PayStream's Newest Report: AP & Working Capital
Accounts payable has traditionally been viewed as a cost center focused on processing invoices and issuing payments. That perception is changing rapidly. Forward-thinking finance leaders now recognize AP as a strategic lever for working capital optimization. PayStream Advisors' latest report examines how organizations can unlock trapped cash within their payables processes and turn AP into a contributor to the corporate balance sheet.
The AP-Working Capital Connection
Every invoice that sits in a manual approval queue represents a missed opportunity. When organizations lack visibility into their payables, they cannot make informed decisions about payment timing. They miss early payment discounts that suppliers offer for prompt settlement, and they fail to optimize days payable outstanding (DPO) in a way that balances supplier relationships with cash preservation. AP automation provides the foundation for working capital management by giving finance teams real-time visibility into all outstanding obligations, enabling them to decide — on a supplier-by-supplier basis — when to pay and how to pay.
Dynamic Discounting and Supply Chain Finance
Dynamic discounting programs allow buyers to offer early payment to suppliers in exchange for a sliding-scale discount. Unlike traditional 2/10 net 30 terms, dynamic discounting adjusts the discount rate based on how early the payment is made, creating a flexible arrangement that benefits both parties. For buyers, the returns on early payment often exceed what they could earn on short-term investments. For suppliers, accelerated payment improves their own cash flow without the cost and complexity of factoring or traditional supply chain finance arrangements. The report details how organizations are implementing these programs alongside their AP automation platforms to generate measurable financial returns.
Getting Started
The report recommends that organizations begin by benchmarking their current AP performance — average processing cost per invoice, cycle time from receipt to payment, discount capture rate, and DPO. With these baselines established, finance leaders can build a business case for automation that goes beyond cost reduction to include working capital improvement. Organizations already leveraging electronic payment methods are particularly well-positioned to layer on working capital optimization, since digital payments provide the speed and control that dynamic discounting programs require.
For a broader view of payables trends, see our 2018 Payables Insight Report.