Accounts Payable (AP) departments have always played a crucial but often underappreciated role in keeping organizations financially healthy. In steady economic times, AP teams manage vendor relationships, pay bills, and prevent cash leaks from careless errors. But when economic conditions become unpredictable, as they have recently, AP becomes the unsung hero that can make or break a company’s cash flow resilience.
Today, AP teams face two forces at once: known cost increases, like rising sales taxes, and unknown economic variables, like tariffs, and supply chain disruptions. These threats can squeeze working capital from both sides. Meanwhile, leadership expects AP to be more strategic than ever, not just a back-office cost center but an early-warning system and a partner in protecting the company’s financial stability.
How can AP teams prepare for this new normal, and how to use automation and AI to stay ahead of the curve?
The AP Challenge: Known and Unknown Pressures
Some changes you can plan for. If your state announces a sales tax increase, you can adjust budgets, update processes, and negotiate vendor contracts accordingly. But tariffs, inflation spikes, or sudden supplier cost hikes are a different beast. They hit with little warning and often at the worst possible time.
Here’s what happens when these unknowns collide with a weak AP process:
- Late or duplicate payments: When AP is too manual, errors slip through. This drains cash unnecessarily, exactly when you need it most.
- No room to negotiate: Vendors may have to pass on cost increases immediately. If your payment terms are rigid or you don’t have good relationships, you’re at their mercy.
- Cash flow blind spots: Without real-time visibility, you can’t flag when outgoing payments will create a cash crunch, until it’s too late.
- Team burnout: In unpredictable times, the same AP team is asked to do more with less, increasing the risk of mistakes.
To weather this, AP needs to be proactive, flexible, and data-informed. Modern tools and a few strategic mindset shifts can help.
Core Strategies for Bulletproofing AP
1. Tighten Payment Terms
One of the fastest ways to protect working capital is to extend payment terms strategically. But this isn’t about unilaterally telling vendors you’ll pay later, that will backfire fast.
- Segment vendors: Identify which suppliers are mission-critical and which have more competitive alternatives. Prioritize negotiating better terms with those who have wiggle room.
- Communicate early: Be transparent about why you’re adjusting terms, tie it to mutual survival in a volatile economy.
- Offer alternatives: If a supplier balks, offer early payments in exchange for discounts when it makes sense. Payment automation can help here.
2. Improve Contract Flexibility
Locking yourself into rigid long-term supplier agreements can be dangerous when tariffs or material costs fluctuate overnight.
- Add contingency clauses: Where possible, build in language that allows for renegotiation if significant cost changes occur.
- Diversify suppliers: Don’t rely on a single source for critical inputs. Even if your AP process is flawless, if your only supplier doubles their prices because of tariffs, you’re stuck.
3. Identify and Plug Process Leaks
When every dollar counts, you can’t afford to hemorrhage cash through preventable errors. The classic AP mistakes, duplicate payments, paying for goods never received, or missing discounts, become more painful.
- Enforce three-way matching: Automate the match between purchase orders, invoices, and receipts whenever possible.
- Standardize approvals: Streamline how invoices are approved to reduce delays. Clarify who approves what and when.
- Run regular audits: Simple monthly audits of random invoices can catch patterns you’d otherwise miss.
- Outsource payments: Remove mundane, time consuming tasks of making payments to focus AP team on more productive activities.
4. Strengthen Supplier Relationships
AP often gets stuck with the “bad cop” role, the team that delays payments and chases discounts. But in volatile times, your suppliers are partners in your financial survival.
- Communicate proactively: Let suppliers know your situation and ask about theirs. It builds goodwill when tough negotiations come up.
- Be transparent about payment status: Use your systems to keep suppliers informed, so they’re not constantly calling to ask where their money is.
5. Use AI and Automation as Force Multipliers
Here’s the honest truth: you can’t manage volatility with a spreadsheet-heavy AP process. The more unpredictable things get, the more you need your team focused on exceptions and strategic work, not keying in invoices or stuffing checks.
Where can AI and automation make a difference?
- Duplicate payment prevention: Smart AP platforms now use AI to flag potential duplicates by recognizing patterns that simple matching rules miss.
- Predictive insights: Some tools analyze past payment trends to flag invoices that could cause cash flow crunches if paid immediately.
- Fraud detection: AI can detect anomalies that might signal fraudulent invoices.
You don’t need a multi-million dollar overhaul to get started. Many existing ERP or AP solutions have built-in automation features that go unused because teams believe they don’t have time to implement them. Start small: pick one or two pain points and automate those first.
Partnering with Finance Leadership
Another shift for AP teams is collaborating closely with your CFO, Treasury, and Procurement colleagues. In a volatile economy, information moves fast, and AP sits on critical data.
By regularly sharing insights, like shifts in vendors or signs a key supplier is struggling, AP becomes an early-warning system for the whole organization. That’s a huge value-add when leadership is scenario planning for worst-case situations like sudden tariff spikes.
What Not to Do
Some AP teams go on autopilot in uncertain times. That’s the surest way to get blindsided. Don’t assume:
- That your vendors will always accept your terms if you push too hard.
- That your manual processes can handle sudden surges in invoices during a supply chain crunch.
- That the rest of the company knows what you’re seeing.
5 Immediate Moves to Start Now
- Audit payment terms: Identify vendors where terms could be tightened or renegotiated for better cash flow.
- Run a vendor risk assessment: Look at your biggest suppliers, do any pose a risk if costs spike or they pass along tariffs? Have a backup plan.
- Identify quick wins for automation: Pick one bottleneck, like payment outsourcing, and see if your current tools can automate it.
- Hold a sit-down with Procurement: Make sure you’re aligned on supplier diversification and contract flexibility.
- Talk to your CFO: Share what you’re seeing. A short briefing on your biggest risks and opportunities can make AP a trusted advisor, not just a bill-payer.
Conclusion
Accounts Payable is the last line of defense against cash flow problems that can snowball in uncertain times. By taking a proactive approach, tightening payment terms smartly, building flexible supplier relationships, fixing process leaks, and using AI and automation to work smarter, AP teams can transform themselves from reactive processors into strategic protectors of the company’s financial resilience.
You don’t have to predict every economic curveball. But you can be ready to absorb the hit when one comes your way. And when your leadership team realizes that AP is the radar keeping an eye out for rough weather, they’ll know exactly who to thank.
Next steps?
Pick one process to improve, one vendor term to review, and one automation tool to test. That’s how you get resilient, one smart move at a time.
