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Improve Your Cash Management by Aligning AP, AR and Treasury

Effective cash management means making as many data-driven decisions as possible regarding cash inflows and outflows. That means that the level of collaboration within and across accounts payable (AP), accounts receivable (AR) and treasury teams drives cash management success.

But collaboration is difficult when silos exist within AP, AR and treasury teams, creating processing bottlenecks and negatively impacting the types and timings of cash inflows and cash outflows.

Silos across AP and treasury impacts the cost of processing payments. These silos also effect timing of payments which can result in discounts being lost and working capital mismanagement. Silos across AR and treasury impact the timing of receipts and even if invoices are paid by certain customers.  Silos within and across AP, AR and treasury negatively impact supplier and customers and the bottom line.

What Creates Silos? How Can They Be Demolished

Lack of communication and disjointed technology are the most common reasons for the existence of silos. It’s not surprising that when different teams use different systems, with access to different data, cross-functional teamwork doesn’t come organically.

Silos within and across AP, AR and treasury can be removed by creating a culture of collaboration, and investing in technology that delivers visibility to all those who impact cash inflows and outflows, reports that inform decisions about cash inflows and outflows, and facilitates collaboration with suppliers and customers.

Effective management of payments means considering the cost of payment types and the cost of payment timing based on potential discount opportunities and the opportunity cost of cash.

The processing costs of checks, ACH and card payments are different, and companies need to consider them when making payments. Companies should not force suppliers to accept the payment type that is most cost-effective for them, but they also should not just select a payment type that is just business as usual without communicating to suppliers why another payment type can be beneficial to them in terms of managing their accounts receivable.

The better the supplier relationship the more control that a company will have in paying a supplier. AP and treasury collaboration facilitate more efficient payments and improved working capital management.

Getting paid in a timely manner with information that facilitates effective receipts processing is the AR side of effective cash management. Customer relationships are critical to companies managing days sales outstanding (DSO), and mitigating AR processing costs and bad debt expense. Customer relationships are affected by technology, AR teams, and sales professionals.

Technology that mitigates information asymmetries between AR teams and customers, and AR and sales teams mitigate issues (real and perceived) and the friction in collections. AR and sales teams need to collaborate in managing customer relationships, so customers receive consistent and pro-active communication. Collaboration between AR and treasury teams and AR and sales teams empowers effective cash management.

Cash management done right requires collaboration within and across AP, AR and treasury teams. Progressive, efficient finance teams invest in mitigating existing silos across all parties that impact cash inflows and outflows. The return on investment will be seen on the bottom line in terms of lower AP and AR processing costs and top line revenue growth resulting from better customer relationships.

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Cash Management Forum by CMLI

March 18-19, 2025

Austin, TX

Join us for two days of 1-to-1 meetings with solution providers, peer-to-peer networking and conference sessions led by experts.

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