Days payable outstanding (DPO), the average number of days a business takes to pay supplier invoices, has become more than an accounting metric. When optimized, DPO helps companies manage liquidity and working capital by aligning payment timing with cash availability, supplier relationships and broader financial objectives.

Achieving this goal means putting together two distinct sets of information from two different teams: invoices and data on supplier terms from accounts payable (AP), and cash forecasts and information on funding costs and liquidity constraints from treasury. Yet treasury and AP often operate in silos, with limited communication and visibility into each other's activities. Integrating the two teams can bridge these gaps and make optimizing DPO more effective and efficient.

Current State: Silos

Treasury and AP have separate mandates: AP focuses on paying suppliers accurately and on time, while treasury manages liquidity, minimizes idle balances and ensures that sufficient cash is available to meet obligations. The two groups’ systems, data formats and processes are often incompatible, making it difficult for each team to see the other's activities or obtain the information needed to make informed payment decisions. A study by Coupa, a spend-management platform, found that financial decision-makers at 75% of companies must use multiple systems to determine how much cash their company has on hand. Forty-two percent said it takes several days to find this information.

Maintaining these groups in silos raises risks. Without adequate information from AP, cash forecasts may be inaccurate, and working capital may be left idle. Payments may go out too early for the company’s liquidity needs, or too late to take advantage of early payment discounts or to maintain good relationships with suppliers.

Optimal State: Integration

Instead of working in isolation, treasury and AP should recognize that their goals complement each other and integrate their processes, responsibilities, and systems.

Well-integrated AP and treasury teams communicate regularly, share data according to established protocols, and work together to identify and address the root causes of cash flow disruptions and risk exposures. Ideally, treasury and AP have access to a shared platform that provides real-time visibility into payment obligations, supplier terms and liquidity. Alternatively, companies can integrate existing systems to create a common view without moving every function into a single application.

With shared visibility into payment obligations and liquidity, treasury and AP can jointly determine when to pay large invoices while balancing cash availability, supplier terms and working capital objectives. The treasury team will not have to put unexpected payments on hold, liquidate assets on short notice, or borrow at higher costs to cover supplier payments. Cash forecasts can incorporate actual payment commitments and expected receipts, relying less on historical averages and improving forecast accuracy.

How to Integrate

Integrating treasury and AP will take time but can be done in steps. Although not required, the process will be easier if AP is automated so that the AP team can focus less on mundane, routine tasks and more on working with treasury.

To successfully integrate, the first issues to address are ownership and visibility. AP and treasury should share responsibility for payment timing and work together on the payment-management process from end to end. The process should incorporate:

• Clear decision rights
• Common invoice and cash data
• Coordinated payment schedules
• Metrics that reward both liquidity management and supplier reliability

For visibility, both groups should have consistent, real-time (or close to it) access to:

• Supplier payment terms and available payment methods
• Invoices awaiting approval and invoices approved for payment
• Planned payment dates and amounts
• Payments already submitted or in flight
• Current cash balances and projected liquidity

Distinct authorization steps — with appropriate controls and segregated duties — should be established for payment submission, approval, release and tracking within the integrated workflow.

Companies can begin the integration with a focused pilot involving a single business unit, ERP or supplier payment stream. Implementation steps could include:

• Mapping the current invoice-to-payment process and identifying where treasury loses visibility
• Agreeing on data definitions, responsibilities and payment-review rules
• Establishing a shared payment calendar and baseline performance measures
• Connecting invoice status, payment proposals, bank balances and payment-status feeds
• Comparing forecast and execution results and fixing exceptions

Companies can use the pilot's results to refine workflows, resolve exceptions and establish a repeatable approach. They can then expand integration to additional business units, payment streams or systems.

Becoming Future-Ready

Integrating treasury and AP allows companies to move beyond routine payment processing to optimizing DPO with strategic decisions about when and how to pay suppliers. It also lays the groundwork for emerging technologies that promise to transform financial operations. AI and machine learning, for example, could help companies improve cash forecasts, identify opportunities to optimize payment timing and respond more quickly to changing liquidity conditions.

But these capabilities depend on access to accurate, connected data across financial functions. By breaking down silos between treasury and AP, companies can improve working capital management today while building the foundation for more automated, intelligent payment decisions tomorrow.

For more on optimizing DPO, see the AFP Payments Guide: Optimizing DPO: A Strategic Approach to Working Capital, sponsored by Wells Fargo.