Prepress
In Cash-Is-King Economy, Companies Pursue Better Ways to Manage and Preserve Cash, Lower Costs
Tuesday 07. April 2009 - Optimizing Accounts Payable is Critical to Improving Cash Management, Experts Say Invoice Management Solutions Deliver Rapid Payback, Boost Stability
Between declining revenues and uncertain access to credit, today’s economy is making cash critically important to business. When cash is king, say experts at Open Text (NASDAQ: OTEX, TSX: OTC), a global leader in Enterprise Content Management (ECM), companies need to make sure they have complete control over where their cash is going in order to reduce costs. That means its vital to take a closer look at accounts payable and the strategic value it can bring to an organization.
While most large companies have powerful financial systems such as SAP, the majority of invoice processing as much as 90 percent is still done using paper-based processes. Historically, says Tom Walker, Open Text’s portfolio manager for accounts payable solutions, companies grew up around paper-based processing of invoices. Since cash was plentiful, they never got around to enhancing these functions because invoice processing wasnt viewed as core to the business.
But in today’s economy, the value of moving to electronic invoice management has never been greater since it gives management a lot more control over cash flow and opens up new money-saving opportunities.
“Given the critical importance of generating adequate cash flow, corporations are now looking beyond the traditional avenues of increasing sales or decreasing costs. Invoice management is one of the places they are looking,” says Walker. In a podcast released today, Walker discusses invoice management issues with Henry Ijams, CEO of PayStream Advisors, a technology research and consulting firm that reviews financial and accounts payable applications, and Bernhard Fischer, Vice President of Solution Management for SAP.
“Paper is the antithesis of control since we don’t know where a paper invoice is in the process,” Ijams says. “With a solution like invoice management, we can centralize information and get visibility to invoices as soon as they are received. This visibility provides a new empowerment for managing outbound cash.”
One opportunity is the ability to negotiate favorable payment terms, according to Walker. With paper-based systems, typical invoice processing time is about three weeks. In contrast, the typical processing time with an invoice management solution is just one-to-two days. This means that the company now has the option of negotiating lower rates in exchange for rapid payment. For a $5 billion corporation, a 2 percent discount could translate into several million dollars in cash savings over the course of a year and could help compensate for an even more substantial revenue decline.
Since it has become increasingly difficult to borrow funds, visibility into cash requirements is critical to ensuring that vendor obligations are met in a timely way. Invoice management solutions also help the company finalize financial reports quickly and accurately, boosting the confidence of lenders and investors.
Another way that invoice management systems help companies is in lowering operating costs. “Companies need to look at their complete financial supply chain and see where they can squeeze out the inefficiencies,” says Fischer. “Cost savings in the 60 percent range are possible by eliminating manual data entry and moving to optical character recognition. Even greater savings are possible when companies move to a shared-services model for consistent, error-free payments across all vendors.”
Beyond taking care of the immediate problem the high costs and lengthy time involved in processing invoices invoice management also gives the organization the basis for continual process improvement. “With an invoice management system you get key performance indicators to help find ways to improve efficiency so you have fewer and fewer touches, or improve business rules to minimize exceptions,” says Walker. “With rapid payback, potential to generate revenue through discount-taking and long-term efficiency gain, invoice management systems make more sense than ever.”
Walker will be discussing invoice management issues at the International Accounts Payable Professionals conference, IAPP Forum 2009, April 19-23.
Business and IT managers in retail organizations can learn more about how “Cash is King” and how to optimize accounts payable by attending a webinar April 21 titled “Cash is King: Efficient Cash Management and Accurate Liabilities in Retail.”
Open Text is a market leader in accounts payable solutions for use with SAP and Oracle that are offered as part of the Open Text ECM Suite. Open Text’s solutions help customers significantly lower cost-per-invoice processing, reduce invoice processing time, and slash invoice resolution time, thus freeing finance department personnel to pursue more strategic activities.