Achieving Bottom Line Success – Techniques Of Top-Performing Accounts Payable Organizations

Spend Matters welcomes this guest article by Helen Tueffel, senior vice president of APEX Analytix.

Throughout my years of working in the procure-to-pay industry, I’ve repeatedly heard comments like: “Our CEO wants us to reduce costs…again, but I can’t imagine how.” Or, “We’ve implemented a purchasing card program and expect to get some benefits from lowering our labor costs through our shared services strategy, but I’m not sure where to go next.” So much of an accounts payable (A/P) professional’s success is tied to efficiency and cost reduction. The most successful disbursement organizations are complementing gains in efficiency with initiatives that add tangible value.

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You’ve surely heard the saying, “Work smarter, not harder.” While I have no doubts that the A/P staff in Fortune 500 companies are also working hard, the techniques they’re using have allowed them to most efficiently use their staff resources, and in turn, are having a consistent, positive impact on their companies’ bottom lines.

Intrigued? Think it’s out of your reach? Or this success is only for the largest of companies? Consider the techniques below, which have worked financial marvels for many of the companies with which I’ve worked. Whether implementing one or all, your bottom line will be positioned to grow.

1. Systematically Solicit Discounts for Early Payment

Today, most established companies are sitting on a cash reserve large enough to put it into action to make them even more money. Bank returns are pitiful, so other options are increasingly being used.

One Fortune 500 company I know put an emphasis on dynamically soliciting discounts from its vendors in exchange for early payments and has been reaping the rewards for years. In its first year, the company realized $500,000 in discounts. The next year it reached $1 million. And last year, it captured $2 million.

Dynamic discounting software makes results like this possible, allowing companies to data mine, searching through entire vendor database regularly to discover new opportunities to offer early payment for discounts. The predictive analytics take into account clues such as how often vendors are checking their payment status, credit rating changes and the proximity to the vendor’s fiscal quarter- or year-end. A/P professionals are able to market their discounts at the exact time when vendors are most open to the offer.

2. Continuously Control For Erroneous Payments or Overpayments

Though a duplicate payment on occasion may not sink your company, those that put continuous controls into place to prevent it are putting that “savings leakage” back into the company’s bottom line where it should be. Truth is, one duplicate payment isn’t earth shattering, but when you tally up all the duplicate payments and pricing errors that occur in the average company, it adds up to a significant drain of capital.

Enterprise resource planning (ERP) software provides an important measure of protection, but A/P companies know it’s not nearly enough. No ERP system can overcome human error, and multiple ERPs compound problems due to systems not integrating and communicating with 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.

3. Don’t Leave Money Lying On The Table

With an ERP system in place, it’s all too easy to be lulled into a false sense of security that erroneous payments have been eliminated. Statistics suggest otherwise. Even in the best run companies, there’s always opportunity for additional recovery.

You can spend your days reaching out to person after person at organizations that have due or overdue payments to your company. Or, you can use predictive analytics to make the path to payment smoother and faster. Best practices suggest A/P organizations conduct annual recovery audits that gather information to create valuable data points that can later be mined.

Let’s say, during your audit 5 years ago, you learned that the controller at Company X would respond to a text much quicker than an email. If that is the preferred means of communication, wouldn’t it save a great deal of time this year to immediately choose that instead of emailing day after day? By implementing an audit program that allows you to start every audit with a predictive analytics model that provides understandings about how to get results earlier, those overdue payments will be cushioning your company’s bottom line faster.

4. Prevent Fraud with a Zero-Tolerance Policy

Vendor fraud can be prevented with the proper procedures. Unfortunately, these procedures oftentimes aren’t put into place until the company is in the news with an Office of Foreign Assets Control (OFAC) violation, a Foreign Corrupt Practices Act incident or an internal case of embezzlement that may have gone on for years, undetected.

Just by having a documented fraud detection program, a company is in a position to demonstrate proactive measures that can significantly reduce fines. Today’s fraud detection software makes it simple for A/P pros to weed out fraudulent vendors during the onboarding process and significantly reduce future A/P headaches. The software allows for checks on federal, state or local liens for nonpayment of taxes, bad credit ratings and fines from improper hiring practices. Even greater protection can be gained with programs that automate a check with the OFAC and other agencies, to ensure vendors are not on watch lists for risky business dealings.

5. Make Sure You Have a Clean Vendor Master – and Keep It Clean

Maintaining a clean vendor master can be a real challenge, but the business imperative for doing so is clear – it is a fundamental practice for A/P and serves as a critical prerequisite to implementing a portal. APEX Analytix auditors have found that almost 30% of all duplicate payments are the result of duplicate vendors or coding issues in a company’s vendor master database.

Conducting an independent review that scrubs and appends your vendor master will reduce your duplicate payment exposure, improve the accuracy of your spend analytics, improve vendor compliance and reduce fraud and other risks. A robust supplier registration process can then take over to vet vendors as part of the onboarding process and help keep the vendor master complete and accurate.

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First Voice

  1. Teri Harkins:

    Great article, Helen. Nicely done

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