All businesses function to make a profit – that is a given, and profit arises when value exceeds costs.
But when it comes to making that profit, too many businesses struggle to appreciate the difference between the perceived value of some functions, against the actual costs.
As an example, as a hotel customer it is always the little things that make the biggest difference.
When I was shopping for a hotel resort for a holiday abroad, I noticed many now offer free pool/beach towels. This added value to the hotel as it meant I could now pack more items through not having to supply my own towels. It also saved me money in luggage costs as I would not have to pay for a bigger suitcase. This simple added commodity helped me choose between one hotel and another.
On paper, getting rid of the cost of these towels (including the purchase, the washing and the risk of theft of the towels) could help the hotel to make a larger profit, but in my experience drops the perceived value of the hotel. Having this free towel option may mean the hotel has an improved occupancy rate compared to others as they have a higher value.
For most businesses accounts payable is a high value function, often considered only as a cost and is all too often overlooked in favour of customer facing roles.
Essential but behind the scenes
Accounts payable processes are by no means the most exciting thing about business and operates very much in the background.
But like those extras in a hotel, an effective accounts payable department can contribute significant value to a business against its perceived costs.
Ensuring your invoice management is streamlined and optimised, your bills are paid on time, and your supplier relationships are as good as they can be, can all be traced back to your accounts payable function.
And they are all absolutely essential functions to get right if your business is going to have any chance of success and future growth.
Cutting costs through AP will cut your reputation to shreds
When it comes to saving money, this is the time when the “obvious” customer facing roles are put on a pedestal and viewed as the most important functions.
On paper, it is the backroom business functions that are likely to be hit first, but aiming that cut at accounts payable, or not funding the function correctly, would start a slow move towards even bigger problems down the road.
By not giving your accounts payable department the resources it needs you are going to hit cash flow problems when that rogue invoice you’ve lost track of comes through the door and you realise you don’t have the money in place to cover it.
Streamline your AP and boost results
Investing more in the tools your business needs to function will save you the headache later on when businesses start to notice you’re asking for invoices to be sent again because the original was lost
Or when you start paying your bills late or asking for extensions.
If your business becomes known for this kind of behaviour your suppliers will become less willing to work with you or could just flat out refuse to engage.
Investing in tools which streamline this business function – like automation – will boost your business reputation, money management function and make a huge difference to the customer experience you are able to offer
Visibility and speed of processing
Automating your AP and giving this department the tools it needs to track invoices, payments, and available cash, all serve the purpose of presenting your company as an efficient machine which customers can easily deal with.
This, ultimately, leads to improved reputation (the equivalent of those five star reviews), an increased number of customers coming to you and an increase in revenue and growth opportunity.
Accounts payable may sit in the background of your business and doesn’t serve as a customer facing role, but it does have an impact on the customer facing aspect of your business.
Failing to understand how important accounts payable is to the reputation of your company is a sure way to take a reputation hit and is a risk you cannot afford to take.