Lean Discount-Capturing Profit Center Machine – An AP Story
Fidesic enables your business to earn 36% return on your capital used for payable transactions. Even greater returns can be achieved if your business works with suppliers to capture discounts greater than the standard 2% net 10 terms that many suppliers offer. A 36% return on working capital is possible by earning a 2% return on the timeframe of the actual due date and the discount due which is typically 20 days, resulting in 18 time intervals in a year.
The basic concept behind business is to increase revenue and cut costs to increase profits. With Fidesic accounting departments can increase efficiency by increasing employee bandwidth allowing them to easily make payments within the discount window, therefore increasing profits. According to Paysteam Advisors the average approval time for business to process payables invoices is 23 days making it difficult if not impossible to capture discounts provided by vendors. According to other sources like IOMA it costs businesses on average $10.15 in fixed and variable expenses to process payable transactions. With pressures to do more with less, companies have to innovate their internal business processes to remain competitive. With Fidesic accounts payable departments can transform themselves from a costly bottleneck into a lean discount-capturing profit machine.
The Fidesic Platform gives your business tools to attack the high costs of accounts payable in 4 ways.
1. Reduce the time it takes to approve payable transactions to as little as 2 days
2. Cut costs by transitioning from paper-based processes to electronic
3. Aggressively seek payment term discounts from vendors for early payment
4. Increase bandwidth of current employees to focus on Value Add Activities
With Fidesic, you can send purchase orders, approve invoices electronically, import approved invoice, and submit ACH and MICR Checks from within Dynamics GP. Fidesic also enables your vendors to receive purchase orders, send invoices, submit banking information to receive payment, and have discussion all online.
Currently, your business spends $1 M a month on payables plus the cost of labor. 25% of the monthly spend is eligible for 2% discount on invoices that you pay within 10 days.
The challenge your business faces is the long approval process that takes 23 days. Although you have made it a priority to capture all the discount terms, your business still struggles to capture all discounts. With Fidesic, your company can easily meet and beat the discount terms offered by your vendors. With this new found speed your buyers will have the negotiation power to aggressively ask vendors that don’t offer discount terms for discounts, and even suggest to vendors even higher discounts for even faster payment. Cash is still King and if your business has it, others will be willing to give discounts to get it.
In the current situation, your business can save $5,000 per 25% of the monthly spend if it can capture all discount terms. Let’s suggest that you can increase the monthly spend eligibility up to 50%. Now your business can save $10,000 a month for every Million of monthly spend. Additionally, the ability to approve invoices in a web-based location and import payables transactions into your ERP without manual data entry significantly cuts labor costs. Not only can Fidesic save you money on discounts, you create value by reallocating employee bandwidth to focus on building the bottom line. These factors combined will transform your AP department into a Lean Discount-Capturing Profit Center Machine generating a 36% return on working capital.