Mastering Operational Excellence in Accounts Payable: A CFO’s Take

Meet Mr. Siddhartha Khaitan, the financial maestro driving Esme Consumer Pvt. Ltd. to unparalleled success. With nearly three decades of finance expertise under his belt across steel, telecom, apparel, and FMCG, Siddhartha is not just a CFO; he's a strategic financial architect. A Chartered Accountancy rank-holder and armed with an MBA, he's the numbers whisperer who has consistently steered the businesses he leads toward new horizons, making him an indomitable force in the world of finance.

Here are Mr. Siddhartha Khaitan's rich insights on the pivotal role of the accounts payable processes in achieving financial excellence.

1. As a seasoned CFO with a decade of experience, has the significance of accounts payable remained consistent or has the function evolved, resulting in supply chain challenges?

Siddhartha Khaitan: So, Covid definitely helped bring about digital transformation across the entire country, including in the finance function. From meetings to audits, a digital framework took over during Covid. Fortunately, this has transformed into better work efficiency even post-Covid.

For example, invoices that came in the form of hard copies - now the same comes in the form of soft copies from suppliers. Similarly, for invoice processing, we put in bots that would streamline the process and get it done faster. Digitisation also helps track invoices and bills much more efficiently from the date it’s received until when it’s due and even subsequent to payment processing. As far as reconciliations go, it is happening much faster and enabling easier resolutions with the suppliers. 

2. Can you give me an instance where a manual process that still exists is disrupting your workflow? Or conversely, a function that you have successfully transformed into a digitised process that is now providing tangible benefits?

Siddhartha Khaitan: Today, all my documents are kept in a scanned format on my system. I never have to worry about where it is or how to find it. Take, for instance, bills or tax documents; a simple click of a button provides instant access. In the past, these documents were stored in physical formats and were not as easy to access. Hence, while there are a number of areas and functions that have been digitised, this transition to digital records is one where significant efficiency has been achieved.

3. Imagine you have a magic wand that can instantly improve one aspect of the accounts payable operations in your company. What would you use it for, and why?

Siddhartha Khaitan: Well, two things come to my mind to answer this question. 

One, I believe that automation can greatly improve the accuracy of data. Whether it is at the data entry phase, be it with OCR or any other mode of data capture or in the invoice processing stage, automation can help enhance data accuracy. Hence, I would use automation to make data error-free and foolproof.

Secondly, which also, in a way, goes hand in hand with my first point, is to leverage accounts payable data for data analytics. So far, data analytics has always been looked at separately, but it needs to go hand in hand. A lot of companies are only looking at driving growth and revenues, and while not incorrect, it is definitely as important to be looking at operational profitability and bringing operational excellence into the system. 

4. What do you think is the best-kept secret in accounts payable?

Siddhartha Khaitan: There are definitely many that come to mind. For one, there are certain vendors that are very important to your organisation. 

Furthermore, it is imperative for every business to uphold a system of checks and balances within their accounts payable processes. Consider the scenario where a provisional invoice is received for a given month; such occurrences are not uncommon. However, if this pattern persists with provisional invoices for subsequent months and the final invoice remains absent, this warrants a closer examination. Are we accumulating a backlog of unpaid invoices spanning multiple months? If yes, you start asking the questions. It becomes imperative to raise questions and introduce accountability measures. You put in a check on your own system that older unpaid invoices may need to obtain CFO approval, for instance, thereby instilling a sense of diligence and accountability within the organisation.

5. As a CFO today, you will need to lead your team into this era of digitisation and digital transformation, whether it’s the AP team or any other finance team. How are you fostering this transformation?

Siddhartha Khaitan: First and foremost, you have to stay abreast of what is happening around you. Without having appropriate information or knowledge, you cannot do much. This includes the CFO community, finance laws, technology, etc. You have to be aware of what’s in the market and what’s possible to do. You get this knowledge from people pitching to you as well as your own research. You must stay updated.

Secondly, you need to understand what your system requires. What’s the best fit for your system? You should know that so that you can take a call on it. For instance, in our organisation, there may not be too much treasury play. 

Lastly, every decision you take should have a payback. What kind of money are you willing to spend? What is the ROI for that investment? 

6. Is there anything that you say has challenged you in recent times? For instance, the digital revolution and your team’s resistance to change.

Siddhartha Khaitan: Well, no one likes change. 

7. If you could describe in one word what the AP function should be today, what would that word be?

Siddhartha Khaitan: Automated.