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Understanding the Reputational Capital of Your Payables and Receivables Departments

Kim Radok19 September 2018

Managing your business’s Reputational Capital has never been so important than in today’s world AND is an issue which will not go away.

First however, we need to understand what Reputational Capital means. There are a number of definitions, however they all basically mean the same thing about brand and business protection.

Reputational Capital is about your business’s brand and whether your stakeholders believe your business operates to the best standards of commercial and social expectations of decency. In other words; your stakeholders can trust you to deal with them and others fairly.

In regards to your Payables and Receivable operations, reputational capital is critical from every aspect. For instance, a poor reputation in Payables can lead a loss of suppliers, a reduction in credit facilities and your business becoming a target for internal and external fraudsters.

Your Receivables relies upon its reputation to maximise cashflow opportunities, early warnings of problems and customer relationship creditability.

To assist in protecting your Payables and Receivables reputation, management has to revise decades of inadequate understanding of the value these two departments bring to the business. It is no longer satisfactory to consider these departments as loss making operations. Management needs to change its thinking to ensure these departments become profit enhancing operations and deserve to be considered as profit centres in their own right.

To ensure these departments are able to build and maintain a positive reputational capital rating requires a commitment from management at all levels. The first part of the process is to promote the value of these departments. Secondly, a commitment to respect the work of the departments by resourcing them adequately with professional employees, quality training and the correct operational tools.

Thirdly, and equally important, management must not undermine the efforts, reputation and suggestions for improvement made by employees of these departments. It is often demoralising for these employees to see their professional decisions demonised or dismissed out of hand and then to see the negative result which follow. Furthermore, rarely do we see any mea culpa responses from management when negative results occur when professional decisions are overruled

In a world where stakeholders are increasing focused on your business reputation, protecting your reputational capital is extremely important. The value of a positive reputational capital rating for the Payables and Receivable departments cannot be overemphasised. A positive rating brings about the opportunity to increase profits. A negative rating only brings increased expenses, bad debts and lost profits.

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