Accounts Payable is B-O-R-I-N-G! But, in these challenging economic times, it is wise to reexamine even the most mundane activities that are routinely performed in your business to identify opportunities for improvement. Let's look at something as basic as Accounts Payable and determine whether a strategy is needed to leverage this activity.

The definition of a "Payables Strategy" depends on two issues: the financial position of the business is at the moment and its vision of the future (i.e., what the firm aspires to become over time). With that as a backdrop, here are some scenarios that may inform a payables strategy:

    • If cash flow is an issue, adopt a 90 day Payables Strategy
    • If the firm needs to reduce expenses, then they'll want to be sure to take advantage of all early payment discounts that may be available.
    • If company's ownership is looking to sell the business and needs to spruce it up for acquisition then it may want to manage to a 30 day schedule to improve "Goodwill" with its suppliers, while keeping its books fiscally sound

Regardless of its fiscal position or vision, the Payables Strategy must be communicated properly in order to be most effective. There are myriad ways to do that, including:

    • Can be expressed as "huddle" meeting within the Accounting/Finance Department
    • Documented in the Departmental Newsletter
    • Discussed in the weekly meeting
    • Documented and distributed via email
    • Posted on the Departmental Intranet site

When it comes time for execution, technology can play an obvious role in support of the Payables Strategy. For example, it can be used to ID discount opportunities with suppliers and vendors. Systems can be used to track and time payments. In the case of standing orders, auto-pay with release review capabilities is another implementation protocol that can be put into place to streamline the desired payable process.

Lastly, the personnel element of the strategy must be properly aligned with the procedural and technological changes. The Corporate Vision can be used to provide needed context. It sets the stage for understanding the importance of the Payables Strategy. Helping staff to understand the alignment will encourage the shift in mindset. needed for them to enact the changes necessary to execute the new Payables Strategy.

I bet most of you never gave Accounts Payable strategy much thought before today? But, you can see how a tweak in thinking can make a difference. Now, take a look at all the other basic business functions that you may have been taking for granted--you may find something in them that can make a difference to your business.

Published on: Feb 16, 2015