Becoming a Treasurer Series

Episode 247

Becoming a Treasurer Series, Part 26:
Languages of Finance: Accounts Payable

What problems arise when treasury and accounts payable misunderstand each other? In this episode, Craig Jeffery and Jason Campbell jump back into the Languages of Finance sub-series to discuss some of the common terms you need to know in order to work together effectively. Listen in and find us on YouTube for more.


Jason Campbell, Strategic Treasurer

Meredith Zonsius


Craig Jeffery, Strategic Treasurer

Craig - Headshot

Subscribe to the Treasury Update Podcast on your favorite app!

The Treasury Update Podcast on Spotify
The Treasury Update Podcast on iTunes
The Treasury Update Podcast on Google Play
Episode Transcription - Episode #247 - Becoming a Treasurer Series, Part 26: Languages of Finance: Accounts Payable

Announcer  00:04

Welcome to the Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury news, analysis, and insights in your car, at the gym, or wherever you decide to tune in.


Jason Campbell  00:19

Welcome back to the Treasury Update Podcast, Becoming a Treasurer series talking about the languages of finance. I’ll be your host for today’s show. Jason Campbell, business development leader here at Strategic Treasurer and chatting with me today is Craig Jeffery, Managing Partner at Strategic Treasurer. Great. Glad to have you on today.


Craig Jeffery  00:37

I’m glad to be here in our soundproof room.  It’s not a soundproof room, but our studio, it’s really cool. We should show people what this room looks like. It’s it’s more fun than doing work.


Jason Campbell  00:47

We should I think the last time we actually talked I think you at I think you mentioned something about doing like a video, like a live stream. So maybe that somewhere down the line, whether it’s through the Treasury Update Podcast, or the Coffee Break Session, something of that nature, it’d be really fun to do.


Craig Jeffery  01:01

Yeah, we did a live stream this week on a 15 minute topic.  Did it with Push. So you can see that on on YouTube on our CTMfile channel, I think. Yeah.


Jason Campbell  01:12

Yeah, I watched it. I thought it was great. I think it was it was good to see both. And to kind of listening to the topic service. It was it was really good. I think that I think again, in the future, right, is having that mix between the video and the audio and just being able to be accessible everywhere. Right?


Craig Jeffery  01:30

Yeah, that’d be great. Do you have any questions today? What do we got?


Jason Campbell  01:37

Well, today’s topic today we’re going to talk a little bit into a little bit further along in the series that we’ve done talking about the languages of finance. And I know that previously, we talked about FP&A. And we’ve talked about the controllers and I thought we had some really good dialogue, really good conversation.  Hopefully, there was some really good takeaways for our listeners, learning, you know a little bit more about those positions. And now moving forward into the series, talk a little bit about the accounts payable. But before we get into that, let’s kind of revisit a little bit about this series here. And if you could go in to talk about, you know, just kind of given our listeners, again, just explaining what the purpose of the language of the finance sub series really is.


Craig Jeffery  02:16

The whole focus of this is different areas of finance, and different areas of a company can use some of the same words, that can mean different things. And there’s also a different set of priorities. And that can seem like, priorities should be the same in every area of finance, but they may be different. Understanding the differences in the words that are used, and in some of the priorities can really help each person understand what’s going on, and communicate more effectively. So that’s really what it is good communication means understanding different terms and different bases, the basis for how people are communicating, that’s really the focus.


Jason Campbell  02:52

Yeah, and that’s, I think that’s great. And I think just, you know, for our listeners, just really kind of chiming in and, and understanding each of these core functions. And again, like you said, that, you know, communicating out those key pieces, those niches of each of each of these is, I think, is really important, as you know, people think about, you know, their next stepping stones. Now, in the past that we talked about, we covered the FP&A. And we talked about controllers, and we want to move into this episode more into again, accounts payable again, I can can’t say enough, how excited about this episode, but it really is kind of, you know, I think it’s more because I understand it a little bit more than the other two that we talked about. And I’m really interested get your point of views, and hearing what you have for our listeners. So let’s kick it off with how is this language of accounts payable, different from treasury.


