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Cash Flow Optimization Through Accounts Payable Automation
Cash flow is the lifeblood of a company. By some measures, it’s even more important than profit (though both are important metrics for measuring business success). Optimizing cash flow is critical for maintaining daily operations, securing financing and investors, and growing a company.
Implementing business process automation (BPA) software is one of the most effective ways to optimize a company’s financial processing. A key benefit of BPA is that it provides the tools to manage cash flow more effectively.
Successful companies have the cash to cover gaps between accounts receivable and accounts payable, pay employees reliably, and maintain their operations. Stable, positive cash flow also enables opportunities for growth and investment. Optimizing cash flow through accounts payable automation benefits the whole business.
Cash Flow and Accounts Payable
Positive cash flow means more money is coming into a company than going out. In other words, that company’s liquid assets are increasing. Negative cash flow, with decreasing liquid assets, may not be a problem short term (for example, when cash flow temporarily decreases during times of investing in company growth). However, long-term negative cash flow can be a major problem.
Since cash flow concerns liquid assets, it’s obvious that accounts payable (AP) plays a major role in optimizing cash flow. AP manages money leaving the company to pay for goods and services. It also manages purchases made on credit, giving your company a certain level of flexibility in determining when cash leaves the company.
Control Over Payment Cycles
Some companies use accounts payable to avoid making payments for as long as possible before the payment comes due. In some situations, though, it is more advantageous for your company to make payments earlier. Automating AP speeds up processing and gives you more control over payment cycles.
With automated AP, invoices entering the company all go into a centralized software system. Automated data capture ensures a higher degree of data accuracy than would be possible with manual data entry. Once the invoice is in the system, the software processes it automatically. The software matches invoices with purchase orders, tracks payment deadlines, and automatically sends approval requests as needed.
BPA software also makes it easier to time payments to your advantage. Pairing AP automation with Payments-as-a-Service (PaaS) software makes it simple to manage timing for payments. It also makes it easier to manage different types of payments, including paper checks, company cards, and electronic payment options. You can schedule payments and control exactly when cash leaves your company.
Improved Vendor Relationships
Streamlining invoice capture and approvals shortens payment cycles and improves vendor relationships. Vendors that know they can rely on your company for prompt payments are more likely to negotiate with your company. Early payment discounts or extended payment terms are two of the possible perks vendors might consider.
Negotiating payment terms is more effective when accounts payable and procurement work together. More and more companies are seeing the advantages to moving back office functions out of silos and enabling collaboration. There are a lot of benefits to procurement and AP working together.
There’s also another way that automation software can improve relationships with vendors and suppliers. NextProcess’s software module includes a vendor self-service portal. Granting vendors limited access to your company’s processing software lets suppliers update their own information, submit missing or updated documents, and check on payment status. You have complete control over this portal and decide exactly what information vendors can see.
Data-Driven Cash Flow Management
A key aspect of effective cash flow management is gaining data visibility in relation to cash in your company. You can’t effectively manage cash flow if you can’t access timely, accurate data about incoming and outgoing payments. BPA software automatically maintains thorough records, tracking every change and event related to invoice processing.
Automation helps CFOs proactively manage working capital instead of reacting to liquidity crunches. Dynamic discounting and early-payment options also become easier to manage with real-time visibility into cash positions. With centralized cloud-based BPA, such as the Software-as-a-Service (SaaS) NextProcess modules, you can access and track data in real-time. All the information needed to monitor cash flow and make reliable projections is right there at your fingertips.
To be clear, automation software does not take over all tasks related to financial planning and analysis. BPA automates routine tasks like data entry, matching invoices and POs, and sending approval reminders. This frees up time for your finance team to learn new skills and focus on data analysis, cash flow management, and other value-added tasks.
Beyond AP Automation
Accounts payable plays a vital role in managing cash flow, but it’s not the only financial process that plays a role. Procurement, capital project management, and other departments all play a role in managing finances and therefore affect cash flow. To get the most cash flow optimization from your BPA software, you need an end-to-end financial solution.
An end-to-end financial solution lets your company manage key financial processes using software systems that work together. When your BPA software communicates seamlessly and integrates with existing ERPs, your company gains control over and visibility into the entire procure-to-pay process. Alongside that, you can also automate and integrate other financial processes, like T&E management, that directly affect the company’s bottom line.
With NextProcess, you’ll get software modules that work together to provide real financial management solutions. We offer the only suite of software with modules to power and simplify your capital project management, procurement and purchase orders, accounts payable, travel and expense, payment disbursements, and document management. Our software is also highly customizable to ensure that it fits your company’s needs.
Contact us today to set up a free demo and see how our accounts payable automation can help your company optimize cash flow.
