Dealing with Unknown Economic Variables: AP Tips to Meet the Challenges Ahead

Over the past decade, Accounts Payable (AP) has consistently proven its strategic value, especially during times of financial and operational uncertainty, such as the economy-crippling COVID-19 pandemic.

Today, our organizations are facing another period of economic uncertainty. Higher taxes and fluctuating tariffs are creating a climate that is difficult to plan for.

In this article, we’ll explore how you and your AP department can embrace a broader, more strategic role. We’ll also discuss how you can use automation and AI to effectively improve reporting.

Work with Senior Management to Analyze Vendors
Now is the time to collaborate closely with your controller and CFO, along with your Treasury and Procurement colleagues, to protect your organization’s capital by tightening or extending payment terms strategically.

AP is in a unique position to provide critical vendor intelligence and problem-solving strategies. By sharing your observations and insights, you establish your credibility in strategic decision making.

Take the following steps to have accurate data on hand:

1. Evaluate your vendors. Determine which suppliers are critical to your organization’s success and identify viable alternatives. With current and accurate vendor information, financial operations will be in a better position to negotiate terms.

2. Diversify your vendors. Establish a plan to add alternative vendors. This provides the organization with more options in the event of price increases or scarcities.

3. Review and adapt critical contracts. Long-term contracts may pose a risk when tariffs or material costs fluctuate. When necessary, renegotiate terms to allow for greater flexibility.

4. Add contingency clauses: Work with Legal and Procurement to discuss and develop language that allows for renegotiation if significant cost changes occur.

6. Suggest payment alternatives. Devise strategies, such as earlier payments, in exchange for deeper discounts, to improve cash flow for both parties.

Tighten Up Your Invoicing Processes
When every dollar counts, you cannot afford AP processing errors, such as duplicate payments, paying for goods never received, or missing discounts.

• Ensure three-way matching. Automate the match between purchase orders, invoices, and receipts whenever possible.
• Streamline approvals. Clearly document who approves what and when.
• Avoid manual processing and automate when possible Focus your AP team on more productive activities.
• Build strong vendor relationships. In financially volatile times, your vendors might collaborate with you to give you the leeway you need to survive.
• Build goodwill and mutual understanding. This will serve you when tough negotiations come up.
• Be transparent about payment status. Pay on a regular, promised basis, keep your vendors informed, and never let them worry about receiving a payment from you.
• Use AI and Automation to free staff for higher-level responsibilities. The more volatile and unpredictable things get, the more you need your team focused on exceptions and strategic work.

How AI and Automation Make a Difference

Most existing ERP and AP solutions have built-in automation features that go unused because AP doesn’t implement them. Begin now by activating just one or two of these features. Even small improvements can unlock savings and pave the way for continuous optimization.

Here are some capabilities that are critical in a tight economy:

• Duplicate payment prevention. Newer AP platforms now use AI to flag potential duplicates by recognizing patterns that simple matching rules miss.
• Predictive insights. There are tools that analyze past payment trends to flag invoices that could cause cash flow shortfalls if paid immediately.
• Fraud detection. AI can detect anomalies that might signal fraudulent invoices and/or payments.

Become a Proactive Influencer

It’s up to you to establish yourself as a trusted advisor. Don’t wait to be consulted. Schedule a weekly briefing with your controller or CFO to discuss your operation’s biggest risks and opportunities. Based on your early analyses, bring your ideas to the table for savings and efficiency.

• A list of vendors you’ve identified whose terms could be tightened or renegotiated for better cash flow.
• Point out the vendors you believe are most likely to raise prices precipitously if costs spike.
• Suggest a backup plan for looking for additional vendors to offset any risks.
• Identify quick wins for automation. For example, pick one bottleneck. Can your current automation solve the problem? Can you identify new automation that will save time, reduce costs and increase efficiency?
• Communicate and align with procurement on vendor diversification and contract flexibility.

Are You Ready for the Challenge?
Start today by picking just one process to improve, one vendor term to review, and one automation tool to test. In this way, you identify yourself as the go-to professional who gets past predicaments—and you’ll demonstrate that one smart move at a time.

As an accounts payable leader, you provide a front-line defense against allowing cash flow shortfalls to overcome a company in uncertain times.

Editor’s Note: IOFM thanks Jay Manley, Vice President of Payments at Source Technologies, for his collaboration on this article.