The Buyer and the Supplier, The Cash Rich and Cash Poor, On Time and Past Due, With or Without Payment Terms, In Boom Times and During Recessions, You have to PROCESS YOUR INVOICES.
Allie Greenspan, CFO at Sharq Industrial, Residential and Trucking (SHIRT) Services, was eager to dig into a new corporate finance initiative, and AP automation powered by e-invoicing was it. Clearly, there was opportunity for improvement in accounts payable.
As was the case with many companies, SHIRT Services was knee-deep in paper invoices. Greenspan hadn’t paid it much heed, until her staff began forwarding online reports and articles from associations and research firms covering the accounts payable function. There had been much dialogue around invoice automation, and discussions of best practice results. Greenspan was a numbers gal, and the metrics caught her attention. When she compared SHIRT’s invoice processing performance with industry leaders, she was appalled.
Then, she began hearing about the “networked enterprise,” how companies that have enabled electronic connections with suppliers and business partners were reaping improvements in business performance and competitive advantages. These business advantages from improved collaboration did not stop at operational efficiency. There was a working capital angle, too.
For a company like SHIRT, with healthy cash balances, the cash returns on short-term investments did little to boost the company’s bottom line. Early payment discounts were another matter. They earned double-digit returns, in some cases north of 20%. They were risk-free, as they would come from invoices that SHIRT was committed to paying. They could be combined with payment term strategies that would allow SHIRT to maintain or extend its DPO. And they would save the company millions of dollars each year on its billion dollars plus in spend.
Together, these opportunities drove Greenspan to act, and she penned the “networked enterprise strategy” memo that would move the company in that direction. Little did she know that her decision would run counter to actions that accounts payable had taken in its efforts to better cope with paper invoice processing.
(NEXT WEEK: SHIRT AP Manager Rickie Crane plans to fight back.)
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