Managing Your Risk While Transforming Your AP/AR Operation
Many companies hesitate to transform their AP/AR operation because their fear of risk and the unknown. Consequently, they are saddled with high cost, reduced cashflow, higher working capital, and expensive short-term borrowing cost. Cashflow is such a critical factor in today’s economy, it impacts a large corporations’ valuation and the growth opportunities in the SME segment.
Modernizing your AP/AR operation need not be daunting if you take the right approach. The following guidelines can help you to mitigate your risk while transforming your AP/AR operations:
- If your environment is complex, such as having multiple ERPs or financial/accounting systems. You should avoid “boiling the ocean” by breaking down your transformation into small manageable projects instead of all-or-nothing. Being overwhelmed is the biggest inhibitors for innovation in company of any size, its leads you to analysis-paralysis. As in science, you can remove uncertainty by experimentation – pick a small, but representative division/product line as a pilot to limit exposure. It allows you to uncover the unknowns and expose the risk profile. Instead of listening to sales pitches, you are working with facts specific to your company. Once you are comfortable with the result, you can then replicate it to other parts of the business.
- For smaller business, you should look for a solution with pre-build integration to popular accounting/finance packages. This will minimize your integration cost and risk, while delivering a quick implementation.
- Always consider your fallback plan, if you decide not to continue with the approach and pick a different path, make sure you can revert your AP/AR processing to your current system while charting for a plan B.
- You should place an extra risk premium for solutions that require you to retire your current systems. If you need to revert back, it is often a nightmare to port back transactions executed after the cut-over. Don’t’ forget you have a continuous stream of incoming new transactions during this process, you will not have the luxury to spend weeks to study it.
- With the maturity and security of today’s cloud-based solution, it can deliver AP/AR automation as a service. The thinner you can make it without heavy on-premise investment, the more agile you will become. This prevents lock-in and can greatly reduce your risk profile.
- Minimize sunk cost due to up-front platform cost or commitment to a fixed monthly volume. Your business is cyclical, the platform should be able to grow and shrink with your need. Beware of solutions or infrastructure that charge you by your high-water mark due to their legacy on-premise pricing model.
Light-weight solution that is cloud-based (as long as it meets all security and regulatory requirements) and not require rip-and-replace is key to minimize risk. If there is no up-front platform cost or long-term contract, and charges by transaction volume, it would essentially provide you the benefit of a try-and-buy, shifting the cost and risk of modernization to the platform provider.
With proper guidelines and the ability to make penalty-free go/no-go decision along the way, we believe you can modernize your AP/AR operations with limited risk exposure. Thereby allowing you to focus on the future and growing your business.