Perceived cost versus actual value of accounts payable

Perceived cost versus actual value of accounts payable

It's easy for businesses to fall down by not appreciating the difference between the perceived value and actual cost of some functions

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.

In the consumer sphere the best example is that of a hotel guest.

As a guest it is always the little things that make the biggest difference – like providing toiletries or towels for the pool. From a profit stand-point a business could – on paper – increase profits by removing these extra add ons, but by doing so the user experience drops along with the perceived value of the hotel.

For most businesses, accounts payable is a high value function, but is 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 these 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), increases in the number of customers coming to you and increases 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.

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