“The transformation of the finance function into a catalyst for growth starts with CFOs having more influence in areas that have broader consequences for the business.”
— Institute of Finance & Management (IOFM)
Procure-to-pay (P2P) technologies are often most closely associated with the first P in their name: procure. At the same time, the efficiency of an enterprise’s payment processes have more of an impact on its growth rate than the efficiency of its purchasing processes. And it is finance – not procurement – whose ability to deliver against performance objectives is improved the most when payments are streamlined, and hampered when they are not.
Automating the many tasks associated with P2P offers advantages such as improving net profit margin, freeing up cash flow and mitigating the risks of non-compliance. Companies that automate their P2P processes benefit from lower administrative costs and higher transaction processing capabilities. According to the IOFM, on average, these financial leaders:
- Spend 75% less to process each invoice
- Spend 60% less to pay each supplier
- Process more than 11 times as many invoices per full-time equivalent (FTE) per month
- Match more than 30% of their invoices to purchase orders automatically
- Process a single invoice in less than 25% the time
- Suffer fewer duplicate payments
- Capture more early payment discounts
It is important for companies to realize, however, that automating P2P does far more than increase the efficiency of status quo processes. It also allows finance to expand their role in fueling overall growth. As detailed in the 2018 FSN Finance Function Global Survey, 23% of finance functions report that they are committed to playing an active role in innovation across the entire enterprise. This represents a significant step up for finance, one that will require automation if it is to be sustainable.
The data associated with P2P processes is an operational gold mine for companies that are prepared to harness it. More automation means more data, data that is trustworthy because it is created and stored without leaving the P2P platform instead of being reliant on manual entry.
By analyzing trends in incoming and outgoing payments, supplier relationships, transaction volumes, purchase order (PO) versus non-PO invoices, and Days Sales Outstanding (DSO) timeframes, finance can provide valuable insights into where the low-hanging fruit of opportunity lies. Working capital strategies guide the timing of supplier payments, and the trend in recent years has been to extend payment terms. In 2017, companies took 3.4 days longer to pay invoices than they did in 2016. This might be good for the balance sheet, but it will have an impact on supplier relationships — relationships that may be essential to top-line health. Working capital decisions should be made on an informed basis, and in the full context of enterprise objectives.
Automating P2P certainly offers a lot of upside benefit for finance, but it can also protect against some of the downsides of doing business in complex industries. Whether a company is B2B or B2C, regulations such as GDPR and the California Consumer Privacy Act raise the bar for data management and oversight. More automation typically leads to less process variability, and therefore less risk of non-compliance with new or changing regulations.
Like many other corporate functions, finance has an opportunity to transform themselves with the help of the right technology. Automating P2P provides the data, governance and risk mitigation required to take growth projections into reality.
If you’re ready to leverage procure-to-pay automation technology to help finance increase the impact on the overall business, download 4 Ways Procure-to-Pay Automation Helps Accelerate Business Growth from IOFM and Corcentric. Then schedule a personalized demonstration of our integrated, modular procurement solution on the Determine Cloud Platform.