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How to Prepare AP For Upcoming Mergers and Acquisitions

Proper preparation, including savvy automation integration processes, helps to minimize the AP challenges often associated with mergers and acquisitions.

During mergers and acquisitions, two or more accounts must be integrated into a singular system. Small companies may still be maintaining manual records, while most corporations have some accounting automation. Updated AP automation and following steps to proper integration streamline and simplify the merger or acquisition process. Proper preparation eliminates or minimizes the AP challenges typically associated with mergers and acquisitions.

Mergers and Acquisitions on the Rise

Mergers and acquisitions are on the rise and hit a worldwide high during the first half of 2018 at a global value of $2.51 trillion. This fact means an increasing number of companies must merge their operations with other businesses. Sometimes it can take years to complete mergers and acquisitions. Automation plays a crucial role to reduce the time it takes and improve overall accuracy. Repetitive tasks are left to automation so personnel can engage in more strategic and communicative work to help facilitate the takeover.

Additionally, automation means companies do not have to rely as much on undocumented processes and knowledge that could be lost during the inevitable staffing disruptions after a merger or acquisition. First, data must be gathered to maximize the use of automation solutions during mergers and acquisitions. If both companies have automation systems in place, it should be relatively easy to pull the necessary reports and extract data from one system to be imported into the other. Then automation makes it easy to train new staff members and ensure integration of operations is seamless throughout the transition.

Looking for Light at the End of the Tunnel

Accounts payable acquisitions often seem to be an endless process. While a consistent formula for integration might not be feasible with so many variables to consider, thoughtful planning and the smart use of AP automation tools can save time and effort. Before the close of the acquisition, discuss the current AP processes with the company being acquired. Meet with the AP team to learn their procedures and accounting system to find the easiest ways to transfer the data for the takeover. If the company currently uses automation, find out how their data can be integrated into the existing AP automation solution.

Review the current short-term debts owed to suppliers by working within the existing system and AP department. Focus on getting a visual and actual picture of how to move this data into a single automated system. If the company does not use automation or has an outdated system, outline how automation makes it easier for new people to take on unfamiliar tasks. Work with the financial team, technology experts, and C-suite to select an automation system that integrates with multiple ERPs to get the acquired company up and running on the same solution as quickly and efficiently as possible.

Get to Know the Vendor Identification Data

Vendors often provide the necessary products and services required for the acquired company to create its offerings. Thus, vendor identification data is crucial to the success of mergers and acquisitions. Take steps to fully understand how the company identifies vendors, the use of number systems versus names and addresses, and how integration is seamless with AP automation.

Become aware of recurring invoices from the same vendors, which are often the same amounts every week or month. These relationships should never skip a beat, as they are essential vendors that contribute to the overall productivity of the acquired organization. All vendor data should be verified and updated as necessary to maintain clear communication as the transition is made. AP automation simplifies the process of verifying and updating contact information and other crucial vendor data.

Consider Terms and Conditions - Improving Vendor Relations

Each vendor has specific terms and conditions. AP automation instantly identifies potential problems from the beginning, such as delivery delays or late invoice payments. Find out about purchase order requirements and return policies. Review the current payment terms and whether there are opportunities to take advantage of early payment discounts to reduce costs and increase cash flow from the beginning.

Immediately contact suppliers to connect with the key contact people to review balances and possible new terms. Encourage a positive ongoing relationship during and after the transition. In the case of organizational restructuring or new technology implementation, it is critical to have the relevant accounts payable KPIs in place to provide baseline metrics and enable measuring the impact of such changes on the AP process. Verify invoice lead time, the number of invoices per AP full-time employee, automatic distribution percent, and the touchless processing ratio to estimate productivity after the takeover.

Examining New Debt and Tax Compliance

New debts inevitably come with mergers and acquisitions. Also, there are also new issues of tax compliance to consider as the transition takes place and thereafter. Failure to comply with tax regulations can lead to severe penalties and fees. Knowledge is power when it comes to examining new debt and ensuring tax compliance. A one-size-fits-all approach won’t work as there are unique tax issues with each transaction.

AP and the tax compliance team can work hand-in-hand to assess stocks, assets, and new debts. Implications must be addressed pertaining to local and state tax, foreign taxes, and other federal taxes such as sales, employment, property, and franchise tax. AP automation puts former accounting practices and updates at the fingertips of the everyone who is working together to examine debt and tax compliance. The team can view the latest data in real-time for the highest level of accuracy every step of the transition. The benefits of AP automation are even further increased with cloud-based solutions, which update regularly to reflect changing tax codes and accounting regulations, unlike on-premise systems which rely on manual upgrades from your IT team.

Information Integration - Bring the AP Team Onboard

Whether the AP team remains the same or grows as a result of the merger or acquisition, all the data must be organized and integrated into the master AP automation system. Review the integration with the team and provide instruction and resources as necessary to ensure everyone is onboard and knows how to maximize the potential of AP automation tools.

Encourage the AP department to become strategic partners with the C-suite, continually looking for opportunities to save money and boost working capital. Use AP automation to help standardize approval workflow and reconciliation for payments. All the outstanding invoices can be matched, approved, and paid electronically. The combined organization will gain greater visibility into the payment process. Each payment can be tracked to determine its current status. Plus, the merged organization can start running reports to find money-saving opportunities. Soon the entire staff will be able to seamlessly receive, process, and pay invoices with just a few clicks (or none at all), as well as continuously working to find ways to increase working capital.

Preparing for upcoming mergers and acquisitions can be a monumental project. Fortunately, automation eliminates countless hours of tedious work. The AP department can take active steps for a future merger or acquisition through communication, gathering data, and the smart use of AP automation throughout every phase of the transition.

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