The AP discount dilemma: Are you leaving money on the table?

One of the most important contributions accounts payable (AP) can make to an organization directly affects the bottom line — capturing early payment discounts.

After procurement has negotiated with vendors to obtain the best possible discounts, the responsibility shifts to the AP team to follow through and snag those discounts by paying vendors in a timely manner. Since paying the bills is AP’s main directive, that should be straightforward enough.

But is it?

The reality

Hyland’s recent AP Control Panel survey, conducted in partnership with the Institute of Finance & Management (IOFM), polled more than 300 AP professionals to determine how well they can accomplish these important tasks:

  • Report on available early payment discounts
  • Report on the percentage of these discounts that were captured

Here are the aggregated responses from all survey participants:

Surprised? Nearly half of all respondents could not report on either discounts available to them or the discounts they’d actually captured.

Plain and simple, that’s money left on the table.

Is automation doing its job?

Given that accounts payable automation should provide comprehensive reporting features, particularly on metrics as critically important as discount status, we factored in respondents’ levels of automation to see whether their solutions were helping them to the expected degree.

(Note: Bar values may not add up to 100 percent per group due to rounding.)

While it’s reassuring to know that the higher the level of AP automation, the more easily respondents were able to track discount data, it’s concerning that even those with significant automation were more likely to be unable to track both key discount metrics.

This begs the question: If automation isn’t providing insight into what is arguably one of the most important AP metrics out there, what’s the problem?

Where it goes wrong

By examining the overall Control Panel data, we discovered that many automation solutions seem to be better tools for researching individual invoices than they are for providing transparency into overall AP metrics — or at least, that’s how those solutions are currently configured by the organizations using them.

We found that it’s relatively easy to glean information about specific invoice numbers, purchase orders or suppliers. There’s no denying that’s useful when it comes to answering an inquiry by an unhappy vendor who is late getting paid.

But accounts payable automation should be more than a fancy lookup tool. Organizations invest in solutions that help improve efficiency and save money.

To do that, these solutions need to go beyond one-off invoice lookups.

The benefits of AP insight

Some AP departments not only know precisely what discounts are available to them at any time and how good they are at capturing them — they can also project which discounts are in danger of expiring and prioritize those payments.

Remember, too, that those carefully negotiated discount terms aren’t just of benefit to your organization. Your vendors actually want you to be eligible to take them in order to improve their cash flow; otherwise, they wouldn’t offer them.

Some higher-performing AP departments have this down to a science, to the degree that they actually turn their operations into a profit center. Consider this for a moment: AP, a function that has long been considered just a back-office cost center, can actually help your organization’s profitability by more than offsetting its own costs through top-notch discount capture practices.

If you’re looking to take AP to a new level, snagging discounts is perhaps the best way to up your game.

Is your AP automation up to the task?

Whether the Control Panel respondents struggle with transparency into discount capture because their AP automation solutions aren’t up to the task or they just need to do a better job of leveraging their capabilities is beyond the scope of our survey.

Either way, if your accounts payable software isn’t telling you what you need to know to capture the discounts your organization is eligible for, it’s time for a change. It’s time to leverage AP automation that provides true visibility into discount opportunities, and take your department to the next level.

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