AP Holds a Winning Card Hand

Will 2019 finally be the year in which the key stakeholders within your organization happily, or at least willingly, support Commercial Cards? For some, accounts payable (AP) is the biggest holdout, but, as we all know, their stance on card solutions can make or break a program. This is especially true for organizations wanting to implement or expand an electronic accounts payable (EAP) option like Virtual Cards, which AP typically manages. A common tactic by a stubborn AP manager is to say the ERP system cannot accommodate such payments. Then no one questions them because AP is viewed as the expert in this arena. To reopen the discussion and start making progress, following are insights from an AP veteran and a four-step approach to try in an effort to get through to AP.

AP’s Attitude Affects Everyone

Sometimes even senior management backs down from AP, but this can be the worst outcome for everyone. Accounts payable expert Mary Schaeffer, AP Now, shares, “When I hear someone say that they are going to wait until so-and-so retires before moving forward with a new project it saddens me. Usually it is because the person in question is either difficult to deal with or completely resistant to change. This is not a good situation either for them or for their organization. The reasons it’s not good for the organization are obvious. It gets left behind, less competitive, and doesn’t progress as much as its competitors.”

Mary continues, “The employee in question is also putting themselves in jeopardy. The business world, including the accounting and accounts payable space, is evolving rapidly. The contrary employee is serving as a roadblock to progress, usually coasting for a few years until they can retire. Plain and simple, they may not get those few years. Management may decide their position is no longer needed and they will definitely be at the top of the list for any headcount reduction initiatives. Personally, they’ve missed a great opportunity to try something new and enjoy their last few years of working.”

Organizations may also be experiencing a conflict between AP and the procurement department regarding card payments. In response to an AP Now industry survey, Internal Controls in AP, one AP manager for a large company commented, “P-cards pose problems with duplicate payments. Coming from an AP standpoint, they are disliked, however our Supply Chain seems to love them…” As disheartened as I was to read this (I’m the lead researcher for the survey project in progress), it represents an opportunity.

Getting Through to AP

  1. Recognize AP as an important part of the card program and initiate a respectful—versus confrontational—discussion. To prevent AP from feeling ganged up on, consider a one-on-one meeting to open the door to better communication.

  2. Recap the benefits of Commercial Cards and the organization’s related goals. Encourage questions to ensure AP has an understanding. Sometimes resistance to cards is rooted in a lack of knowledge.

  3. Find common ground; for example, supporting internal goals, making AP’s job easier, etc.

  4. Ask AP about their concerns and challenges. Step through the related processes together to identify the facts. Invite them to brainstorm with you on possible solutions. Everyone wants to feel valued and heard.

Examples

  • If they cite duplicate payments as a problem, determine the extent of the issue, the control gaps that allow it to happen, and how to resolve it.

  • If their challenge pertains to reconciliation, maybe they are making the process harder than it has to be. Inquire about the pain points and share ideas for process improvement that would still retain satisfactory controls.

  • If they view the ERP/accounting system as a roadblock to Virtual Cards, involve the system vendor. There might be functionality that AP is not aware of.

As with most problems, productively working together can lead to positive results. AP’s support of the card program can be a game changer—for them and the organization.

Related Resource

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

When P-Cards are NOT the Best Option: A Real-life Example

Purchasing Card, Virtual Card, or other payment method? A company for which I did some consulting work was initially planning to adopt P-Cards for certain orders under $2,000. After all, this is where P-Cards traditionally excel. However, a review of the facts revealed otherwise in this case. My ultimate recommendation to them was to back away from their P-Card plan and instead consider Virtual Cards. Keep reading to see why and how this case might align with circumstances within your organization. 

The Situation

The company thought it was spending too much time on low-dollar purchases. Specifically, buying departments had too many invoices to approve and, subsequently, accounts payable had too many invoices to pay. It sounded like a great P-Card opportunity until they mapped out the related purchase-to-pay (P2P) process for these orders. The purchases in question utilized an eInvoicing model for which the suppliers, in conjunction with invoice submission, electronically provided various order details requested by the company. The P2P process was quite slick. The main drawback was the invoice volume; orders under $2,000 comprised approximately 55% of the activity.

Changing to a P-Card process would have actually complicated everything, negating the benefits of P-Card usage. They had cost analyses to prove it. Ironically, the company had a separate P2P process (not their eInvoicing model) that could have benefited from P-Card adoption.

A Better Solution

In their eInvoicing model, Virtual Card payments could have helped by retaining the existing process efficiencies, but providing a secure, electronic payment option. Low-dollar invoices could be consolidated into fewer payments for AP to make and tweaks to their invoice approval process could reduce the burden on buying departments.

Key Takeaways

When contemplating a change to your payment strategy, be sure to:

  • specifically identify the pain points you are trying to solve
  • revisit your P2P requirements, as perhaps some simple tweaks could resolve the pain points
  • document today’s P2P process cost and what it might be after implementing a particular change
  • research various options before making any decisions
Every new payment strategy plan deserves another look before pursuing. You might find that a Plan B would be better. 

Every new payment strategy plan deserves another look before pursuing. You might find that a Plan B would be better. 



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

Payments to the Card Issuer: Speed Up or Slow Down?

Has your organization made a thoughtful decision about the timing of payments to your card issuer? Does this deserve another look? There is more to it than not being late. For many organizations, revenue share (rebate) incentives are impacted by the speed of pay, also known as file turn. Even if this is not part of your contract, have you worked with your treasury/finance department to evaluate the benefit of paying the issuer quickly against the value of holding on to your cash longer? A recent survey by AP Now reveals the majority of organizations pay their Commercial Card issuer on a monthly basis soon after the cycle ends, but this is not the only option, as shown below. Nearly a quarter of the survey respondents wait as long as possible. Only 7% make payments more than monthly to increase their rebate.

What to Do

While every organization should ensure on-time payments to its card issuer, it is a best practice to identify the ideal timing to support your organization’s needs and goals. 

Review your contract to determine if speed of pay/file turn is part of the rebate calculation. If yes, where does your organization stand today? What would your rebate look like if your organization paid the issuer faster or more frequently? Evaluate different scenarios; for example, right after the cycle ends each month, twice per month, weekly, etc. Present your analysis to your management.

Regardless of your rebate incentives, consult with your treasury/finance team to determine the best payment strategy for your organization’s cash flow and overall financial position. Their opinion may also depend on interest rates, which can fluctuate, so it is worthwhile to revisit this topic from time to time.

As an added bonus, having a discussion with treasury/finance might lead to Commercial Card program expansion, such as the adoption of Virtual Cards to help extend float.

My Experience

I was fortunate to have worked for the Federal Reserve Bank. We could pursue the best possible rebate tier for speed of pay since cash flow was not an issue. However, to make this happen, I still had to figure out the right payment timing, which involved various calculations that took into account an average transaction age.

Finally, do not allow payments to your issuer to be delayed by cardholders’ reconciliation of transactions, which should be a separate process. Since your organization is required to pay in full by a certain date, waiting for cardholders to reconcile does not add value. The AP Practices Survey by AP Now shows that, unfortunately, 30% do wait. 



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more