Managing your cash flow and working capital depends on visibility into your current status. Electronic payments can provide that essential visibility.
This blog first appeared on the Corcentric website.
Enterprises today are looking for any opportunities to increase efficiency, knowledge, accountability, and accuracy, especially when it comes to cash management. Manual and paper-based processes stand in the way of these opportunities. That’s why more and more companies are turning to digital solutions for their most important financial operations, transforming those operations from purely functional necessities into strategic assets. And that’s why enterprises are turning to electronic payment solutions.
e-Payment solutions are on the rise, especially network-based solutions which provide organizations with deep visibility into their payments due to suppliers. Late last year, Ardent Partners released a report, sponsored by Corcentric, entitled “The State of B2B Payments 2015.” This report focused on the emerging value that e-Payments provide to accounts payable, as well as to the enterprise itself.
Although increased efficiency and reduced costs are factors, the real value of these solutions is that they give AP the ability to provide important payment data, not only to internal stakeholders, like procurement and treasury, but also to suppliers. The importance of this can’t be overstated. According to the Ardent report, “lack of visibility into payment data” is the top payment related challenge for AP. In today’s business environment, where decisions are based on quantifiable numbers, a lack of data into cash outflow, or the inability to access that data anytime can stand in the way of that company’s success. Ardent’s report notes, “a lack of visibility into payments and their surrounding data creates a massive “black hole” within the critical financial operations process of cash management.”
The problems this can cause go well beyond AP. Procurement wouldn’t know whether suppliers have been paid too late or too early (although they would probably receive a phone call from a vendor if the former were to occur); Treasury might not know their true cash positions when considering new investments or allocations; and audit teams would be unable to confidently close out the books on time because of an incomplete view of liabilities.
It’s clear what problems can arise from a lack of visibility. Now consider the opportunities that visibility makes possible, including increased collaboration between enterprise entities. AP, Treasury, and Procurement can work together to develop a flexible supplier payment strategy, one with precise scheduling that will enable all stakeholders to know exactly what their cash status might be, at any given time. With e-Payments, the uncertainty of “float” inherent in paper checks, is gone, so whatever the system shows as paid has effectively been paid and is not sitting on someone’s desk or in the mailroom. That certainty of cash status is one that enterprises strive for in today’s business environment.