The accounts receivable function can learn a lot from what is going on in the accounts payable universe. Much of the evolution of the payments industry gets it impetus from Accounts Payable, and that is going to necessarily affect Accounts Receivable. In addition, how Accounts Payable processes invoices can impact how Accounts Receivable departments transmit invoice details.
Many companies have implemented online Accounts Payable portals to facilitate the electronic capture of invoices. The main goal of the underlying e-payables initiative is purchase-to-pay process efficiency. However, Accounts Payable cannot achieve their automation objectives if they do not realize a high level of supplier participation.
The problem is buyers, due to self-interest, seldom give much attention to their suppliers’ needs. Inadvertently, Accounts Payable departments are collectively forcing suppliers to deal with a multitude of different portals and processes. For Accounts Receivable, these multiple systems have actually increased the cost of collections due to data entry and research tasks being pushed out of Accounts Payable and onto their trading partners’ Accounts Receivable departments. If invoice details must be entered or uploaded manually, this can create an excessive burden on the Accounts Receivable or Credit function. This is the opposite of any desired outcome of an e-commerce initiative.
Likewise, suppliers that implement an Electronic Invoice Presentment and Payment (EIPP) solution hope to boost order-to-cash efficiency and cut costs. Facing a variety of customer Accounts Payable portals, an EIPP solution must be able to transmit invoices to a broad spectrum of online systems. As with Accounts Payable portals, for these EIPP portals to be successful, one needs to have enough customers using it to both access invoices and then process payments.
Ultimately, a well managed EIPP system will offer efficiency, visibility and control but only as long as a majority of transactions are processed through the solution. In order to achieve optimum performance, there are 4 things Credit and Accounts Receivable can do:
- Clean up your master files – Look at your customer lists and delete duplicate accounts, identify any related accounts and make sure your existing accounts have current and validated contact information. This benefits not only the billing process, but also collections. In an electronic environment you don’t want to waste time correcting out of date or otherwise inaccurate information – once errors are generated, they work their way across the entire process.
- Accept more than one form of electronic payment – In order to eliminate as many paper checks as possible make sure you accept payment via ACH, credit card and wire transfer. Work with your credit card merchant to make sure you qualify for high ticket rates so credit cards can be accepted for even more transactions.
- Overhaul your customer enrollment tactics – Segment your buyers by transaction volume and size so you can start a comprehensive enrollment campaign. Your goal should be to maximize the dollars flowing through the EIPP system. New customers should not be given the choice of receiving paper invoices or paying by check – they should automatically be entered into the EIPP systems. Your EIPP vendors should be willing to provide support in customer enrollment.
- Communicate and train – Take it upon yourself to make sure that every team member who has responsibilities related to the order-to-cash process understands the dynamics of an EIPP system and can support of the product and its enrollment process.
How many of the 4 items above has your company/department implemented and what results have you seen?