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Accounts Payable and Supporting Q4 Cash Flow Management

Accounts payable professionals and the C-suite are using AP automation tools to support smart Q4 cash flow management and minimize the stress typically associated with this hectic season.

For the financial team, the fourth quarter scuffle seems to put a damper on the festive mood during the holiday season. Rather than working long hours and feeling stressed about the numbers, the year-end close process can be smooth and streamlined. Get beyond the holiday and year-end struggle by harnessing the power of accounts payable to support Q4 cash flow management. Discover how any organization can monitor the cash flow and act with confidence during a season frequently associated with financial unpredictability.

Get to Know the Q4 Cash Flow

When you get to know the Q4 cash flow patterns from previous years it makes it much easier to determine what could happen today. AP automation tools put pertinent data within reach to detect patterns, examine benchmarks, and makes changes along the way. With access to this data at your fingertips, it’s important to re-familiarize yourself with the terms and conditions of suppliers and vendors before the year comes to a close. Is there room for negotiation to improve those terms and support improved Q4 cash flow management? Talk to the vendors to find ways to save money at this crucial time of year.

It also helps to look outside of your organization and examine the seasonal cash flow issues typically associated with the industry. Use predictive planning to account for all potential expenses, including one-off purchases. Use AP automation to keep track of vendor updates and expenses in real-time, and remain on top of spending and money owed to gain greater control over Q4 cash flow. Identifying all of these seasonal patterns helps prevent cash flow frustration during this busy time of year.

Should You Delay to Pay?

Savvy management uses AP automation to detect patterns and develop a viable strategy for the future. Sometimes it pays to delay paying specific corporate bills until the due dates. In other situations, early payment discounts can add up to serious savings - and improve Q4 cash flow. Use automated bill payment options to send and receive payments instantly, and in accordance with due dates. Electronic payments can be made on the due date without further thought or effort.

Also, be personable with suppliers to get the best possible terms by maintaining ongoing relationships based on mutual trust. Plan for Q4 by working out reasonable agreements with regular suppliers months before the season arrives. Nurture these relationships to gain access to payment arrangements that can boost Q4 cash flow, and be a financial advantage to the company throughout the year.

Negotiate the Terms with Vendors

The accounts payable department has transformed from the back office shadow to share strategic information with the C-suite to help them save money, streamline operations, and improve cash flow. AP automation readily provides data that helps companies plan for Q4 cash flow management and keeps it regularly updated with the latest data from the ERP and P2P process. If there is a cash flow issue, start negotiating the terms with top vendors that you can prioritize based on supplier reports in your automation solution. Some are willing to delay payments or allow the payment of a large bill in installments, freeing up cash right away.

Supplier relations is one of the areas where AP and procurement may overlap. Work together to encourage vendors to offer more appealing terms. When AP and procurement seamlessly provide attentive communication and service with suppliers, it builds positive long-term relationships. Suppliers become more likely to negotiate and offer the best possible terms. And AP automation ensures the AP team and procedure know the updated status of every supplier account to address small issues before they become big problems.

Getting Through the Holiday Highs and Lows

With Q4 comes the inevitable holiday highs and lows. Will the company earn enough to get out of the red? How does the extra spending to meet holiday demand impact corporate cash flow? What are the typical holiday sales and are the projections positive for the current season? The financial team and C-suite need to keep their fingers on the pulse of these variables to better manage cash flow at this volatile time of the year. While some patterns are detectable, no two seasons are exactly the same as the current financial climate plays a significant role.

While some companies struggle, the final quarter of the year can be quite a profitable season for many companies. A recent study revealed one-third of small businesses find Q4 is the most profitable season of the year - despite the higher costs. If so, use automated data to support the decision to save a portion of the Q4 profits to act as a cushion during other financially challenging times of the year. Plan ahead, so there is always money in reserve to keep the company moving forward, even if there are shortfalls in the future.

Find a Flexible Balance

AP automation puts key data within the instant scope of anyone on the team, regardless of location or time of day. Detecting issues before they become problems helps the C-suite find a flexible balance. For example, it might be better to work with an understanding vendor who negotiates payment terms rather than a budget one that expects payments on-time or early. Know the organization’s operational hurdles during Q4 and be proactive about dealing with them.

Cash flow management skills are beneficial during Q4, and the rest of the year. A few simple strategies establish a foundation for success, including:

  • Use historical and current data from AP automation tools to make accurate cash flow projections to establish a corporate plan for dealing with them;
  • In accounts payable, use electronic funds transfer to make payments to vendors on the last day they are due to hold on to the cash and use it for as long as possible;
  • Closely examine accounts receivable and look for ways to make improvements, and derive ideas from AP solutions; and
  • Have a plan ready to execute in case of shortfalls or unforeseen financial crisis to avoid last-minute decisions based on panic rather than logic.

Accounts payable plays an integral role in supporting Q4 cash management. The data compiled by AP automation can be analyzed by the AP team to provide crucial strategic support to the C-suite. During this hectic time of year, nobody wants to work longer hours than necessary. Use automation and savvy planning to boost cash flow, improve overall operations, and get more time to yourself to enjoy the holidays and new year.

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