Why finance teams need to be freed up for the supplier relationship

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With rising inflation and increasingly strained supply chains, CFOs need to know how to optimize their working capital while maintaining supplier engagement, writes Paul Moreton, head of client services at Proactis.

Accounts Payable teams are often seen as a cost center by finance managers and ripe for automation. Indeed, in turbulent economic times, when businesses must continually onboard and offload new vendors while keeping track of a multitude of customer payment terms, accounts payable automation technology is essential.

Automated procure-to-pay, accounts payable, and e-invoicing should be table stakes for any CFO who wants to reduce the risk of manual processes bogging down the team and creating costly errors.

But downsizing the AP team, following the move to automation, could be a mistake. In fact, the AP team is the first point of contact for most suppliers and should therefore be considered a critical source of information and a key driver of positive supplier relationships.

First, AP should be viewed as an “eye on the ground” by CFOs to know how vendors operate and behave. If a supplier demands unreasonable payment terms, it may be because they are struggling to maintain working capital. This is critical information that a CFO needs to know, because losing a critical supplier to running out of cash doesn’t help the bottom line business.

Rising inflation, supply chain shortages, longer delivery times and interest rates will make this event more common.

Embracing this strategic view will then lead CFOs to see that the AP team can be empowered to manage follow-up conversations with vendors, empowering them to eventually negotiate better prepayment discounts that will benefit the business.

Why not assign the team closest to the suppliers to the team that can negotiate the best payment terms for the business? Defining responsibility for this within the AP team saves the CFO from worrying if the competitors have a better idea.

Finally, freeing up the accounts payable team with automation technology will allow them to take on tasks from other members of the finance team. Future CFOs cutting their teeth in PA will be motivated by the opportunity to learn about the different functions of the finance team and, managed properly, cross-team collaboration could sprout the innovation that CFOs financiers rarely have the headspace to generate on their own.

Distribute responsibility

Navigating to 2022 is going to give CFOs a hard time and it’s not unreasonable that their first reaction is to consider downsizing their business. However, good supplier relationships are worth their weight in gold at a time when global supply chain issues and rising inflation show no signs of the future.

Securing the best payment terms and satisfying vendors will be critical for any finance team or CFO looking to stay ahead of the competition.

Freeing up the AP team to handle the vendor relationship will ensure that a CFO has the closest possible experts to address issues and spot opportunities.

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