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:
- 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.
- 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_improvefirstname.lastname@example.org
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.