As we continue to deal with lockdowns, controllers still need to juggle a lot of plates. Money is tight, stress levels are high, and you’re probably trying to do all the work with fewer of employees around. But hopefully, things are getting back to normal in the next few months, and whether you’re looking at a rapid, V-shaped return or a slower reaction, any slip on the way back is much riskier.
Reducing Risk and Increasing Control: Why the Right Changes Set You Up
So, knowing this, why would you want to make an investment in change? Many reasons. First, there’s a good chance that businesses will come out of this stronger and more resilient. Second, it’s likely that you will need to solidify or reinforce the changes you’ve already made to keep up with the work from home orders. Third? As we said, any slip up on the way back to normal is much riskier.
Knowing this, it pays to understand where these risks are and where they may pop up. Managing the accounting and finance side of the business requires a keen eye on the current and potential risks, ranging from cash flow to internal controls. But too often, there’s one area of the business that not only prevents efficient cash flow, but exposes you to fraud, inaccuracies, and mistakes.
Accounts Payable is one of the most important parts of any business, and can help you increase accuracy, extend payment windows when you need, shorten them when you can get discounts, improve relationships with suppliers, and so much more.
How can you work to improve this process? What are some of the areas to focus on? And how can improvement help you reduce the stress put on by early year changes? We look to discuss this and explore some of the things to look for in a solution in this two-part series on AP for recovery.
The Needs of the Rebounding Business—and How AP Automation Makes Life Easier
Moving your business toward a new normal is going to be a challenge. Staffing changes, the process of bringing people back into the office, and more; all are things that will present their own changes. Over the past few months, we’ve looked at some of the changes you’ve had to make during the lockdowns. But understandably, these changes don’t have to be temporary.
In fact, when approached properly, these changes can help steer you toward increased resilience, better decisions, and better growth. As you approach the rebound, it’s vital to look at the things that have made your business better and incorporate them.
Realigning Recovery-Focused Metrics and KPIs
For cash-strapped businesses, controllers probably had to focus on spending the right way at the right time. Something we discussed in our six metrics to focus on during recovery, one of the many areas to focus is Days Payables Outstanding.
DPO is a metric that directly linked to cash management and liquidity. Organizations track and adjust their DPO to improve their cash flow and working capital while protecting their balance sheet profile. Often, paying early is great. Discounts, better relationships, and more are among the many reasons you may need to extend payables outstanding.
Optimizing this process was all about buying time, but as you pivot towards growth, you need to think of how to look at this. If recovery is all about buying time, growth is all about putting the right resources in the right place at the right time. In this, the DPO metric is still important, and retooling this for growth can help you know when, where, and how to make investments.
The right AP solution can make your life easier, helping to focus on cash flow windows and spend smarter. This delivers for your business, helping ease forecasting and putting your business in a position for growth.
Encouraging Smarter Decentralization
It’s likely that you’ve decentralized your office, but what about your spending? According to HBR, decentralization is all about responsiveness, allowing businesses to be acutely alert to business opportunities and threats, and to be capable of grabbing the opportunity or fending off the threat fast and effectively.
From empowering departments to use their money in a way that helps them do more to increasing morale, empowering decentralized spend is one part of the equation, controlling that spend is the other.
Either way, if you want to encourage this, you also need to have visibility into the spending. Learn more about how to encourage decentralized spend here.
Whether they’re malicious or accidental, you can’t afford duplicate or erroneous payments. According to APQC, top performers report that nearly a full percentage point (0.8%) of their annual disbursements are duplicate or erroneous—and bottom performers spend about twice that.
Recapturing money is time consuming and annoying for vendors, and it’s better to avoid a problem than fix it. Worse, if there’s duplication, there could also be other issues. If you’re entering data manually into your systems, your rush to get the job done could also end up with a payment made for a fraudulent invoice—and that’s money you won’t see again.
Fraud has ramped up during the lockdown, and whether it’s from your employees or partners, preventing it is critical. From the employee printing the checks to the executive who finally saw the window that he or she needs to start siphoning to the vendor who turned to crime to stay alive, being able to see and stop fraud starts with visibility.
Approaching this is a challenge, but with the right AP solution, you can take control of your processes by matching transactions more efficiently and tracking changes with an audit trail. Learn more about the challenges in stopping fraud and the most common culprits here.
Positioned for Success: Discuss Strategies with Your Peers
Getting from recovery to resilience will require a keen understanding of what works. While the right software can help you understand your AP processes and work to improve them—and we just so happen to work with one of the best, Bill.com—often, a place to discuss opportunities and best practices works nearly as well.
We launched the Controllers Council as a community and forum for controllers across the US to discuss and benchmark against similar companies. With just a small annual investment, you can join the discussion and get a lot more benefits along the way. We invite you to watch our most recent webcast titled Achieving Finance Transformation, Five Real Steps to Success, and hope to see you on the discussion boards.
Ready to learn more? Click here to read all the membership benefits.