Five Secrets How Accounts Payable Organizations Improve their Bottom Line

Savvy AP pros understand to fish where the fish are, instead of casting a wide net and hoping for a catch

Helen Tueffel
Helen Tueffel

Accounts payable (AP) organizations in Fortune 500 companies have their secrets.

Most of these secrets center around how they improve the bottom lines of their companies. Throughout my years of working with these groups—aligning them with tools to systematize audits, prevent fraud and manage vendors—it’s become apparent that certain techniques are key to all top-performing AP organizations.

I’m spilling the beans. The following five techniques are the same ones AP best practitioners use to protect and increase the bottom lines of their companies.

1. Continuous Controls for Overpayments or Erroneous Payments

For years, it was referred to as savings leakage in procure to pay. Duplicate payments, pricing errors, missed discounts, and losses due to fraudulent vendors and unethical employees can have a significant drain on a company’s bottom line. Enterprise resource planning (ERP) software provides an important measure of protection, but AP companies know it’s not nearly enough. No ERP system can overcome human error and multiple ERPs compound problems due to non-integrated systems’ inability to fluidly talk to one another.

Today, continuous monitoring—from data extraction to reporting—can take place entirely in the cloud. Software analyzes consolidated data, and provides reports that can be reviewed on a daily basis to quickly investigate and take steps to protect disbursements and reverse transactions before checks are issued to vendors.

2. Next-Generation Dynamic Discounting

AP professionals have known for decades that suppliers often discount their services or goods in exchange for early payment. Today’s dynamic discounting software, however, ups the game. It allows companies to data mine, searching their vendor base throughout the pay cycle to determine new opportunities to offer early payment for discounts. Another innovation, discount likelihood algorithms, dynamically take into account supplier activity, and other private and public domain inputs to enable targeted offers and custom invitations to a supplier base. When the clues suggest a vendor may be open to discounting, AP professionals are able to market their discounts, which lend to improved bottom-line performance.

3. Predictive Analytics

In the process of conducting a recovery audit, information is gathered that can create valuable data points that can later be mined. How contacts in supplier organizations respond to your outreach tells you how to communicate with them in the future. AP professionals may find insights into particular contacts that respond quicker, preferred modes of communication or companies that react quicker to payment requests.

Savvy AP pros understand to fish where the fish are, instead of simply casting a wide net and hoping to make a catch. They start every audit with a predictive analytics model that provides understandings about how to get results earlier and better results over the course of an audit.

4. Fraud Reduction in the Supply Chain

Today’s supplier risk environment continues to get more complicated due to increasing regulation, new legislation and global operations. Just by having a documented fraud detection program, a company is in a position to demonstrate proactive measures and fines can be significantly reduced. Today’s fraud detection software allows AP professionals to weed out fraudulent vendors during the onboarding process. Ensuring vendors aren’t subject to federal, state or local liens for nonpayment of taxes; don’t have a bad credit rating; and weren’t fined for improper hiring practices—among other issues—protects a company from the likelihood of unscrupulous vendor activity. Additionally, checking with the U.S. Office of Foreign Assets Control (OFAC), among others, to ensure vendors are not on their watch lists saves you the consequences of negative publicity, as well as heavy fines and/or sanctions.

Of course, there must be buy-in from top-level management to address supplier fraud prevention, but it is just as important for middle managers to adopt a zero-tolerance policy toward fraud. In addition, no one person should have responsibility of an entire accounting function. The individual setting up a vendor should not be the same person approving invoice payments. Multiple eyes on the process is vital, especially in smaller organizations.

5. Cost Reductions via Integrated Systems

Reducing costs is an obvious way AP companies increase their companies’ bottom lines. Smart AP professionals are able to find new ways to reduce costs, even when it seems every avenue was already pursued. Over the years, AP professionals did their best to pick the best solution for an immediate need. But adding new pieces of software leads to complexity. When they start adding on point solutions or using technologies that don’t integrate, there can be a lot of time and effort spent in making all the applications and tools work with one another.

The burden of integration and ongoing support either lands on your information technology (IT) department or on a third party. For instance, Markets and Markets forecasts the enterprise application integration market will grow from $7.85 billion in 2014 to $13.35 billion in 2019. Getting suites of solutions that work with your ERP where possible provides the best solution. For example, by integrating single-provider supplier portals with AP software and fraud detection software, AP specialists can find a new and efficient solution to vendor maintenance.

There’s a lot more to AP today than just paying invoices. While the list provided may sound daunting, if none are being done currently, even implementing one can show results. As time allows, add on others and soon you may find your AP department showing efficiencies that you never expected and being recognized for the value you are bringing to your company.

Can’t choose which is most important? If you’re ready to implement all the tips, but aren’t capable of managing them all in house, partner with an analytics company that provides multiple levels of service and systems to benefit your organization.

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