The untapped potential of AP

The world of enterprise finance is complex, an intricate web composed of a lot of moving parts.

Accounts Payable (AP) is often perceived as a support function, quietly endeavoring to manage supplier payments in a timely fashion and to assure the accuracy of financial records and ledgers. However, this perception is a little misleading.

AP has the potential to exert a far greater influence than it currently does in many large-scale businesses. For many enterprises, AP contains the untapped potential to become a profit center by strategically focusing on loss prevention and recovery.

The crucial role of accounts payable

Many simply accept that AP’s primary responsibilities are efficiently processing invoices and managing the accounts payable ledger. Fostering supplier relationships and providing insightful reports to stakeholders are also central areas of focus.

However, while these functions remain central to its mission, this is far from the whole story. AP can do much more, and loss prevention and recovery have the potential to transform the value of AP to the enterprise.

Boosting loss prevention

  • Error detection and correction – A vigilant AP team should be able to identify discrepancies and errors in invoices promptly. This includes verifying invoice details, cross-referencing them with procurement purchase orders, and spotting duplicate invoices. By catching these issues early, AP can prevent overpayments and financial losses.
  • Invoice dispute resolution – AP is often the first line of defense when supplier disputes arise. Proactive dispute resolution not only prevents potential losses but also strengthens supplier relationships. Implementing robust processes for timely communication and negotiation allows AP to take control and arrive at mutually beneficial resolutions.
  • Fraud detection – AP can play a crucial role in fraud detection. Suspicious invoices, irregular payment patterns, or duplicate payments can be red flags. By leveraging data analytics and financial acumen, AP should be able to identify and mitigate fraud risks, safeguarding the company’s finances.
  • Adhering to compliance – Strict adherence to accounting regulations and internal policies needs to be uncompromising. AP needs to ensure that every financial transaction complies with these standards, reducing the risk of regulatory fines and penalties.

Boosting loss recovery

  • Lost discounts – Early payment discounts offered by some suppliers are often overlooked. These are missed opportunities to reduce costs simply through efficiently prioritizing payments to appropriate suppliers. AP should implement dynamic processes to capture these discounts systematically, lowering costs and increasing profitability.
  • Duplicate payments – Despite high levels of awareness of the risks and rigorous processes in place, duplicate payments do slip through the net. AP should proactively rectify such issues by tracking and recovering these overpayments, further reducing costs.
  • Supplier negotiations – Skillful negotiations with suppliers can lead to better terms, discounts, or extended payment periods. With its comprehensive knowledge of the company’s financial obligations, and of the financial relationships and histories with each supplier, AP is well-positioned to engage in these negotiations.
  • Contract compliance – Ensuring compliance with the terms and conditions contained within supplier contracts is paramount. AP can work collaboratively with procurement to enforce contract terms, preventing unnecessary expenses and loss.

Key points for turning AP into a profit center

To maximize the effect of loss prevention and recovery efforts and transform AP into a profit center, there are some crucial points of focus for enterprise finance departments:

  • Invest in the right technology – Implement an advanced AP automation solution to streamline processes and maximize efficiency. This generates data that can be subjected to detailed analysis.
  • Data analytics – Leveraging data analytics to identify patterns and anomalies in AP transactions is the gateway to detecting errors, and facilitates fraud detection and prevention.
  • Training and skills – Ensure AP teams are equipped with the knowledge and skills needed to use the technology to provide maximum value and benefit. Effective negotiation, dispute resolution, and compliance management skills are also very important.
  • Performance metrics – Define key performance indicators (KPIs) related to loss and recovery, such as error detection, dispute resolution timeframes, and cost recovery. This opens the door to incentivising AP teams to meet and exceed these KPIs, motivating them towards better performance.

Turning AP into a profit center with APMatching

See how APMatching accounts payable automation software supports enterprises in the quest to maximize financial performance. Take a personalised demo with one of our representatives, and we’ll show you how the software eliminates tedious, time-consuming manual invoice processing and automates duplicate invoice detection.

If you like what you see, we’ll give you full support so that you can more fully evaluate APMatching with a Proof of Concept (PoC), demonstrating how effective it is, using your own data.