Craig Jeffery  03:34

The words that AP uses and the words that treasurers use, and then even procurement, you think of procurement all the way to, to payment. And you think of treasury, they they use quite a few of the same words. But oftentimes, it’s different. You know, we’re talking about the cash conversion cycle, someone’s making a payment, treasury, treasury cares about payments, they care about the flow of cash, APIs from different areas of focus. So it’s not so many, it’s not so much that they’re words that mean completely different things. It’s more about priorities on these, we think about what is AP trying to do they, they want to avoid fraud, they don’t want to have business email compromised, or someone has shifted, pay information to some other location. So they’re concerned about that. They’re also really measured heavily on efficiency, the efficiency of that process, right? It’s an overhead part of the company. You know, a lot of people come up with these ideas that you know, AP or AR can be revenue generated as well, in many senses. All of these administrative areas, including including treasury, are a cost to the organization. And yes, they can be more efficient and generate better returns. But they’re pressured AP and AR in particular, are pressured on the efficiency front. This drives a lot of the behavior and so interruptions from people they’re paying, the vendors that they’re they’re paying, because payments are late they’ve they’ve Short paid or other issues can create a significant problem for them, because they’re taking all these inbound calls and emails. And as much as they try to block that noise and distraction from happening, it occurs because they’ll come and go to other areas of the company, and they’ll follow up with AP. So they’re trying to avoid quite a bit of that. So being efficient, making payments not paying early, because they’ll get in trouble for that, that can be a challenge. Now, I’ll give you an example about an end of end of month view for AP would differ from with differ from treasury. So Treasury cares about when payments are made the whole month, they need to know what their cash flows are, they want a good forecast. They don’t want anybody to pay early, they need to provide for the liquidity on every given day, not just at the end of the month. And so sometimes you have groups that you know, hold payments up to the end of the month, and roll them over, particularly at quarter end, there’s a lot of these delays, or they’re trying to get things cleaned out. Others are trying to get things cleaned up before the end of the month. So they avoid those calls, they’ll be huge level disbursements right before the end of the month. Just to just to avoid some of those calls. And Treasury is more concerned not about the month end reporting, you know, what the outstanding is at the end of the month, whether it’s lower or higher, but really one focused on the the availability of capital.


Jason Campbell  06:26

So is it also fair to say to like, you know, in the world of folks are accounts payable, it’s almost like, you also have to be a steward of protecting the integrity of the organization in multiple ways from from, from a cash flow perspective, because the integrity of the reporting, right, it’s important to ensure that, you know, the the payables are captured in within the correct financial timeframe, right. But I was also thinking like the integrity but also to like the reputation of an organization, right, especially from a vendor perspective, because you have vendors that are ambassadors to your brand that you’re, you know, that your contract with, and it’s important to ensure that your vendors, you adhere to the contractual obligations. So really, that’s an important piece, as well into that position. Right.


Craig Jeffery  07:11

It certainly has a significant factor. And, you know, there’s there’s terms and agreements, but payments don’t don’t follow the terms all that often. to a significant extent they do. When we looked at when we went into the COVID crisis, the pandemic, it was it was around 40% of firms, delayed payments, specifically identified that they were delaying payments to provide a cushion. And the biggest concern for companies was delays in their receivables, right. So the opposite side was the situation removed through that that change. So it’s a it’s a key area. And there’s there’s there’s legal concerns, you know, making promises to pay. So if you’re an AP, you can you can be put in a crunch, and it could be brought about by Treasury saying we need to conserve capital. So extend, extend payables without officially extending payables, push things back, push things over the end of a quarter push things over the end of the month, or extend them out another five or 10 days, they get calls, you know, they’ll get calls and follow up. It’s like, when are you gonna pass this payments past due? Is there a dispute? Or is it an issue? No. And, you know, if you make a promise to pay, that’s a different type of legal situation if you make a promise to pay for a certain period of time. And so people either offer their scheduling to pay, we’re going to schedule that to pay later. Well, it’s later but now you know, it’s coming in 14 days, people tend to provide a little bit of relief. Well, let’s say they don’t even want to do that. Sometimes they’re like, Okay, we’re planning to schedule that next Friday. We’ll schedule when it’s going to go out next friday. So it’s not even a commitment to it’s not even a full commitment to schedule it. It’s a here’s what we’re planning to schedule when it goes out. So it’s it’s more of a an open ended item, as a as a defensive mechanism that AP has to kind of step through to avoid the legal issues, particularly if they’re being pressured by others that company, but all that’s to say, as AP is maybe does a vital job. It’s really, really important for an organization, like you said, for the the quality and care of the organization, protecting the flow. But it’s one of those jobs that for the most part is one of those thankless jobs. And I’ll give you I’ll give you a story that shows well, that that kind of makes that point in consulting, we walk around different organizations and talk to people when you’re walking around you always have that that chatter that goes on. The questions everything from the weather to that’s a pretty sign, you know, just the conversation us because you don’t want that air. There was a party going on. Oh, what’s that party for? Is it someone’s birthday? It’s a pizza party that a vendor provides a P if they get all their invoices paid before the end of the month. And that is that is like that is fantastic collection activity. Right. It’s like who is who is not appreciated? AP, nobody appreciates a p, but they’re being appreciated. They’re getting a pizza party who gives them pizza parties? Well, a vendor is given a piece, right? Who is gonna get paid on time every month? You know, someone’s someone’s spending $100, all of their invoices are getting paid. I mean, this was a pretty significant spin. But part of that point is, we have to in organizations make sure AP AR Treasury controllers audit. They’re all appreciated properly. And I don’t mean pizza parties. But the idea of what’s driving them, what are they what are they trying to do? And how does that fit into the organization’s process? Sometimes that’s not not really considered. And so, hey, we have to pay him anyway. If we get all these done by the other month, we’re gonna get a pizza party. That is pretty nice. We’re doing that. And we’re not hiding it. We’re doing it. And so I think that’s part of the the language, the mindset and some of the and some of the perspectives.


