There is no denying that the introduction of automation and smart systems have transformed the way in which AP works and operates. Sure, there might be fewer people involved but it’s about offering more than just a transactional function. This is because it is all about contributing more in terms of profit.
Seek Out an Early Settlement Discount
One of the most efficient and effective ways of driving up profits is by putting an Early Settlement Discount (ESD) in place. While savings might be negotiated at the time of sourcing, three-quarters of these savings are not realised when payments are made.
It’s vital that these discounts are included in contracts and the process can be managed and controlled by AP when they have access to the right analytics. Furthermore, the AP policy should also include procedures that make it possible to capture early discounts. While ESDs might not be included on the Master Vendor File or contract, with every interaction, it is vital that AP can look at the potential to capture ESDs.
Recovering Overpayments
When processing thousands of invoices across multiple vendors, errors are highly likely. Automation and the correct tools have certainly helped to reduce this but profits can be increased by looking for any potential overpayments or duplicates. Overpayments cause companies to lose significant amounts of money but it is possible to recover these payments.
In-depth analysis is required and reports need to be generated in order to identify historical overpayments. The Institute of Internal Auditors claims that one in one thousand to two thousand payments is duplicated which makes it especially important to seek them out. There is a process to follow when recovering overpayments. It involves running reports, investigating the findings, engaging with vendors to recover payments, categorising the issues using reason codes, identifying trends to deal with critical issues and implementing a prevention strategy.
Procurement Card Programs
It’s possible for AP to use this program to successfully win additional income but it is broken down into two sections. This includes using the program to capture more rebates but also using it to reduce one time transactions.
The reality is that it’s important to provide departments with reasons why the program is beneficial to them and it is also worth working with cardholders to increase limits. Furthermore, AP should also use analytics to identify vendors that are sending large numbers of transactions that are below a certain amount. Therefore, AP can work with vendors to encourage them to accept this form of payment by offering incentives and improved payment terms.
As far as one-time transactions go, it is possible to lose those that are not paid using a procurement card. However, using the right software solution, it becomes possible to enhance efficiency when it comes to managing these transactions.
However, there is one thing to consider when it comes to procurement programs and that is the increased risk of fraud and abuse. These risks can be reduced and managed with the use of proactive monitoring and controls.
