcing, procurement, and payables automation, and the company became one of the first to benefit from dynamic discounting. Alan holds a supply chain management degree from Arizona State University. In 2015, he was part of a team that won SAP’s Hasso Plattner Founders Award for an innovative approach to B2B payments. Alan lives in Atlanta with his wife and 2 daughters. He has served on the board of the Weinstein School since 2007 and actively participates in 2nd Helpings, a nonprofit to rescue and deliver surplus food.

Scott Pezza

About Scott Pezza

As part of SAP Ariba's Digital Transformation Organization's Center of Excellence, Scott researches, compiles, and shares best-practice information to help SAP Ariba's customers get the most out of their investments. He has a dual focus on the emerging technologies (AI/ML, IoT, Blockchain, etc.) across the source-to-settle cycle, as well as a specific interest in the financial supply chain (invoice management, payments, discounting, and supply chain finance). His research helps inform strategic planning, performance measurement, and program execution. He has spent the past 17 years in the B2B technology space, in roles ranging from software development and support to research and consulting. Scott earned his BA in English and Philosophy from Clark University, his MBA from Boston University Graduate School of Management, and his JD from Boston University School of Law, where he served on the Executive Board of the Annual Review of Banking and Financial Law.