Dear CFOs, here’s a fun fact: according to a recent Hacett’s survey, organizations can potentially save as much as $1.3 trillion by optimizing the working capital of Accounts Payable (A/P) and Accounts Receivable (A/R). This opportunity clearly shows that organizations are missing out on chances to increase cash flow. This one factor can make a difference when running a business in the face of disruption.
Identifying improvement opportunities in account payable (A/P) and account receivable (A/R) processes significantly impacts optimizing working capital. In account payables, for instance, sometimes vendors could issue invoices with outdated payment terms or deviate from the negotiated terms, causing discrepancies. Unfortunately, ERP systems are not designed to catch and highlight those errors. Instead, it requires manual intervention and several back checks to understand where and why the error originated. Your suppliers might thank you for all the efforts put in to clarify, but these avoidable circumstances certainly hit your working capital in terms of mismanagement of cash flow.
Managing account receivables could be a little trickier as customers control when businesses get paid. Today most of the processes are reactive. The A/R teams are mainly focused on past dues and don’t proactively avoid future delays. Furthermore, a minute oversight such as writing the wrong name or sending the invoice to the wrong department can delay payments by many weeks. Overcoming these roadblocks with a little bit of foresight can help reduce working capital significantly.
Empower account payable and receivable teams with advanced visibility and automation
Now that you know how common errors related to data entry, pricing, payment terms, etc., can adversely affect the working capital, let’s understand how you can optimize the processes without manually scouting for every error.
Enter automated process discovery!
AI-enabled process discovery tools such as SurfaceAI provides objective insights into existing processes including deviations. The insights can be leveraged to fuel automation initiatives, freeing up working capital and saving millions of dollars.
Let’s take an example to understand how process discovery can be used to standardize and automate A/P and A/R processes. Let’s say your business has agreed on a 90-day payment term with a customer and has a supplier term of more than 60 days. For this deal to work in your favor, you need to define your standard payment terms considering all the exceptions that can occur. In addition, you will have to monitor average invoice clearing time and billing cycles with all the variations that can induce delays. With automated process discovery, business leaders can uncover hidden inefficiencies and opportunities for standardizing tasks. Based on the insights, managers can agree to a 30-day payment term or negotiate to maximize working capital.
Explore the benefits of SurfaceAI for your A/P and A/R teams
SurfaceAI is an advanced process discovery platform with a trusted customer base across the globe. It provides “X-ray” like visibility into business processes to not only optimize billing and invoicing processes, but also strategically planning working capital and cash preservation. Want to learn how our platform can empower your business? Get a personalized demo.