Should Accounts Payable be a Profit Center? David Gustin - October 27, 2014 3:35 AM | Categories: Dynamic Discounting, Payables Finance | Tags: pcard rebates I am old school, and old school thinks companies make money by selling products and services above cost. Included in those costs are direct operating costs (or costs of goods sold on the balance sheet) and Sales General and Administration costs (or indirect costs). Pricing should cover the direct and indirect costs. But recently I have been seeing articles around using the rebates and supplier discounts from various programs to measure A/P as a profit center. Is that sound? Are progressive companies really thinking they have found a new revenue stream? Whatever happened to A/P focusing on improving the process, reducing costs and improving the remittance delivery and visibility into cash? Is that not enough? I know in my own personal experience, if someone will pay me by pcard, if I can add the pcard fee into the price I will. So who benefits? Whoever gets credit as a buyer for the rebate (the business unit, treasury, A/P, etc., depending on internal accounting at company) but the procurement unit or the business unit is stuck with a higher cost. And perhaps this does not happen on the first order, but on subsequent orders. So my point is that these things are never clear and many times are a zero sum game or worse. Buying and selling have to do with leverage. Walmart has leverage. Using A/P as a profit center just doesn’t sound smart to me. At the end of the day, procurement and treasury executives want a unified view of their spend, so they know how much spend went through ACH, through pcard, and via various other programs in place – supply chain finance, dynamic discounting, factoring, auctions, etc., In order to do this, you need to have the right automation infrastructure in place. And there is where A/P helps. I doubt many corporates have access to their total spend and generated revenue because vendor solutions are specific point solutions. The corporate would need to invest in their data warehouse and analytics to do so. What do others think? Should A/P be a profit center? P.S. sign up for Trade Financing Matters weekly digest here Related Articles Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.