In today’s world where companies are looking at every aspect of the business to save money, the low hanging fruit is usually cost of goods sold. Few companies are turning to accounting departments to save money but maybe they should.
Many articles have been written about the automation of the accounting department and the benefits that transpire but there are other ways to look for cost savings in the accounting functions. Below are a few examples of cost savings ideas and I will keep adding to the list in upcoming blog posts.
Cash discounts and late fee penalties can add to the bottom line fast. Payable departments that take advantage of a modest discount term of 1/10 net 30 will return an annualized 18% to the bottom line. Late fees not only encourage customers to pay faster but one Fortune 100 company acknowledged late fee income of $1.5 million per month. So if your customers are not going to pay in time at least you should be compensated for financing their business.
Though only a few years old, settlement via commercial card, also termed virtual card payment, AP card payment, or “electronic payables,” has gained traction very quickly. It provides a way of paying the vendor while retaining cash for a longer period, with an ancillary benefit of earning rebates that can offset AP department operating costs. Virtual card payment through a financial services provider allows companies to retain their PO and invoice approval processes for large-dollar spend, and then settle via card. The vendor is paid promptly in exchange for providing discount fees, while AP does not pay the bank until the statement is due.
The examples above are just a few of the many ways savvy companies can look beyond the obvious when looking for cost savings. Stay tuned for more.