Why finance teams should be freed up for the supplier relationship

30 March 2022 Consultancy.com.au 3 min. read

With inflation on the rise and supply chains under mounting stress, CFOs need to get clever with how they optimise their working capital and at the same time keep suppliers committed, writes Paul Moreton from Proactis.

Accounts Payable (AP) teams are often looked at as a cost centre by financial leaders and ripe for automation. Indeed, in times of economic turbulence, when companies are having to continually onboard and offload new suppliers 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 considered table stakes for any CFO that wants to reduce the risk that manual processes will bog down the team and create costly mistakes.

Accounts Payable is the first point of contact for most suppliers

But cutting the headcount of the AP team, following the shift to automation, could be an error. In fact, the AP team is the first point of contact for most suppliers, and so should be treated as an essential source of information and a key driver of positive supplier relationships.

Firstly, AP should be considered a CFOs ‘eyes on the ground’ for how suppliers are performing and behaving. If a supplier is demanding unreasonable payment terms, it may be because they are struggling to maintain their working capital. This is an essential piece of information that a CFO needs to know as losing a critical supplier because they have run out of cash does not help the end company.

Rising inflation, supply chain shortages, longer delivery timeframes, and interest rates are going to make this occurrence more commonplace.

Taking this strategic view will then lead CFOs to see that the AP team can be empowered to handle follow up conversations with suppliers, trusting them with the responsibility to possibly negotiate better/early payment discounts that will benefit the business.

Why not enable the team closest to the suppliers the ones who are able to negotiate the best payment terms for the business? Setting the responsibility for this within the AP team alleviates the CFO from worrying if competitors are getting a better idea.

Finally, freeing up the Accounts Payable team with automation technology will enable them to take on tasks from other members of the finance team. Future financial managers cutting their teeth in AP will be motivated by the chance to learn about different functions of the finance team and, managed correctly, cross-team collaboration could sprout innovation that CFOs rarely have the headspace to generate themselves.

Spreading the responsibility

Navigating 2022 is going to give CFOs a real headache and it’s not unreasonable that their first reaction is to look at reducing the headcount in their business. However, great supplier relationships will be worth their weight in gold in a time when global supply chain issues and rising inflation show no sign of going anywhere soon.

Securing the best payment terms and keeping suppliers happy will be an essential staple to any Finance team or CFO’s who want to stay ahead of the competition. 

Freeing up the AP team to own the supplier relationship will ensure that a CFO has the closest-possible experts looking after the issues and spotting opportunities.