Where Automation Meets Cash Optimization

Friday, August 17, 2012

Automation meets Cash Optimization

Why e-Invoicing is an invaluable strategic tool for CFOs and Treasurers

Driven by the global financial crisis, working capital management has become a top objective for corporate finance. As a result, CFOs and Treasurers are tracking the flow of cash into and out of their companies' operations like never before, bringing new meaning to the old refrain "cash is king."

Not surprisingly, "visibility" has become the financial buzzword of the day.

But traditional paper-based invoice processes, where critical data is locked in different corporate silos, make it difficult for financial executives to "see" much of anything. In a paper environment, key information is not captured, data is poorly organized, and systems are not well-integrated. In addition, even if paper data is keyed or input into financial systems and processed, it is often too late to give executives the visibility within a month or quarter that is required for proper cash-flow analysis.

In a recent survey of 85 U.S. and European companies with average annual revenues of $12 billion, The Hackett Group/REL and the National Association of Corporate Treasurers found that only 22 percent of respondents can forecast mid-term operating cash flow within 5 percent accuracy.

Consider the case of the world's largest building materials company. In the past, if the CFO wanted to see the company's total cash requirement for the next business day, each of the company's more than 20 business units would have to spend countless hours manually compiling information into a spreadsheet. This burdensome process made real-time cash forecasting impossible. Moreover, the spreadsheet offered no information on payment terms, the availability of early-payment discounts, whether the payment qualified for a p-card, or other critical variables in finance's decision-making.

The company needed enhanced visibility into its payables. That meant real-time information on who is being paid (and whether they were one of the company's largest suppliers), the availability of early payment discounts, and the terms associated with different payment options (e.g. check, card, ACH).

All of this information is critical to helping the company use its cash in a much more efficient way.


The company's solution: deploying e-invoicing in its AP shared services environment. All of the company's business units now use an e-invoicing portal to electronically receive invoices from over 105,000 suppliers worldwide. The portal automates processes such as: electronic invoice receipt, invoice scanning and capture, supplier registration and inquiry, e-invoice processing, enterprise workflow and compliance/dispute management, and reporting. The portal also enables AP staff to review the status of invoices online, while managers can monitor how AP processes are performing.

Most importantly, the portal is integrated with the multiple enterprise resource planning (ERP) systems across the company's business units, providing an interactive dashboard displaying real-time information on cash flow and liabilities to its suppliers. Key information not only is current but it also is transparent for decision-makers. No doubt,, e-invoicing will improve the company's cash flow forecasting. But it also will enable the company to make fluid decisions about the benefits of paying a supplier with a p-card versus paper check, or keeping cash on hand versus taking advantage of supplier discounts. Data from the portal will also help prevent duplicate payments and will provide the company with leverage in its negotiations with suppliers. And procurement can more easily analyze spend patterns, to better manage suppliers and make more strategic decisions.

The Bottom Line
Working capital management remains a top priority for CFOs and Treasurers. Against this backdrop, companies need greater visibility into the AP cycle to assess liabilities and control cash. Visibility into the invoice cycle is critical as procurement and AP become more closely aligned within companies. E-invoicing and inherent reporting provides the increased visibility necessary to optimize cash. It empowers CFOs and Treasurers to make more informed decisions and helps eliminate missed opportunities such as untapped supplier discounts. All of this makes e-invoicing an invaluable tool for the finance executive.

Matthew E. Oakes is President and CEO of Direct Insite.
He can be reached at 954-510-3750.