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With rising inflation and increasing pressure on supply chains, CFOs need to be smart about how to optimize their working capital while keeping suppliers engaged, writes Proactis’ Paul Moreton.
Finance leaders often view accounts payable (AP) teams as a cost center and ripe for automation. In times of economic turbulence, when companies must constantly onboard and offload new suppliers while keeping track of a multitude of customer payment terms, Accounts Payable automation technology is essential.
Automated purchases to pay, accounts payable and electronic invoicing should be considered bets by any CFO who wants to reduce the risk of manual processes burdening the team and causing costly errors.
But downsizing the AP team after moving to automation could be a mistake. In fact, the AP team is the first point of contact for most suppliers and should therefore be treated as a primary source of information and a key driver of positive supplier relationships.
First, the AP should be seen as the CFO who has “eyes on the ground” for how suppliers are performing and behaving. If a supplier demands unreasonable payment terms, it may be because they are trying to maintain their working capital. This is essential information that a CFO needs to know because losing a critical supplier because they ran out of cash will not help the bottom line.
Rising inflation, supply chain shortages, longer lead times and interest rates will make this phenomenon more common.
Adopting this strategic view will then lead the CFO to see that the AP team can be empowered to handle follow-up conversations with suppliers and hold them accountable for possibly negotiating better/early payment discounts that will benefit the business.
Why not allow the team closest to the suppliers to be the ones able to negotiate the best payment terms for the business? Setting responsibility for this within the AP team frees the CFO from worrying about competitors getting a better idea.
Finally, freeing up the Accounts Payable team with automation technology will allow them to take over tasks from other finance team members. Future CFOs cutting their teeth on AP will be motivated by the opportunity to learn about the various functions of the finance team, and if managed correctly, cross-team collaboration could spark innovation that CFOs rarely have to create on their own.
Diffusion of responsibility
Navigating 2022 will cause CFOs a real headache and it is not unreasonable that their first reaction is to look at downsizing their business. But great supplier relationships will be worth their weight in gold at a time when global supply chain woes and rising inflation show no signs of going anywhere anytime soon.
Securing the best payment terms and keeping suppliers happy will be essential for any finance team or CFO looking to stay ahead of the competition.
Freeing the AP team to own the supplier relationship ensures that the CFO has the closest possible experts to address issues and uncover opportunities.
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