In a time like this, maintaining a strong cash flow is of utmost importance for businesses. Unfortunately for many organisations, large amounts of cash are being tied up in inefficient, back-office finance functions, and they’re quickly realising that digitising accounts payable (AP) processes is the first step in building a robust continuity plan that frees up that cash and promotes future profitability. Accounts payable automation also helps to dramatically reduce DPO, increase visibility into when and how much suppliers are paid, and help make smarter financial decisions.
Here are 7 ways AP automation can help you better manage your cash:
Evaluate Cash Flow and Effectively Serve Suppliers
The first step in better managing cash is evaluating your current cash flow to understand where you stand. In assessing cash flow, you should also:
- Examine all of your suppliers
- Look at and reassess terms with long-standing suppliers
- Reach out to fix terms with suppliers that are negatively affecting your business
AI-driven AP automation is the best way to gain oversight into supplier relationships — allowing AP departments to easily and accurately track supplier information, give suppliers limited access to the system and data in it, and strengthen supplier relationships by providing a self-service portal with access to their own invoices, payments status and other key information.
Cut Processing Fees and Costs
In paper-based AP departments, late payments and fees are a common occurrence. Even though AP staff is often doing everything they can to get payments out on time, manual processes make it nearly impossible to take advantage of early payment discounts. However, by automating the AP process, invoice processing time can be dramatically accelerated — eliminating the risk of late-payment fees and increasing the amount of early payment discounts captured, while simultaneously saving on labor costs.
Eliminate Time-Consuming Errors
Human error is almost unavoidable. And when it comes to managing cash, AP departments must do everything they can to mitigate the risk that comes from error-prone, manual tasks. Because when AP departments lack control and organisation, it can lead to lengthy payment processing, costly errors like duplicate payments, and more time wasted on reconciling issues.
Luckily, these errors caused by manual processes can easily be greatly reduced or even eliminated with the help of an AI-powered solution. Not only does AP automation capture information from both digital and paper invoices with the highest degree of accuracy, but all invoices are processed automatically and cross-checked to ensure the information is accurate and that it doesn’t get paid twice.
Manage Payment Balances
You’ve got to spend money to make money. But when it comes to improving cash flow, it’s important to make sure those expenses don’t increase month to month by having tighter control over the processing of payments and ensuring invoices are being paid within terms, and in full.
Once again, AP automation is the answer here. An automated solution can make managing payment balances easy by:
- Streamlining the entire payments process
- Cutting costs and allowing payment times to be used to an advantage
- Increasing visibility and control over payments by allowing users to track data such as carried-over balances, average payable period, AP aging schedule, etc.
Negotiate Payment Terms with Suppliers
Supplier relationships are a valuable asset for businesses. When organisations establish a strong rapport and reputation of consistently paying on time, suppliers are often quite willing to negotiate early payment discounts that mutually benefit each other’s cash flows — they get paid faster, and you pay less. Additionally, when vendor relationships are strong and long-lasting, vendors may even be willing to negotiate longer payment terms for you and allow you to keep more cash on hand.
Use Virtual Cards
Another simple step is to evaluate virtual card providers such as Comdata. Many buying organisations will accept P-cards and virtual payments, which commonly leads to monthly rebates that will at least fund the AP solution, and sometimes even the costs of running the Finance Department entirely. A 2019 study suggests that business use of virtual cards is “expected to grow by 90 percent through the next few years, and usage will pass $1 trillion by the year 2022.”
Increase Overall Cash Flow Visibility
You can’t fix what you can’t measure, and you can’t measure what you can’t see. Because managing cash flow is one of AP’s most important functions, AP teams need a way to have eyes on all cash-related activities. The mark of an efficient and transparent AP department is automation. Accounts payable automation provides valuable insight into your current cash flow and provides data that helps business leaders make smarter, more informed decisions.
With AP automation, every step of the process is tracked and all information is archived as invoices are processed through the system. Users can view key metrics in real time with customisable dashboards and easily search for vital information needed to monitor cash flow and plan for future purchases.
Automation is the Answer
Cash is the lifeblood of an organisation and the key to business continuity, so why manage it with outdated, manual AP processes? As businesses move forward in an uncertain environment, automation should be a tool that every AP team utilizes. With the visibility, control, efficiency and cost savings gained with AP automation, organisations can ensure a strong, consistent cash flow that sets them up for long-term success.