CFO Magazine editors certainly think so. In a useful article released today, they argue that accounts payable (AP) may be the last bastion of working capital improvements for most companies. AP "provides an opportunity for process and structural improvements that can enable companies to hold on to their cash longer" and positively impact working capital and cash flow.

 

The article -- "Six Ways to Stretch Your Payment Terms" -- is a good primer for how to organize invoice and payables efficiency and transformation. Here are just a few of the highlights:

 

  • "When it comes to projects aimed at improvement payment terms, it's clear who should be in charge: the AP director..."
  • CFOs or CPOs should be the chief sponsors of AP transformation and should "be committed to a particular return on investment."
  • To get the best results, procurement and finance must align on the importance of securing the best payment terms -- during the negotiation cycle.
  • Divide your suppliers into four different categories -- from the "untouchables" to the "wallflowers" -- tailor your payables approach accordingly.
  • When negotiating longer payment terms, be sure to have a firm grasp on your company's adjusted gross margin (including delivery costs, discounts, and allowances).
  • Build budgets and create incentives that are based on cash flow improvements.

 

 

I encourage you to read the full article here.