Accounts Payable: The Missing Piece to Post-M&A Synergies

by Matt Clark

Five benefits of automating accounts payable for any company that is looking to pursue an M&A transaction.

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One of the top reasons dealmakers give when asked why they’re considering merging with or acquiring another company is potential synergies. This makes sense and may seem obvious, as the combination of certain business activities can increase performance and decrease costs. Yet, so many companies seem to misjudge what they thought would be a synergetic combination. There could be a host of reasons as to why the post-M&A integration processes don’t go as planned: A clash of company cultures; a lack of understanding from executives from either (or both) companies as to what the original objectives were for the deal; or a failure in proper due diligence. 

But another reason why the integration process doesn’t always go as planned –– can be attributed to inefficiencies in back office processes such as accounts payable. Many financial executives view accounts payable as a back-office function, however automating accounts payable enables companies to obtain a unified view of their spend while digitization and automation of accounts payable processes provides better forecasting of finances, and eases compliance with financial monitoring and reporting requirements – all music to dealmakers’ ears.

Compare those benefits to companies that rely on manual and paper processes, requiring additional staff to perform mundane tasks. That approach can slow down the payment cycle, and the amount of dark purchasing – or the inability to track where a company’s expenditures are going – can increase significantly. 

Here’s a scenario that I’ve seen too many times: two companies merge, thereby doubling the number of vendors and suppliers being used. They’ve now doubled the number of invoices that need to be processed. The employee headcount for processing these invoices has increased. And the amount of hours per week devoted to these routine accounts payable tasks has gone up exponentially, thereby increasing costs.

Is it any wonder why some companies that pursue an M&A deal never achieve the synergies that they had set out to accomplish?

Outlined below are a few of the benefits of automating accounts payable for any company that is looking to pursue an M&A transaction:

Invoice processing costs and time can be reduced significantly. Costs can be reduced by as much as 80 percent because these real-time payments take seconds, rather than days, to process, which means less time answering supplier inquiries regarding disbursement dates and exceptions. Implementing e-invoicing provides full visibility into all aspects of invoice status, enabling companies to process payments earlier and capture early-pay discounts. Automating the approval process can also reduce invoice processing time by up to 70 percent and can eliminate the possibility of duplicate payments. 

Visibility throughout the supply chain will be improved. One hundred percent visibility into the payment cycle enables a company to generate more accurate analytics reports for forecasting and optimizing payment cycles. You can see what you’re spending on office supplies, coffee for the team, and frivolous expenses, which – quarter-after-quarter – can have an impact on a company, especially depending on your financial health. And suppliers love the predictability and visibility that comes with automating the process, thereby strengthening the vendor relationship. 

Reduction in errors. A manual, paper-based process is inherently at risk for an uptick in errors, whereas a shift to electronic invoicing is a much more accurate and reliable approach. Additionally, moving away from paper checks, shifting to e-payments, and consolidating the activity into a single cloud-based platform makes fraud virtually impossible. 

Cash flow visibility and process efficiency throughout the enterprise. When it comes to enterprise resource planning (ERP), you need to break down barriers between business units so that you achieve cash flow visibility and process efficiency across the entire organization. An automated accounts payable solution should be able to integrate seamlessly with any ERP or accounting system. Therefore, a company can go paperless without making any changes to their existing accounts payable system and without straining IT resources.

The AP team is able to play a more strategic role in the company’s revenue efforts. With the mundane, repetitive tasks now automated – and therefore eliminated from employees’ responsibilities – the AP workforce can now add more strategic value to the organization. And this will make for happier, more productive employees who will feel that their jobs are more valued…and valuable. It isn't about automation reducing or replacing headcount. It’s about using the tools to supplement your workforce and make them more productive to solve organizational challenges with customers, people and operational excellence efficiencies.

The number of M&A deals may increase by year’s end, according to PwC, and automating accounts payable should be on every dealmakers’ checklist to ensure a smoother post-M&A integration process. In my experience, the return on investment in automating AP is tenfold when you factor in the increase in employee productivity, the rise in transparency around supplier and vendor relationships, the reduction in cost, and the insight into seeing trends in how you pay and what you’re paying for. 

We’re often told that the devil is in the details, and by automating this “unsexy” part of the process, you help eliminate those unknowns and future-proof your business. And in doing so, you will have found the missing piece to what makes a post-M&A integration successful.
Matt Clark is President & COO of Corcentric .