How Accounts Payable is a supporting Pillar to Treasury and Procurement.

Collaboration among Accounts Payable (AP), procurement, and treasury departments is inevitable for an organization’s financial management. 

The procurement department is responsible for purchasing goods and services for a company within stipulated periods at the best possible cost. Treasury manages cash flows and liquidity and helps management to develop long term financial strategies for the company, while AP processes invoices and payments on time. 

Although these groups – Procurement, Treasury, and AP are part of the same process, they often work independently in an organization, complicating supplier management. 

AP plays a crucial role in supporting both Treasury and Procurement as they share common goals when it comes to managing and engaging with suppliers. With Accounts payable transformation, companies can witness better collaboration and alignment among these groups. They can leverage each other’s strengths and work towards common business objectives more effectively.

An efficient AP system can provide valuable support by maintaining a sustainable cash flow and ensuring timely payment to vendors. Leading BPO (business process outsourcing) service providers can serve companies to stabilize critical business processes, like AP. Read on the post to explore how AP supports both Treasury and Procurement functions. 

Procurement, Treasury, and AP can fall out of sync due to the lack of communication and coordination among these departments. Unsynchronized functioning can create numerous issues, including the following:

1. Mismatched Purchase Orders

Unsynced functioning or ineffective communication between procurement and AP may lead to mismatched purchase orders issued and invoices received. Ultimately, it ends up with delayed payments and potential disputes.

2. Cash Management Concerns

When treasury is not synced with procurement and AP, there can be cash management problems, like, overpayment of invoices or delayed payments which can negatively impact cash flow. 

 3. Lacked Productivity and Effectiveness

When these three groups do not collaborate, streamlining processes and reducing redundancies can be a challenge. For example, if the procurement department does not provide visibility into upcoming purchasing requirements, the treasury can not forecast cash flow requirements and may not be able to maintain sufficient capital to pay invoices. AP, ultimately will not be able to pay invoices accurately and timely, increasing the risk of late fees and ruined relationships with suppliers. It leads to inefficiency.

4. Compliance Risks

When procurement, AP, and treasury processes are unsynchronized, it brings a risk of non-compliance with regulatory requirements. For example, if the procurement process is not in sync with AP, it may lead to deferred payments or payments made without appropriate authorization, which can violate regulatory requirements.

To address such challenges, organizations must ensure that all three departments are working in tandem. It can be achieved with an integrated system for real-time tracking of cash flow and payments.  

When procurement, AP, and treasury departments are aligned around organizational goals and a focused strategy, businesses experience connectivity and operational efficiency that enables scaling. AP acts as a supporting pillar to both Treasury and Procurement departments in different ways.

1. Avoid Late Payments

At first, the AP department ensures timely payments to avoid any debit for late payment penalties or interest charges from the company’s cash flow. Late payments can impact cash flow, for which the treasury is responsible, significantly and even result in legal action from vendors. Outsourced accounts payable processes with leading BPO companies can serve businesses in achieving an effective AP process.

2. Adequate Fund Reserves

Efficient AP teams can help treasury management to anticipate the cash flow by delivering accurate and timely information on the due amounts towards vendors. With this information, planning the cash flow to ensure that the business has adequate reserves to meet its day-to-day financial obligations. 

3. Availing Discount

The AP team ensures the efficient processing of payments, which is essential to maintaining sound relationships with vendors. As a result, vendors can offer better payment terms to businesses. Also, the AP team can negotiate with vendors to get discounts as they are making timely payments. Accounts payable outsourcing solutions can make your AP processes more efficient.

Procurement functions include identifying the right suppliers to meet quality standards, negotiating for the best prices, and securing adequate goods and services. The following are the reasons that make the AP function a supporting pillar to the procurement:

1. Ensuring Budget Alignment

AP team of a company can help in managing the procurement department’s budget by furnishing timely and accurate details on the payments to vendors. Using this information, the company can track procurement expenses and ensure that the procurement function is aligned with the budget. Outsourcing Accounts payable data entry services can help to achieve 99.7% accuracy in AP data.

2. Procurement at Better Terms

Since the AP team in a company ensures timely payments to the vendors, it helps to maintain good relationships with the suppliers. Suppliers are more likely to provide goods and services at better prices and terms to the company, thanks to the efficient AP function. 

3. Compliance

AP teams ensure that the vendor payments are made in compliance with the company’s procedures and can also flag any concerns that may arise.

Thus, AP plays a vital role in treasury management and procurement function by managing payments to vendors, helping in cash flow management, working capital optimization, budgeting and compliance. Therefore, organizations should ensure that they have a well-functioning AP team. 

ARDEM is among the leading outsourcing companies meeting its client’s needs with decades of experience and the best accounts payable outsourcing services. Its efficient teams ensure accurate accounts payable invoice processing and timely bill payments to vendors.

For AP transformation, ARDEM put together a qualified team as per the client’s business requirements.  

• It understands the intricacies of the client company’s existing processes during the due diligence phase. 
• Then teams develop a transition plan within the timeline as per the client’s schedule. 
• For transition initiation, teams are trained to work efficiently and meet the client’s expectations.

Ultimately, with ARDEM, companies can witness the stabilization and streamline of AP processes.

Advanced technology-based AP solutions are the best place to start when organizations are growing fast and need to gain efficiency within Procurement and Treasury departments. ARDEM can help organizations attain increased efficiency and productivity with its accounts payable automation services.

ARDEM provides Business Process Outsourcing and Business Process Automation Services to established companies to help them improve operational Efficiency and Reduce Costs.  For more information please reach out to us  at pricing@ardem.com or call us at 908-359-2600.