Finance leaders are under pressure to reduce operating costs without sacrificing performance. Accounts payable is one of the most overlooked places to find savings. The function touches vendor relationships, payment timing, and spending data, all levers that directly impact the bottom line.
This post covers five actions AP teams can take immediately to start reducing company spend and start capturing value. For deeper dive check out our eBook How Accounts Payable Can Strategically Cut Company-Wide Operating Costs.
Pull a list of your top 20 vendors by spend. Check each contract for early payment discount terms. Many businesses have 2/10 net 30 terms buried in agreements they have never used.
Map your vendors by category and look for redundancy. Multiple suppliers providing essentially the same product or service to different departments is common. Each carries separate contracts, pricing structures, and administrative overhead.
Start with something simple like office supplies and audit your vendor list for redundancies and potential savings..
Late payment fees are pure waste. They cost money, damage vendor relationships, and signal operational dysfunction. According to Atradius, half of all B2B invoices in the US are currently overdue. Avoiding penalties alone puts you ahead of the curve.
Identify vendors with strict late-fee enforcement policies. Set up automated reminders for those payment deadlines. This one change eliminates the most common cause of late payments: simple oversight.
Transaction-level data tells you what happened. Patterns tell you what to expect. Pull one quarter of invoice data and categorize it by vendor, department, and purchase type.
Look for seasonal spikes, rush order trends, and end-of-period surges. These patterns reveal planning gaps and negotiation opportunities invisible at the invoice level.
When every purchase flows through the same approval chain regardless of dollar value, bottlenecks form at the top and gaps emerge at the bottom. A $500 purchase and a $50,000 purchase should not require the same level of scrutiny.
Identify one approval bottleneck in your current workflow. Test whether a tiered threshold speeds things up without increasing risk. Lower-dollar purchases move quickly through front-line approvers while larger commitments get appropriate review.
Transforming AP into a cost-cutting function does not require a major initiative. It requires attention and incremental action. These five steps take minimal time and no additional budget. Early wins build credibility and fund the harder work that follows.
This post has been a way to get you started down the path of increasing the strategic value of your AP department. For more in-depth information. Check out our new guide:
Go beyond efficiency gains and improve cashflow for the whole company. Read our free guide for an in-depth look.
The chapters ahead cover five interconnected strategies. Each strategy delivers value independently. Combined, they create a self-reinforcing system where insights from one area inform improvements in others.
This guidebook presents a different approach—one that transforms accounts payable from administrative overhead into a source of measurable cost reduction and strategic value.