Payments And The Changing Role Of The CFO

The CFO’s role within their business is undergoing fundamental change.

It is no longer enough for CFOs to serve as a financial scorekeeper. Boards, CEOs and other corporate leaders expect their CFO to help develop strategies for keeping up with change, ensuring control and compliance, managing exploding data volumes, and driving revenue growth and profits.

To meet the new demands placed on them by their businesses, CFOs must automate finance and harness the power of their data. Sixty-two percent of CFOs and other finance executives surveyed for Accenture’s The CFO Reimagined study already have seen increased demand for insights and analytics from financial data. As a result, CFOs are prioritizing the automation of transaction processing, accounting, compliance and control (e.g. reconciliation, audit, tax filing), and reporting.

Thirty-four percent of traditional finance tasks are already performed by technology, Accenture reports. But that doesn’t mean that there aren’t plenty of opportunities for CFOs to digitize routine accounting, control and compliance tasks to create additional business value and drive efficiencies.

Optimizing payments to suppliers should be high on the CFO’s to-do list.

Optimizing Supplier Payments Helps CFOs Achieve Strategic Objectives

There are four ways CFOs can optimize the financial supply chain, and take a more disciplined approach to achieving their strategic objectives:

1. Improved cash management
Extending Days Payable Outstanding (DPO) – a calculation of the average amount of time it takes a business to pay its suppliers – when taking a strategic and disciplined approach to paying suppliers electronically an organization should consider varying the settlement timing based upon payment type. You can easily capture discounts and incentives for accelerating payments, while extending DPO for manual check payments. It’s a great way to drive supplier adoption and gain additional float. Improving cash management supports your strategic objectives such as paying down debt, making capital investments, increasing research and development and supporting growth initiatives.

2. Higher profit margins
Increasing profitability is a big challenge for businesses in today’s increasingly competitive global economy. CFOs can help their business accomplish this objective by paying suppliers via a virtual card – 16-digit, one-time-use, “plastic-less” card programs that are tied to a transaction.

Businesses earn money back on their accounts payable spend. This can defray an accounts payable department’s overhead, free up the capital to purchase a solution for automating invoice processing or contribute to higher profit margins.

3. Lower Cost of Goods Sold (COGS)
The purchase of raw materials is a big contributor to a business’ COGS. CFOs can help their business reduce its COGS and improve its competitive position in the process by capturing the discounts that suppliers offer on the invoice-due amount in exchange for early payment.

A stout 80 percent of suppliers offer early payment discounts, the Institute of Finance and Management’s (IOFM) 2016 AP Key Performance Indicators Study found. The average discount offered is 2 percent, although many buyers in many industries routinely capture early payment discounts of 6 percent or more, IOFM adds.

Automating supplier payments empowers businesses to capture more early payment discounts to lower their COGS. Automated solutions include workflow engines that digitally route invoices for approval and exceptions handling, based on a buyer’s pre-configured business rules.

With automation, there is no chance that invoices will become lost. Alerts, notifications and escalation procedures keep invoices from becoming “stuck” on someone’s desk. Accounts payable staff can instantly view invoices whose window for early payment discounts is closing. And electronic payments eliminate the time-consuming task of printing checks, stuffing them into envelopes, affixing postage, and sorting payments by zip code.

4. Mitigate risks
Fraud and compliance violations can lead to irreparable reputational and brand damage, fines and penalties, sanctions, significant write-offs, lost business and more. Paying suppliers electronically provides businesses with the visibility, tracking and control they need to mitigate costly fraud and compliance risks. Automation tracks invoice history and approvals, ensures compliance with invoice approval policies, enforces separation of duties, assures chain of custody, makes audit information readily available, applies PCI compliance controls and prevents sensitive documents from being destroyed prematurely.

Each of these benefits is compelling.

Together they help CFOs digitize finance and harness the power of their finance data – positioning themselves as a business partner to boards, CEOs and other corporate leaders.

It is no wonder that 69 percent of CFOs and other executives plan to increase investments this year in digital technologies such as electronic payments to keep their competitive market position, per the 2018 CFO Insights on New Technologies study conducted by Grant Thornton and CFO Research.

Are you looking for help in optimizing your financial supply chain and improving payments to suppliers? Get in touch to speak to our team.