According to a detailed three-part survey of CFOs conducted by Ernst and Young*, CFO's feel now, more than ever before that there are four different initiatives or tasks they must perform in order to be effective. The importance of each of these four had become a higher priority compared to just three years earlier.
The list includes cost management, improving risk management, cash flow and improving financial control. Many CFOs may believe that they have to look outside of their area of influence to effect the change -- to Marketing or Sales, R&D or Strategy, Human Resources or M&A. While that may be true that such other centers of the business can help him improve these areas, the best news is that with the help of the Accounts Payable Manager and Accounts Receivable Manager, the CFO can make an enormous impact on all four of these initiatives by making changes. He or she doesn't require input from other C-level executives in his or her own center, making that impact swifter and more impactful.
To Control Cost --
Accounts Payable: The Accounts Payable Department operates as a cost center with many variables that influence that cost. If the company is still issuing A/P payments primarily on paper, that can change to yield huge savings. Next, if the company is issuing ACH payments but has high fees associated with treasury services or, worse yet, if they are issuing ACH payments logging into an online portal and re-keying information to make payments, all of these costs of fees or FTE labor can be reduced. And, finally, if the company is not yet reaping the benefits of rebates on A/P spend by issuing V-Cards then the CFO is about to change everything...possibly turning this cost center into a profit center.
To improve risk management:
Accounts Payable: If issuing checks as the primary form of payment, this department is most open to fraud events. According to a 2017 study by the Association for Financial Professionals, 75% of all business experienced check fraud in 2016. This risk can be significantly reduced by migrating to electronic payments For instance -- there has never been a fraud event with a Virtual Card payment** because a payment is associated with a specific payee and an absolute dollar amount. ACH payments can also greatly reduce risk by connecting the payer directly with the payee's bank account.
To improve cash flow:
Accounts Receivable: Electronic invoice presentment can greatly influence the productivity of the A/R department but such systems are extraordinarily complex and expensive. Massive improvement in A/R clearing invoices and applying cash for improved cash management can be achieved by utilizing a cloud-based system to streamline the operation. Companies receiving high volumes of electronic payments can benefit greatly from such systems and see an improvement in DSO and Cash availability.
To improve financial control:
Accounts Payable: When seeking to improve or streamline processes, many solutions expect companies to relinquish control and turn the processes over to the system. This will concern the CFO who seeks to improve control. The last thing she wants is to have to answer for mistakes made by the contracted, outsourced provider. Utilizing a solution that allows your team to manage the system, control the payments, approvals and release of payments is key.
Learn more about improving your 2018 by reviewing these articles with more details about A/P and A/R improvements that can make your company more efficient and make you the influencer of the most important areas for corporate improvement with no power struggling with other leaders.
Learn More About Accounts Payable Process Automation:
- 5 Ways AP Managers Can Save Time and Money with Accounts Payable Automation
- 2018: Will It Be The Year for Your Accounts Payable Automation
- A/R Lockbox Transforms Business Processes for Receivers and Payers
* Source: Ernst and Young 2016 Study - What Makes a Chief Financial Officer
**Source: Comdata 2017