How AP and Treasury Can Be Better Teammates

CalendarDecember 16, 2021

Finance departments contain many functions that don’t always work together as well as they should. That’s especially true of Accounts Payable and Treasury. You’d think they’d work more effectively together as teams that both control the flow of funds for an organization, but in my experience, that’s rare.

That lack of coordination may be due to functional and cultural differences, or the effect of technology silos. AP and Treasury may sometimes work at cross-purposes, with conflicting priorities that manifest in their goals.

But AP automation has freed up both more time and more data for AP professionals to use on analysis and strategy. Payments automation in particular provides unprecedented visibility into all payments, creating the conditions for a productive AP/Treasury partnership centered around shared objectives of optimizing cash and mitigating risk. Both teams need to understand each other’s strengths and capabilities, respect each other’s culture, and align around common goals.

Treasury professionals tend to be very analytical, and work closely with the company’s bankers to figure out how to maximize returns and minimize investment and other risks. Treasury tends to receive a high level of visibility, which can sometimes create a wedge between them and other finance teams. 

In AP, it's a very different, more process-oriented culture. Efficiency is a point of pride. AP orients its goals around optimizing throughput, taking in factors like number of days to process an invoice and number of payments processed per person. Metrics like these speak to the efficiency of throughput—but not what’s in the throughput.

In fact, when AP isn’t automated, the AP team still does data entry, prints check, stuffs envelopes, and spends lots of time on the phone collecting supplier payment data and correcting payment and invoicing errors.

AP teams don't have time to partner with Treasury, or analyze factors that impact cash flow, such as missed discount opportunities, or late payment fees and their causes. They’re not positioned to partner with Treasury because they're so busy making sure the right payment goes against the right invoice. They’re often seen as a cost center and therefore something to minimize or outsource.

The catalyst for change is payment automation. A comprehensive and fully automated payment solution can help execute the cash management plays Treasury calls. Automation handles some of the key blocking and tackling for AP, namely enabling suppliers for electronic payments, simplifying payments workflow, and creating the visibility and control needed to execute the plays. It’s a solution that enables AP to more effectively help Treasury execute on its goals.

Without automation in place, there typically isn’t the basis for a strong AP/Treasury relationship, and it’s not uncommon for those teams to work at cross-purposes. AP stays focused on throughput, getting payments out as fast as they can. They’re so resource-constrained that they don’t have time to maximize discounts, or try to get more suppliers on ACH or card payments.

In fact, Treasury might want AP to pay more slowly in some cases, so they can maximize interest in investment accounts they might be drawing on for funds or, conversely, avoid interest payments on credit lines they’re using to fund operations. And they care a lot about what’s in the throughput. At scale, early payment discounts, card rebates, and late payment fees can all have a material impact on cash flow.

With payments automation, Treasury can help ensure that the right payments go out at the right time and in the right way—and the two functions can have some shared goals. For example, rebates make card payments the most ideal payment method. In today’s low-interest climate, maximizing card payments can bring more value than check float, and save costs for AP. Virtual cards also minimize fraud risk. All these factors motivate AP and Treasury to share the goal of optimizing card payments.

They can also team up around optimizing ACH payments. Many suppliers won’t accept card payments, but most will accept an ACH. Payment fraud is lower with ACH than check, and with the right payment automation provider, you can eliminate the risk entirely.

It’s hard to imagine any team without coaches and players working closely together around shared goals. Payment automation solutions give Treasury and AP a way to do that. They elevate AP to a strategic player, making them more effective as they support Treasury in making even more money for the company.


Josh Cyphers

Josh Cyphers

President of Corpay, a FLEETCOR Company. For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies.