September 2012
Beyond Payables: The Evolution of the
Modern Financial Ecosystem
Contemporary business management has grown more and more complex as
organizational objectives and goals evolve. Back-office and traditional
functions that were once considered simple “costs of conducting business”
now hold true strategic value. The aspects of the modern “financial
ecosystem,” which integrates attributes related to accounts payable,
accounts receivable, trade finance and global payment management, can
drive operational efficiencies when supported and managed by effective
capabilities and competencies. The average organization, focused on driving
down operational costs related to invoice-processing and settlement, as well
as improving visibility into corporate cash flow, can benefit from proficient
management of this ecosystem.
The Value (and Future) of the Financial Ecosystem
One of the more intriguing aspects of analyzing traditional corporate
processes is gauging the true perception of items that were once
considered “back-office” with little-to-no strategic value. According to
Figure 1, the majority (61%) of organizations in the Beyond Payables survey
pool indicate that the modern financial ecosystem is considered a critical
component of conducting global business.
Analyst Insight
Aberdeen’s Insights provide the
analyst's perspective on the
research as drawn from an
aggregated view of research
surveys, interviews, and
data analysis
The Financial Ecosystem
The “financial ecosystem” is a
broad term meant to describe
the complex series of functions
within modern financial
management, such as A/P, A/R,
trade finance and global
payment management.
Figure 1: The Value of the Financial Ecosystem
2% 4%
High value; critical
component of global business
Moderate value; only some
units view as integral
33%
61%
Low value; considered a “cost
of conducting business”
No value
Percentage of Respondents, n=60
Source: Aberdeen Group, September 2012
This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and
represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.
and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 2
This revolutionary new overarching view of processes related to A/P, A/R,
trade finance / trade partner management and global payment management
enlightens the business world to one predominant notion: the linkage
between these processes is more than operational. Maximum efficiency
across all of these attributes can help organizations truly understand cash
flow and how they are managing their finances (both spending and
receivables).
Top Priorities
Although each component of the financial ecosystem carries its own unique
set of intricacies, when viewed as a single, robust infrastructure of
processes, one significant priority arises in the eyes of organizations across
the globe: improve overall visibility into cash flow and cash management
(78%, Figure 2, below).
Figure 2: “Top-of-Mind” Aspects in Managing the Financial
Ecosystem
Source: Aberdeen Group, September 2012
As discovered in the A/P Invoice Management in a Networked Economy report
(May 2012), there is a reliance on interconnected financial systems (internal
accounting platforms, trade partners, banking and payment institutions, etc.)
for not only managing the receipt and approval of invoices, but also other
financial management processes that have the same level of criticality across
the organization.
This “networked economy” influence (described in the previous paragraph)
reduces the executive view into available cash and its flow throughout
organizational functions. Also, an impedance in one phase of this networked
ecosystem (i.e. manual inefficiency in the settlement process or poor invoice
approval processes) will effectively shatter visibility into the implications of
proper cash flow.
© 2012 Aberdeen Group.
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Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 3
Similarly, by lowering invoice-processing costs (44%), organizations can
increase the level of cost savings and boost operational value across this
financial supply chain.
The Future of the Financial Ecosystem
The financial management processes associated with internal relationships
(A/P and A/R) and external relationships (banking, trade finance / trade
partner management and global payment management) that are now linked
via the “networked economy effect” may be connected by traditional
workflows, however, the failure to manage these aspects in a strategic,
integrated manner has directly resulted in the organizational pressure to
improve visibility into cash.
As unveiled in this Beyond Payables research study, the Aberdeen Group has
found that less than half (45%) of organizations currently manage the
strategic aspects of the modern financial ecosystem in a centralized manner
(Figure 3).
Figure 3: Current and Expected Structure of the Financial
Ecosystem
Source: Aberdeen Group, September 2012
However, when we look to the future of this financial ecosystem, the vast
majority (70%) of organizations are expected to manage A/P, A/R, trade
finance / trade partner management and global payment management under
a centralized, single umbrella. This finding proves that financial executives,
realizing how these processes are already inherently-linked via complex
workflows, are prepared to encompass these attributes under a centrallymanaged program / division to improve operational performance and
achieve a much-heralded state of extraordinary cash flow visibility.
© 2012 Aberdeen Group.
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Fax: 617 723 7897
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 4
Leaders and Followers Framework
Within the set of respondents for the Beyond Payables benchmark survey,
Aberdeen has identified a series of “leaders” and “followers” based on
performance results as indicated in Table 1 (below).
Table 1: Leaders / Followers Performance Framework
Definition of
Maturity Class
Mean Class Performance
Leaders:
Top 30%
of aggregate
performance scorers
 87% rate of visibility into overall organizational cash
flow on a day-to-day basis
 Days Payable Outstanding (DPO) rate of 22.3 days
 Days Sales Outstanding (DSO) rate of 25.8 days
Industry Average:
Bottom 70%
of aggregate
performance scorers
 20% rate of visibility into overall organizational cash
flow on a day-to-day basis
 Days Payable Outstanding (DPO) rate of 35.7 days
 Days Sales Outstanding (DSO) rate of 34.4 days
Source: Aberdeen Group, September 2012
Leaders are known for their top-tier level of visibility into overall
organizational cash flow, a factor that proves that these companies are
actively and strategically managing all components of the modern financial
ecosystem in such a way that they are still able to control their knowledge
of cash management. These organizations are also achieving leading rates of
both Days Payable Outstanding (DPO) and Days Sales Outstanding (DSO),
further quantifying the notion of effective management of the modern
financial supply chain.
As we will learn in the corresponding sections, these Leaders are leveraging
a wide swath of core capabilities, competencies and technology enablers to
reach this level of financial success.
Effective Capabilities in Managing the Financial
Ecosystem
It is only through the continued reliance on key programmatic capabilities
and competencies that Leaders are able to full maximize the value from
strategic management of the financial ecosystem. These capabilities are
outlined in Table 2 (below).
Table 2: Core Competencies and Capabilities
Capability
Standardize payment processes (to ensure
consistency in discount capture and accurate
cash flow)
© 2012 Aberdeen Group.
www.aberdeen.com
Leaders
Followers
77%
50%
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Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 5
Electronic payment requirements established
as a standard means of conducting business
with key suppliers
77%
43%
Visibility into all stages of the electronic
payment process (from payment origination to
settlement)
62%
36%
Documented process for payments that is
shared internally and externally
61%
44%
Cross-functional coordination of payments
management between procurement, finance,
treasury, IT
54%
49%
Ability to measure cash flow performance
across the organization (standardized cash flow
analysis)
40%
23%
Source: Aberdeen Group, September 2012
Standardization of payment processes sets expectations with regards to the
protocol and processes, enabling organization to pay at scheduled intervals
of time, which if timed correctly, can help companies capture early payment
discount. According to the survey, Leaders are 54% more likely to
standardize their payment processes compared to Followers. Uniformity
and consistency in the accounts payable and the accounts receivable side
can reduce guess-work out of the cash flow position, which in turn can
enhance an organization’s forecasting ability.
Furthermore, Leaders are over 1.7 times as likely as Followers (43% vs.
20%, respectively) to track cash flow performance across the organization
via standardized cash flow analysis. The ability to assess and improvise cash
flow performance only fosters the bond in the financial ecosystem, where
AP, AR, trade finance, and global payments are all intertwined.
Leaders also outpace Followers by an overwhelming percentage (nearly
80%) in regards to setting expectations and establishing a set of electronic
payment requirements for conducting business with key suppliers. The
ultimate goal within A/P is to pave way for straight through processing (STP)
by reducing manual intervention as much as possible and expedite /
standardize processes via automation.
In order to accomplish this objective, it is not only important to ensure
adoption of electronic payment capabilities internally but also to enable
trading partners and encourage key suppliers to embrace similar platforms.
In fact, according to the A/P Invoice Management in a Networked Economy
study, 26% of Best-in-Class companies (top 20% of enterprise performers
based on a series of performance criteria) cited devotion of resources for
supplier enablement for electronic invoice submission as one of the key
strategic actions for facilitating AP improvement processes.
© 2012 Aberdeen Group.
www.aberdeen.com
Telephone: 617 854 5200
Fax: 617 723 7897
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 6
Financial Technology: Giving Leaders an Edge
Although much of the focus on the financial ecosystem lies within the
organizational attitude and management strategies applied towards this
arena, the fact remains that leading organizations have found inherent value
in leveraging technology and other tools to boost the effectiveness of
financial management processes (Figure 4).
Figure 4: Technology / Solution Utilization
Source: Aberdeen Group, September 2012
Full accounts payable automation, in place in 46% more of Leaders than
Followers, can be considered a foundational form of technology that affects
the full spectrum of financial ecosystem processes. A/P automation includes
digital scanning for invoice receipt phases and sets up an automated series of
processes in which invoices are collected, information is extracted, invoices
are approved and then set up for settlement. Many of the inefficiencies
within the financial ecosystem lie within the initial steps of the A/P function.
Payment factories, utilized by nearly 70% more Followers than Leaders,
eliminate manual settlement processes and align payments to specific
formats (ACH, wire transfer, etc.) for full operational efficiency. These
factories “harmonize” payment workflows, reduce costs associated with
payment processes and enhance protection against compliance risks.
Trade financing technology, leverage by 45% more Leaders than Followers,
allows financial executives to improve A/R and collection processes by
offering a portal in which to send and receive electronic payments and
invoices, thus reducing operational costs and improving mitigation of
financial risks. This technology solution will also ensure real-time visibility
into cash flow as a result of the crucial finance information that flows
through the portal.
© 2012 Aberdeen Group.
www.aberdeen.com
Telephone: 617 854 5200
Fax: 617 723 7897
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 7
The CFO’s Evolving Role in Managing the Financial
Ecosystem
The office of the contemporary Chief Financial Officer is traditionally
focused on supporting organizational strategies and serving as a conduit
between spend management stakeholders and the executive office. In light
of economic conditions and the need to ensure agility within the dynamic
framework of the financial ecosystem, it becomes critical that CFOs expand
their responsibilities for the greater good of the enterprise.
Aberdeen research has found that CFOs in leading organizations are 72%
more likely than those CFOs in following companies to hold the main
responsibility for cash flow analysis, a factor which speaks to the fact that
Leaders have markedly superior visibility into organizational cash flow.
CFOs typically hold a vast array of knowledge of their enterprise’s financial
dealings; with this intelligence and access to a wide framework of processes,
CFOs can gain an accurate picture into available cash and link that
information to the executive office to allow for enterprise-wide planning,
budgeting and forecasting.
Figure 5: Financial Ecosystem Attributes in Which the CFO Holds
Main Responsibility
Source: Aberdeen Group, September 2012
An organization and its business units are only as strong as its weakest link.
This adage couldn’t be more applicable than it is to today’s business
environment (as well as the networked economy) where cross-functional
and inter-departmental collaboration is an assumed mode of operation.
Therefore, involvement of senior-level executives can no longer be
relegated to one core function or department and for a truly cohesive
organization, CFOs are now showcasing a high level of interest across the
key financial functions, such as A/P, A/R / collection activities and global
payment management, as well as the evolving concept of the “financial
© 2012 Aberdeen Group.
www.aberdeen.com
Telephone: 617 854 5200
Fax: 617 723 7897
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 8
ecosystem.” By grounding these responsibilities into such a high-profile role,
leading organizations are actively able to dissect their cash flow and execute
informed business decisions based on that intelligence.
Key Takeaways and Recommendations for Program
Improvement
In order to thrive in this intricate financial ecosystem, organizations need to
embrace a holistic approach for conducting business, where A/P, A/R, trade
finance and global payments are functionally integrated. The following
recommendations can assist organizations in improving visibility into cash
flow and gaining more value out of the financial ecosystem:

Place emphasis on how aspects of the modern financial ecosystem are
linked and managed as a means of pinpointing gaps and opportunities for
improvement.

Support management of this ecosystem with specific enablers, such as
payment factories, full A/P automation and trade financing tools.

Put the power of liquidity and cash flow analysis in the hands of the
CFO.

Maintain a strategic outlook for managing the financial ecosystem.
© 2012 Aberdeen Group.
www.aberdeen.com
Telephone: 617 854 5200
Fax: 617 723 7897
Beyond Payables: The Evolution of the Modern Financial Ecosystem
Page 9
For more information on this or other research topics, please visit
www.aberdeen.com.
Related Research
Receivables Management for the Long
Term: Balancing Collections and
Customer Service; August 2012
A/P Invoice Management in a Networked
Economy; May 2012
Treasury Strategy and Operational Cash:
The Importance of A/P and A/R; May
2012
Effective GRC Management: Strategies for
Mitigating Risks and Sustaining Growth in
the Tough Economy; May 2012
Authors: Christopher J. Dwyer, Research Director, Global Supply Management
and GRC / Financial Management (chris.dwyer@aberdeen.com), @ABG_GSM
Ankita Tyagi, Senior Research Associate, GRC / Financial Management
(ankita.tyagi@aberdeen.com)
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This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies
provide for objective fact-based research and represent the best analysis available at the time of publication. Unless
otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be
reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by
Aberdeen Group, Inc. (2012a)
© 2012 Aberdeen Group.
www.aberdeen.com
Telephone: 617 854 5200
Fax: 617 723 7897