Accounts payable is one of those areas that can sometimes get lost in the hustle and bustle of the day to day need of a business. It’s interesting to see which kind of businesses focus on customer service AP departments vs processing AP departments.
I’ve had several people ask me why I split them up this way because it makes more sense to just focus on paying vendors and leave it at that. The problem with this focus is that when you look at the work AP does, only a small part of it is actually about the payment.
Yes, shocking. Accounts PAYABLE is not only about payments. There are few outside of AP who can see this very small distinguishment. As I’ve talked about in other posts, AP takes the vendor invoice data and pushes all this information into the GL. Accounting uses this data to ensure up to date financials. AP then takes the same vendor invoice data and pushes all this information to the treasury team or bank portals to pay the vendors. I reiterate, this is one of the smallest parts of what AP does.
It’s easier to start with the one side of the spectrum, Customer Service AP Departments. These departments are focused on creating relationships with internal and external customers. This kind of AP group is large and focused on customer needs and questions. Ultimately it means having someone pick up the phone every time an accountant wants to know why an invoice GL was posted incorrectly, or answer an email sent with questions on a recent ACH payment, or get details on funds returned to a bank account that AP has paid out of before. A customer service AP department answers and resolves all of these situations.
Swing to the other side of the spectrum. Now your AP department processes everything. They are not a department focused on any questions but instead focus solely on getting the data to move from one place to another. There are very few hands in this department. There may not be any hands in this department but instead a manager monitoring the flow of information. This kind of AP department is a blip on everyone’s radar.
You can imagine that the spectrum coincides with the cost of the department. Without needing any salary for a processing department, it is cheap to keep this kind of AP group running. On the other hand, a customer service focused AP department is buzzing with movement and resolutions. This means alot of people are doing alot of things and there are alot of dollars exchanging hands.
The challenge is when your CFO or Controller goes to a conference and hears about new and improved technologies that will limit your headcount and increase productivity of AP. This can be dangerous because although it is true that AP can be revamped to become a processing department, one must first look at how their AP department is running before looking for a new solution. Yes, there are tons of technologies out there that make AP easier, but do they fit into your AP culture.
Taking a round peg and trying to put it in a square hole never did anyone any good. Instead, make a clear business mission statement for your AP department. It may sound crazy, but AP is it’s own little business within the company. Just like mapping your department, create a business statement that encompasses what you feel AP does for your company.
Use this statement to enhance solutions. For example, your Controller wants to replace your T&E system because they hate it. They hate it enough to want to implement a new system all together. First, understand why they hate it. If you find there is no way to solve the issue your Controller is having, then take to the google highway and learn about all the new systems out there that your Controller may be interested in. Go to demos, ask as many questions as you can. From there, give your Controller details on what would change within your AP department for each system implementation- AND most importantly, how it would impact your mission statement.
Understanding how your AP department is structured now and what kind of pain points you hear about from others in the company can help you decide what to solve first. If your company wants a processing AP department, let them know AP won’t be able to call a vendor with remit information. If your company wants the white glove customer service AP department, let them know how much it will cost. Sometimes explaining it in extremes allows management to find the middle ground best for the company as a whole.
What is Accounts Payable? 