Managing the invoice tug-of-war: AP versus AR
My son is getting excited for summer camp. At the end of camp, parents will attend a family day to see what their kids worked on, play games, and most importantly, to take their kids home. But, as usual, the clear favorite game of the day will be tug-of-war: the classic matchup of one team pulling for supremacy over the other. Brute strength is often the deciding factor.
It’s funny how so many things in life are a proverbial tug-of-war. At home, it might be struggling between purchasing that new entertainment system versus fixing the roof on your house. At dinner, it might be the healthy choice versus the hearty choice.
And at work, it might be in the accounting and finance department, specifically one accounts payable process versus another accounts receivable process.
Origins of an epic battle
If you’re not in AP or AR, let me explain why this is such a battle. You see, AP often interacts with a vendor’s AR department. Conversely, in AR, a customer’s AP department is your regular contact.
And I bet those conversations aren’t about the latest summer blockbuster or the weather for the weekend.
Much too often it’s a tug-of-war over money. Did you receive an invoice from your vendor that you don’t think is correct? Or did you send an invoice to your customer, only to receive back a portion of the payment you originally requested?
So who wins? Just like at summer camp, the winner is the one with the most strength.
But in this case, strength isn’t about muscles. Rather, it’s information that is the source of power. And in the AP versus AR tug-of-war, the winner is the one with the best information. Whoever’s records are best, whoever’s proof is better, and whoever has the confidence that all of the information they need is right at their fingertips will come out on top.
Is your back office an obstacle course?
But there are plenty of obstacles along the way preventing a victorious finish. Too often information is decentralized. Think about it sitting in a file folder, manufacturing specs on the production floor, shipping documents and photographs in the warehouse, and invoicing information stuck in the accounting system.
And what about all of the e-mails and phone calls that took place in between?
To prevent these obstacles, centralizing information is key. To do so, you must be able to capture content and information from any number of sources and interrelate it to each other.
The best way to do so is to use software like enterprise content management (ECM) that includes robust back office software. When a purchase order is issued, it’s tagged with a number. Then, all of the subsequent documents, e-mails, photos and specifications are tagged with that same number. Now, you have all the information you need. More importantly, you have all the information you need in one place.
ECM is like a one-stop-shop for information that touches all the areas of an organization’s finance operations.
So when you are negotiating with your vendor’s AR department or your customer’s AP department, think about how long it would take you to gather all of the information you will need to win your argument.
Then think about ECM. Without it, you might need to resort to brute strength to win. But with ECM, the strength of the information you have right at your fingertips will give you the proof you need to win the AP versus AR tug-of-war.