This article on the impact accounts payable has on the supply chain was originally published in September 2020. All relevant statistics and content have been updated as of September 2021.
After a year and a half of unprecedented disruption, it’s time for enterprises to rethink how they manage their supply chain. Building an organized and strategic approach that puts accounts payable at the center of your processes can help you create a resilient and future-ready organization. In this article, Jonathan Laverentz, Head of Product Marketing at Tradeshift, breaks down his thoughts on the need to put your accounts payable at the center of your supply chain.
I've been thinking a lot about the challenges different companies face as they weather the organizational crisis caused by the impact of the pandemic. Nearly a year ago, I spoke with Rock Persaud at Take-Two Interactive about how he proactively planned for a crisis. But, after reflecting on the past year, I've come to realize that Rock is more the exception than the rule. Most organizations are proactive when it comes to internal crisis planning, but that same proactive spirit seems lost on their approach to supply chain continuity.
In many cases, organizations were caught unprepared to handle business as usual with a distributed workforce. They were forced to rely on external organizations to provide plans for business continuity in order to overcome the unique challenges brought upon them by the pandemic. In other words: they were reactive.
My greater realization was that managing and supporting the supply chain throughout the crisis seemingly only concerned the c-suite and procurement teams. Ostensibly, accounts payable was largely left out of the conversation. What’s more, it feels like they didn't raise their hand to be included.
Bonus Material: Have you noticed your internal teams and departments are siloed off? A lack of centralized communication and strategy can lead to bottlenecks and hurdles along your supply chain. Check out our advice for breaking down silos and connecting your AP team to the rest of your supply chain.
It left a question resonating in my mind. Why does accounts payable feel so far detached from the supply chain? Personally, I feel it comes down to the fact that accounts payable pros feel as if they’re merely a tactical, back-office payments organization. It’s no wonder they feel undervalued.
When you explore accounts payable reach, this perception couldn’t be further from the truth. Accounts payable is deeply and intrinsically tied into the supply chain and thus the success of the business—the work of accounts payable matters.
Bonus Material: See how investing in a digital platform can help you create a stronger, more secure AP process.
Accounts payable are the only team within the organization that addresses 100% of the supply base. They alone can influence supplier relationships, and their action or inaction can radically impact how sellers view the organization.
Think supplier relationships aren’t critical? You’d be wrong. Suppliers can make or break whether you have the goods and services you need to continue to do business.
Bonus Material: Looking to enhance your supplier relationship management strategies? Check out our advice for better business relationships.
How are you going to finish that widget without that critical part? How is your product getting to its destination when there are logistic challenges? How are you going to communicate when you have no power? Most companies answered these questions during the crisis. And they didn’t like what they found.
So, when you think about operational risk, what greater risk is there than failing to pay bills? The upstream effects can be catastrophic to suppliers—and your buyers, too. A failure to meet standard payment terms has the potential to disrupt an entire supply chain.
If you consider data as well, accounts payable holds many of the cards yet again. When performing spend analysis, where do you think all that data comes from? Accounts payable. Forecasting? Yup, accounts payable as well. All spend goes through accounts payable. It’s a gold mine of data just waiting to be unlocked.
Accounts payable teams, it’s time to embrace what a genuinely critical component of the supply chain you are. You have the power to make or break your supply chain resilience during business as usual or a crisis. You are the overlooked collaborative channel between your organization and your suppliers.
It’s time to get in the game. It’s your supply chain too. Own it.
As software built for adaptability, Tradeshift works to help you create a more streamlined and resilient supply chain function. With a digital-first approach to supply chain management and accounts payables, your team can better prepare for the disruption of the future while building stronger professional ties today. To see Tradeshift in action, reach out to our team of experts.