Can AP Automation Uphold a Payment Strategy?

There is a long-standing payment strategy problem that affects both procurement and AP. Organizations do not always pay their suppliers as intended, thereby causing inefficiencies and/or lost savings, and possible duplicate payments in the future. There are all sorts of iterations of the issue, but one example is when you discover that a “P-Card vendor” was paid by accounts payable via a different method. How does AP know when an invoice that falls into their lap should have followed a P-Card P2P process instead? Can AP automation solutions be the answer—ensuring that an organization’s payments plan does not fall apart? Further, should P-Cards be part of AP automation? These are just some of the topics that arose during a recent panel discussion that I was privileged to be part of, hosted by AP Now, on the future of technology in AP. Following is more about that, as well as questions for your organization to consider as you seek to achieve greater payment strategy success.

Should P-Cards Be Part of AP Automation?

This question was posed to me during the panel discussion mentioned in the introduction. Here is why a simple yes or no response is not enough.

Purchasing Cards entered the business-to-business (B2B) payments arena as a unique entity. Give cards to employees, so departments can quickly and easily buy what they need, especially low-value purchases. Invoice volume for AP is reduced. Everyone wins from this streamlined purchase-to-pay (P2P) process. In this sense, P-Cards reside outside the AP world and, theoretically, it is why AP automation solutions should not need to incorporate P-Card payments. However, some organizations insert P-Card payments into a traditional AP process (hopefully they have a good reason for doing so). As such, AP automation solutions should be adaptable to accommodate customers’ preferences, including P-Cards, even though Virtual Cards or straight-through payments are more common in this scenario.

More broadly, I would like to see the majority—if not all—AP technology solutions:

  • unite procurement and AP; since these teams often fail to communicate with each other, technology could help close the gap

  • offer automated controls to ensure each supplier is paid as intended

For more about the future of AP technology, including tips when seeking an AP automation solution, access the recording of the panel discussion. Besides me, the panelists included Jamie Radford and Richard Pigott. It was moderated by Mary Schaeffer, founder of AP Now.

Questions for Your Organization

To what extent is your organization paying suppliers as intended, such as according to contract terms? Answering the following can reveal where there is room for improvement.

  • How are payment decisions made? Is it left up to the buyer and/or AP? Or does your organization have a payments policy or documented payment strategy? Being strategic about which payment methods to use—and when—can really pay off.

  • Who are the stakeholders? Are they trained and kept informed about the policy or strategy?

  • Are payment-related terms and conditions explicit within contracts?

  • What are the controls to help ensure the right payment method is used?

  • Are the controls automated, such as through an AP automation or ERP solution, or do they rely on human intervention?

  • Are the controls effective or can they be circumvented?

  • Who is responsible for monitoring that the desired payment method was used with each supplier?

  • How does monitoring occur?

  • If a problem is discovered (the wrong payment method or purchase-to-pay process was used), how does it get addressed to prevent repeated problems?

If your organization has not previously answered these questions, then make it a priority. To succeed, a payments policy or strategy needs to have the right structure to support it.

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About the Author

Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…