Accounts Payable News^®

For many organisations, the economic difficulties which first surfaced in 2008 have given rise to a fragile period of nervousness - where four years later, keeping control of the cash is paramount. And yet, the era of instability has also opened the door to new opportunities, ideas and innovation. But with around 40% of UK trade within the Eurozone, UK banks and businesses are nervously looking over their shoulders at Spain and Greece. Furthermore, with France losing its AAA rating and Greece teetering on the edge of a disorderly default, the repercussions could be far reaching. Of course a solution will be found, but the impact on UK organisations could well be more painful than previously considered.

Employee Fraud hits £1.4bn

But what does all this have to do with an AP department? Well, quite a lot. Over the last year, the UK’s National Fraud Authority has noticed a 25% leap in the instances of fraud, with employee fraud costing UK businesses in excess of £1.4bn. While no-one wants to think of their work colleague as a potential fraudster – it’s a fact that during times of recession when people’s finances are squeezed, some look to less than savoury ways to line their pockets.

For example, a London council finance officer was recently jailed for two years for plundering more than £100,000 of public funds from the local authority’s housing account. He was able to abuse his position by using the details of landlords known to the councils, but swapping their bank details for his own on transfer forms. They were able to slip through undetected because he simply “copied and pasted” the signatures of genuine housing officers, which he’d lifted from other documents on to the forms.

While it’s impossible to stop people being creative in the ways they make money, it is possible to make it more difficult. In the case of the London council, the fraud could have been thwarted from the beginning if the master supplier file had been properly maintained and validated. In addition, if the AP department had a more stringent approvals process with levels pre-set with the ERP system, the inconsistencies would have been discovered and flagged sooner.

Automation Helps

Of course a lot of these issues can be solved with the implementation of an appropriate automation software solution. The introduction of imaging and workflow technology for example narrows the opportunity for fraud – while also providing increased visibility, cost savings, process improvements, reduction in process time, increased accuracy and the capture of duplicates etc. However, it should be remembered that it’s essential for organisations to get their house in order prior to the introduction to any new technology, so that it doesn’t become an expensive method of automating errors.

The economic uncertainty has also meant that many organisations have to do more with less. Employees aren’t being replaced if they leave – their workload is simply being distributed around the team. While it’s tempting (and indeed accurate) to look at this as being difficult for those working within AP, it does mean that employers are open to new ideas, working practices and technology which will save time and save money. This means that AP is no longer perceived as just the transactional treadmill of the past, but is increasingly being looked upon to create new opportunities to add real value to an organisation’s bottom line.

Cash is King

For example, if you’re analysing data extracted from your accounting system, reducing cost per invoice times, capturing duplicate payments, setting parameters for dynamic discounting – you’re not simply punching numbers, you’re creating the oil which spins the organisational wheel – cash.

With the supply chain equally affected by the Eurozone crisis - being able to maintain corporate liquidity in some cases had meant the difference between calling in the receivers and stimilating growth. The simple fact that invoice financing represents 14% of GDP highlights on the one hand UK’s business’s commitment to leveraging cash, but also its vulnerability. To complicate matters further, the exposure of UK banks to the Eurozone has made them reluctant to lend – leading to many of the larger corporate to hoard their cash to maintain a buffer of liquidity. However, if the banks aren’t lending and organisations aren’t spending – the wheels are in danger of grinding to a halt.

Shrewd CEOs understand the repercussions of this and during 2012/2013 the biggest story will be the growth of channel partnerships and BPO (Business Process Outsourcing). In other words, cash strapped organisations will spread the risk, combine knowledge and try to find ways to grow while keeping the costs as low as possible.

Keep AP Ahead of the Game

What those in AP have to do is keep ahead of the game, be inventive, be creative and use the situation to your own and your orgainsation’s advantage. If you can help manage spend in times of uncertainty, your department could be the one area your CFO and CEO comes to depend on. And that, in times of recession – is a great place to be..