Jason Campbell  10:56

Well, I mean, like pizza is delicious. So, to be honest, I don’t know if I’ve ever told you before, but pizza is actually my favorite food of all time. I could eat it all the time. If you want to show some appreciation. I’m just, I just want to throw that out there. In case you ever wanted to know, what is what is Jason really into?  Jason’s really into pizza? Yeah, absolutely, love it. So I know, just going a little bit back to the question about the differentiation between accounts payable from treasury. But what are the problems with misunderstanding each other?


Craig Jeffery  11:28

Competing KPIs is something we’ve talked about on this podcast, a lot different standards and goals that can be that can be one of them, you know, what are what are your key performance indicators, but even more broadly, as opposed to just key performance indicators, what people are measured on? What are people driving towards? If we think of Treasury, one of their roles is the superintendent of payments. They superintend payments, they don’t do every function with payments API has a huge role in payments. They’re the manager of accounts payable, right? They manage that activity, they have a specific set of rules and guidelines that they do, and Treasury as superintendent payments, has to make sure that all of those functions are occurring properly. they’re well secured. They’re supporting the relationships, the organization, and so forth, and in compliance with different rules, sanctions, what have you. So those two roles, Superintendent payments versus manager Vapi are different treasurer, cares about relationships, the bank relationships, have the support capital, access to capital over time, and controls, accounts payable, what do they really focus on heavily, they’re focused on making sure their payments are authorized, valid and efficient. So that the efficiency play is really significant. They’re all of those things that I said relationships, control capital, authorized efficiency, everyone in your organization should care about that, when you take a step back, everyone should care about that. But the focus of the different groups tell a story, and that can determine what behavior is done. And so misunderstanding each other, can create all kinds of problems like on the efficiency side, or trying to avoid pain. Another example, I was touring a company and we’re, we’re, we’re interviewing and doing an assessment. And we’re spent a lot of time on the on the AP side, and we’re talking to a clerk. He goes through, make some changes in the system, he’s processing payments for his ap run, we’re observing to note and why we do that is because every single procedure in every single competences, this is how things are as is a work of fiction. It may have been true at one point, but it’s become a fiction at past into mythology. They don’t do what it says, what did he do? He went and change the terms like it was instead of do 30 days, he would he would change the terms on the individual invoice to pay upon receipt. Why did he do this? Three years ago, they were really late pain. They called the the vendor had called the CEO and said, we’re not getting paid, we’re gonna ship stuff. CEO came down and said, You got to get them pay. This is like our biggest supplier, you’ve got to get them paid. And so since that time, they didn’t want any problems there. They’re paying everybody like instantly the hugest supplier, and the project that we’re working on was working on optimizing working capital. And so if you just looked in the system, he said, hey, here are the terms. What are the terms terms look good? How come a P is how come DPO is less than what the terms are across the board? How did these amounts differ? And this was actually an easy way to find it. We didn’t have to do too much analysis because, you know, as a supplier that they were paying 40% of their nearly 40% of their payables to was being paid basically on due upon receipt terms. And so that’s a that’s an area where the efficiency trying to avoid pain creates a very different result for the treasurer’s like Hey, pay on time has a good working capital movement, good working capital plan. The other the other goal, working capital didn’t matter too much they paid, they were concerned about efficiency and avoiding some pain. So those are some examples of problems with misunderstanding each other, or misunderstanding the entire organization’s approach to payments in this case.


Jason Campbell  15:22

And I think the important piece of it is ensuring that again, from, you know, having alignment of goals that you said that maybe different KPI perspective per department, right, but ultimately, like, there’s an alignment gotta be in place. And everybody knows at that point, you know, having having a smooth process of how funds are distributed, you know, regardless of where they stand within the department there. So so now we talked about them with some problems and misunderstandings. So let’s, let’s flip it a little bit here and just talk about when do AP and Treasury groups need to work together?


