Accounts Payable Accuracy
Are you experiencing payment errors, returned payments, resources dedicated to correcting AP failures?
It's no secret that today's business environment is permeated by constant pressure to contain costs while minimizing risks. And yet, embedded in this cautious, penny-wise climate is a particularly glaring contradiction: supplier payment missteps are now more commonplace than ever before. Payment errors can come from:
- Supplier overpayment because new contracts are inadvertently ignored
- Payments arrive late, causing suppliers to stop shipments and disrupt production
- Suppliers continue to be paid long after their contracts have expired
- Frequent mergers and acquisitions mean changes in supplier banking relationships and remit-to addresses that can lead to payment failures and costly error correction.
At a time when every company is trying to reduce costs and increase cash on hand, the cumulative effect of these mistakes can be disastrous.
One procurement executive we know estimates that her company spends at least $10M more per year by paying off-contract terms to suppliers
What’s more, she says the firm also wastes at least 3 full-time equivalents per year in analyzing and fixing supplier payment errors. Unfortunately, problems like these are becoming more and more common. In fact, research from the Aberdeen Group revealed that the average enterprise now loses 2.2 percent of its savings due to leakage (Dwyer, 2010).
And there can be a big impact on working capital as well. By instituting a global change in their payment policy and practice, Boston University was able to update and standardize their vendor payment terms.
BU believes that if they choose to take prompt pay discounts whenever possible, this could yield a cost benefit of $1.5M per year, generating a positive net present value of $7.5M over 10 years
The key to achieving these results lies at the intersection of a company’s AP and procurement departments. Today, more than ever before, the realization of those valuable, hard-fought supplier discounts and significant reductions in AP errors demand seamless integration between your AP, procurement and supplier information processes.
Aravo can help
Aravo has helped many companies across industries implement a single source of truth for supplier payment and contract data to improve AP accuracy, ensure realization of contract savings and drive working capital benefits. For more information, please click on one of the choices in the Learn More box to the right.
"With Aravo, Boston University suppliers now register online and must choose BU standard payment terms of N60 or enroll in the University's accelerated payment program. This initiative has improved the University's working capital position on a one time basis by an estimated $16M on a supply base of $325M"
Richard Stack, Director of Sourcing & Procurement, Boston University