Risk management is what treasury departments do. But it's not the only thing they do. Strategic planning is a growing priority of the treasury department—helping businesses determine a sense of true north and steering them in the right direction.
In evaluating the direction a company's headed, treasurers ask: Is the company operating in a way that minimizes the threat of non-compliance or fraud? Is it on track to generate more revenue as a result of implementing the right cost-cutting measures?
But it's more than an advisory role. Treasurers aren't just watching trends and analyzing cash flow. They are looking for innovation that will add value to a company's bottom line for years to come.
Where cash is invested or lying stagnant is of utmost concern to the treasury. Each and every dollar spent tells a story about the fundamental priorities and values of an organization. Is cash flow driving toward or away from a company's goals?
In the past, check float was relied upon as a passive strategy in accounts payable to keep cash resources in-house for as long as possible. Even as interest rates dip and electronic payment options take center stage, the strategy is still used as a way to squeeze a little extra money out of the supplier payments process.
Treasury can help AP by guiding and determining proactive ways to support healthy cash flow in the business. This means future-focused strategies that aren't using yesterday's tactics to squeeze a few extra dollars out of check float.
If your AP team is squandering away precious time and resources on manual processing of paper checks, then you aren't taking advantage of the maximum savings available to you in accounts payable.
Leading businesses with an eye toward the future means embracing change before it is the only option. This is especially true of automation as we'll see the speed of technology accelerate in the coming years.
Research firm Grant Thornton released a 2017 CFO survey indicating a shift taking place among key decision makers. CFOs now estimate they spend a third of their time as strategic advisors.
This means that leaders need clearer department-wide vision and collaboration to drive the business forward. This includes deciding when to pursue automation opportunities.
Graham Tasman, a principal at Grant Thornton's Business Advisory Services, illuminates this challenge for CFOs:
"The tension that the CFO is experiencing between priorities inside and outside of the finance function increases the need to streamline processes through technology, which, in turn, promotes more integration between finance, risk, treasury, and operations."
While choosing to completely overhaul a legacy system can be time consuming and expensive, considering solutions that already integrate with your existing legacy systems can be a way to move forward, without having to do a complete overhaul of existing technologies. Many cloud-based services offer this kind of automation.
Taking advantage of growth opportunities happens when businesses cut back in other areas, freeing up capital and making it lean and able to pivot quickly.
Determining areas of unnecessary spend is part of this process. Unfortunately, AP is one department rife with cash bleed. Manual mailing processes, redundant approval workflows, and printing and carting off boxes of paper checks for signatures requires far too many steps to get suppliers paid each month.
Making this trade-off of paper accounts payable for automated workflows isn't just cutting costs, it's investing in the future.
In an article for the Harvard Business Review on cutting costs, the author urges businesses to grasp how important cost reduction is to the overall strategy and direction of a company:
"The best-run companies, in contrast, think of cost management as a way to support their strategy, and of cost as a precious investment that will fuel their growth. They put their money where their strategy is and continually cut bad costs and redirect resources toward good costs."
Once bad costs are eliminated and resources are freed up, the treasury department can help a business scale in its areas of strength. Say the business makes a new acquisition that includes multiple locations. More than likely, check approvers for supplier payments won't be centralized anymore. This presents the need for automated features like electronic check approvals to help your business move faster.
Moving faster in these administrative functions allows the business as a whole to serve its customers better, and focus on the highest-value priorities.
A back office that runs like a well-oiled machine because of automation will help you reach your goals. Starting with things like payment automation doesn't need to take up a lot of time or IT resources. It can work alongside current solutions as an added layer of efficiency.
Some customers even use what they've saved from going paperless in AP to invest in front-end automation initiatives like invoice capture or other technologies that make the process of payment seamless from start to finish.
A lot of companies believe they must "go big or go home" when it comes to AP automation. However, this runs counterintuitive to the format of many cloud-based automation solutions. It's best to identify the pain points you are experiencing in your back office, where you are losing cash, and use that knowledge to propel you forward on the path to automation, however small or big a step you take.
Adding automation that cooperates with your existing ERP ensures that you can scale up without losing a lot of time or money investing in a solution that doesn't play nice with invoice capture or OCR technologies.
And bonus! Payment automation is the last step in the process, making it easy to swap out manual processes for electronic payments.
With this knowledge of how to use automation as a tool to promote healthy cash flow and growth, any treasury department can guide accounts payable toward certain success.