Craig Jeffery  15:53

I think the workstream for payments is, you know, a working capital management play as well as efficiency, that is absolutely something they have to coordinate, AP may have certain ideas of what they could do. But they almost always have to work with Treasury to get it through because it’s going to terminate in a banking relationship somewhere, it shouldn’t be done with a third party. And the last second Treasury is informed at the same time, when Treasury is making decisions, they need to make sure that AP is understanding, you know, is providing the input on the process on the flow. So addressing the efficiency concerns of AP, and the working capital and capital needs of the organization. The other side has to do with payment security organizations are not well prepared and well protected on their payment workflows and payment processes. They’re exposed. They’re exposed, they’re exposing financial data that’s being exposed on the network. on desktops across the board, I think Treasury is not only Superintendent of payments. But Superintendent of payments, security needs to be working closely with all of the payment areas, including AP, which is a massively important group in this area. And so looking at that, for efficiency, and control is essential from a payment standpoint. And that’s not just do it once and forget about for 10 years, but maybe a clean assessment and then doing it again, there’s other farther downstream systems like reconciliation, where Treasury AP, and maybe an accounting group is involved, they need to work together on that you don’t want to design a process. It’s like, oh, this is very efficient on the outbound AP side, but you’ve broken reconciliation. So now the reconciliation group is screaming, you know, they’re downstream, that’s like you threw trash in the river, you messed up, you know, timing of items, individual postings versus detailed posts, and you made it impossible to reconcile treasury and AP need to make sure they’re they’re working together with the other parties in that case, reconciliation. And then finally, services and relationships. Bankers provide services, they research things, they provide advice on what works well. Treasury and AP need to work together to make sure that they’re getting the right service, the right service level, the right functions for everything from control efficiency across the board, you can make payments that are that are great, if you have something that’s that makes payments very efficient, but also allows the recipients to know when they’re coming have greater visibility to it. You create a better process, because now there’s less defects less people calling, when am I getting paid, it’s like, Oh, I see it, it’s scheduled, it’s coming in four days. It’s in a portal, I know it or I can see it. And I can take it earlier if I want to have flexibility to have lever. So if we think about all of these things that are great for working capital or efficiency, if the if the groups get together and talk through what they’re trying to accomplish, the decisions to be made, we’ll make sure it’s it’s considering each each participants view and key drivers that they have.


Jason Campbell  18:59

Yeah, I mean, it goes back to you know, as you mentioned, you know, some of the you know, there’s a lot of key functions in that Accounts Payable around, you know, ensuring alignment, the goals being that, that that Superintendent of payments, right, you want to keep your vendors on your good side, I mean, that can be catastrophic. If the vendor all of a sudden says you know what, we’re going to change the, you know, we want to change the terms of payment, or in the relationship, right, that could put a copy in a very chicken with their head cut off kind of moment, trying to figure and scramble what to do with those next steps. So it’s important, vital, have some, some great folks running and you know, working in that department leading that department, and then also to as well as being able to work together with Treasury and ensuring that, you know, the relationship and the alignment is there.


Craig Jeffery  19:42

So, well, that’s a good example. I mean, a vendor may want to cut off activity because it becomes worth it’s not worth anything to them. Or they may say we’re going to we’re going to be pushing the prices up higher because you’re you’re killing us on when you’re paying us you’re paying us in 45 days, 60 days now it’s 60 to 90 or it’s unknown when that’s going to end happened. And that’s creating significant friction on our side that’s costing us more. I need to get that back by a higher a higher rate. So there’s there’s quite a few more conversations we can have about AP and procurement sourcing.


Jason Campbell  20:15

Absolutely. I think I got a couple of stories, but we’ll see the stories that I may be able to share down the road for another episode of the Treasury Update Podcast. Well, thank you for joining me today, Craig. I really appreciate it. And thank you to our listeners for tuning in into this episode on becoming a treasurer. Until next time, take care.


Announcer  20:38

You’ve reached the end of another episode of the Treasury Update Podcast. Be sure to follow Strategic Treasurer on LinkedIn. Just search for Strategic treasurer. This podcast is provided for informational purposes only, and statements made by Strategic Treasurer LLC on this podcast are not intended as legal, business, consulting, or tax advice. For more information, visit and bookmark

Related Resources

Earn your CTP credits on-demand

Check out our on-demand options for earning your continuing education credits for CTP. We offer 0.5 – 1.2 CTP credits for select webinars and podcast episodes. Listen and then take the coordinating quiz and pass it to receive your credits straight to your inbox!

Becoming a Treasurer Series
Becoming a Treasurer – A Treasury Update Podcast Series

This series within The Treasury Update Podcast explores questions around being a successful treasurer. Topics discussed include preparation, what needs to be measured, effective communication, development of a team, and acquirement of resources needed.