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• Businesses today understand the need to be competitive not only in the prices they offer customers but also in the way they carry out their operations. The procure-to-pay process represents one of the ways for businesses to streamline internal operations.
• Prime steps for automating procure to pay process including purchase requisition, purchase orders, invoicing, and payment. Other steps you can automate include the identification of goods and services the company needs and the reconciliation of invoices received.
Businesses today understand the need to be competitive not only in the prices they offer customers but also in the way they carry out their operations. The procure-to-pay process represents one of the ways for businesses to streamline internal operations. Prime steps for automating procure to pay process including purchase requisition, purchase orders, invoicing, and payment. Other steps you can automate include the identification of goods and services the company needs and the reconciliation of invoices received.
If your business has not yet begun automating your procure-to-pay process, here are 8 reasons to begin doing so today.
1. Reduction in Operational Costs
Your company will accrue high-level and low-level cost savings from automating its P2P workflow. At the low level, the company will make savings by reducing the amount of paper and ink previously used in printing the numerous procurement documents used. At a high level, the company reduced the number of labor hours incurred in managing procurement documents manually. For instance, manually checking every invoice for accuracy requires several people in a mid-sized organization. Automating this reduces labor costs while allowing the organization to redirect its staff to work on more strategic tasks.
Visibility into the supply chain is an often under looked advantage of P2P automation. It means that every stakeholder can always check the status of orders, invoices, or other items they are concerned about. For instance, an employee can check whether their purchase requisition has been approved. Suppliers get a portal from where they can track their invoice status. The organization can take a macro look at the number of contracted vendors, pending orders, and outstanding invoices. Visibility is crucial for accurate decision-making in an organization.
3. Improved Supplier Relationships
Automation and standardization of the P2P process create an environment for healthy relationships with your suppliers. Many automation solutions have a portal from where suppliers can upload and update their personal information. They can also improve communication and check their order status. Automation of invoice approval means that invoices are approved faster and will always take a certain amount of time. This clarity is very important for suppliers and may even prompt them to offer more attractive prices and payment terms.
4. Capturing of Data
Data is the fuel for efficiency in businesses today. In any procurement operation, the availability of data in the usable form will always lead to value creation. Using P2P software creates the ability to collect data in real time, meaning that the organization can create dashboards for real-time tracking of important metrics. For instance, the organization can track the amount of business done with particular vendors, the geographical spread of suppliers, and the logistical routes most relied upon.
5. Curbing Maverick Spending
Reliance on manual spending often leads to a problem of non-adherence to budget limits. When the purchasing department receives purchase requisitions, it can be difficult to track how much each department has spent when the data isn’t properly tracked. However, in an automated P2P scenario, the request can be checked against the pre-approved departmental budget. The department can report on how much each department has spent, who raised the requisitions, who approved them, and the matching purchase order number. This level of transparency acts as a deterrent against maverick and unnecessary spending.
Departments can also be scored by the level of spending discipline. For instance, a department that spends two-thirds of its budget within the first quarter of the year would need to justify the reasons.
6. Risk Reduction
Risk assessment and management are important parts of a procurement manager’s job. In fact, the ability to consume large amounts of information, analyze, and make recommendations are considered essential procurement skills. Automation provides a procurement manager with the ability to assess what risks the company is exposed to.
Is there overreliance on one vendor for mission-critical products or services? Is the company relying on too much debt to finance working capital needs? These are some questions that real-time data analysis would be able to help answer. In addition, automation eliminates the risk of making human errors when checking invoices, making orders, or another process that would otherwise require manual data entry.
7. Increased Speed of Order
Automation can increase the agility of a business by increasing the speed with which it responds to changes in the operating environment. For instance, when a key supplier cannot deliver or there are logistical delays, the organization can quickly pivot to another vendor. The organization can quickly pull information from its repository and objectively find a suitable new vendor that meets its needs. Quick approval would help the business avoid losses that arise from disruption of operations.
What to Watch Out for in P2P Automation
A lot of preliminary work needs to take place before your organization settles on automating procure to pay process. It’s often a major capital outlay and companies will often end up using such a system for a minimum of 5 years. The organization must list its needs and ensure the proposed solution fully meets its needs.
The P2P vendor your company settles on ought to provide support and customization as per your organization’s needs. They should provide assurances that the software you use, if commercial, will continue receiving feature and security updates for the foreseeable future.