In today's economy, cash is king. Improving control and visibility for the supply chain translates into a key strategic advantage for companies: more visibility on the management of money in the bank, and bottom line savings in the processing of financial transactions.
As a result, supply management is receiving renewed attention, alongside inventory and receivables, as a key lever to drive cash flow. In a world where 'quick wins' are expected from any investments, smart companies are taking the opportunity to improve their procurement to payment process by transforming accounts payable (AP) from a manual, time-consuming process, to an automated, efficient one.
Immediate results can be achieved using business process management (BPM) to drive the human centric tasks performed in the processing of AP, by transforming traditional, paper-based, labour-intensive practices of invoice processing, routing, exceptions and approvals into an automated, collaborative solution.
Organisations face execution challenges throughout their procure-to-pay process, from the point where a purchase order, or other demand signal, is submitted to a supplier for fulfilment, through the eventual receipt, verification, and storage (of the product), to payment for goods or services received. These challenges have been heightened by the current economic conditions that restrict credit and increase supply risk.
It's where the money is
Why focus on AP? Well simply, because that's where one of the biggest opportunities to save money lies. This means focusing on where the highest costs are incurred, and thus having the highest potential of overall cost reduction.
When it comes to buying goods and services, it is because businesses face significant, costly, and flawed AP processes that improvements can have a big impact.
Consider that AP professionals process millions of business-to-business invoices each week, and over 90% of those are still processed manually. The average cost to process and pay a supplier invoice is between R45 and R120, with 10% processed too late to be paid within discounting terms, and nearly 2% containing errors.
AP professionals process millions of business-to-business invoices each week.
Tim Stanley is sales director at Global 360.
Clearly, then, AP processes are expensive and error-prone. Multiple handoffs and mazes of paper-based approvals can slow down productivity across the entire organisation. Improvements in the AP process itself, and better integration across functions in procure-to-pay, means a higher degree of reliability and confidence in supply decisions. It also means lower costs and better service delivery.
What AP issues are top of mind for the enterprise executive?
Company leaders are looking to address five issues that surround supply management and their AP processes:
* Can we track invoices through the approval cycle?
* Can we meet disclosure and audit mandates?
* How do we tailor payments to respond to current business conditions?
* How efficient is our exception handling and discrepancy resolution?
* What visibility do we have in the manual processing of invoices?
* How well can we manage our service level agreements to get vendor discounts?
Challenges
While there is a wide range of organisational challenges linked to AP productivity, they can be categorised into three key priority areas: information management, automation, and business optimisation. The volume of transactions and paper overload present an information management challenge, as AP is a document-intensive function by nature. Organisations can receive hundreds of thousands, sometimes millions of invoices annually - both with and without purchase orders (POs). Each invoice often has multiple associated documents such as delivery and credit notes.
Organisations struggle to find efficient ways to manage, store, and access their high volume of documents, and often find their current manual handling to be error prone and difficult to track. Most companies receive invoices by multiple means and in multiple formats; including, e-mail, fax, Web forms, and most commonly as paper documents sent by snail mail. Even though many of these are in an electronic format, these still translate to manual processing as often these electronic documents are printed and then processed.
Meeting these challenges, companies are looking for solutions that assure financial transparency through capturing and storing invoices upon arrival, streamline processing and approvals and enabling collaborative exception processing.
It remains a fact that companies do not pay enough attention to cash, except in recessions. Current economic conditions have raised the importance of cash flow strategies like AP transformation, to the board level. However, with the use of solutions such as BPM, companies can automate their paper-based, labour-intensive AP processes.
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