Within part 2 of this blog series we outlined the initial steps necessary to achieve a truly paperless procurement environment. In this final part of the series we will reveal how to engage Accounts Payable, Procurement and your suppliers all in harmony. We will then break down the KPI’s to measure for success along with a look at what do once you are live.
Rules of Engagement
Supplier Engagement
It’s advisable that you do more than just tell your supplier that they must invoice you electronically. The way you communicate the initiative can make a big difference to the level of engagement you get from suppliers. Here are a few pointers:
Sell the benefits to the supplier – get paid on time, improve working capital, self-service invoice tracking, preferred supplier
Use your company branding in your communications and if possible, have it sent from a senior executive Provide supplier training materials for use of the e-invoicing platform 4. Offer training sessions for your suppliers
Engaging with a collaborative message shows your supplier that you’re working as partners and increases the likelihood of them signing up to your initiative.
Procurement Engagement
E-invoicing might be driven by Finance but procurement has a role to play. In theory your buyers should be the key contacts for your suppliers so any grumblings about being asked to invoice electronically will probably come through them, meaning the buyer should be on board with the project. Procurement can also help by adding an e-invoicing clause to new and existing supplier contracts and by managing any commercial discussions the supplier might bring up as a result of the project. Ensuring that any new suppliers automatically have an e-invoicing clause is also a sensible move.
Accounts Payable (AP) Engagement
A successful e-invoicing project will change AP processes and the skill sets required in the team, moving from invoice processing to exception handling and proactive capital management. The efficiencies could mean that you’re able to reduce head count in AP, or at least avoid an increase when you grow.
Planning for and selling these changes to your team is therefore crucial. AP become more strategic, this should be an opportunity for your team members. Inevitably, not everyone can make the transition, so work with HR to plan for this with training and re-skilling.
Measuring Progress
As with all projects, a business case should be produced to ensure it works for your organisation at this time. In order to measure progress towards this business case, Xoomworks recommend a number of basic KPIs that should be measured at the outset and on a regular basis to demonstrate progress and help identify any possible areas for concern:
What Next?
So, now you have your suppliers sending in e-invoices. Your match rate is higher, exceptions are lower, suppliers happier, and your AP team with less manual effort. One of the key areas of benefit can be to apply your freed-up AP resources to help manage working capital.
Management of working capital utilizes surplus cash in the business and the incentive for the supplier of increased cash flow to produce beneficial returns. These opportunities are setup by agreeing payment terms with the supplier so that a discounted price can be paid for their product or service if payment is made within X number of days.
It is important that implementation of early payment discounts is a collaboration between both finance and procurement. Finance will define the value to the business of having £1 in the bank per day and procurement will then be able to use this value to propose a percentage discount for early payment that will yield a positive return for the business. Procurement will then have the responsibility of negotiating with the supplier and agreeing a contract containing the new payment terms.
The freed-up AP resource will be able to focus their time on ensuring that invoices are meeting their early payment discount targets by prioritising invoices that have an associated early payment discount and by closing down invoice exceptions efficiently and quickly.
Conclusion
Embarking on a mission to remove (or at least reduce) paper invoicing should not be under estimated. It’s not easy but then nothing worth doing ever is.
Here we’ve explored why you should do it, what it might cost you and some practical advice on how to do it effectively and efficiently.
In short, ensure that your business case stacks up by calculating the benefits to your company – not those quoted by e-invoicing software vendors. Plan the initiative as a project and think about the impact on your organisation. Finally – realise the benefits by making use of things like early payment discounts.
If you would like further information on any of the aspects discussed in this paper then please leave us a message here.
Within part 2 of this blog series we outlined the initial steps necessary to achieve a truly paperless procurement environment. In this final part of the series we will reveal how to engage Accounts Payable, Procurement and your suppliers all in harmony. We will then break down the KPI’s to measure for success along with a look at what do once you are live.
Rules of Engagement
Supplier Engagement
It’s advisable that you do more than just tell your supplier that they must invoice you electronically. The way you communicate the initiative can make a big difference to the level of engagement you get from suppliers. Here are a few pointers:
Provide supplier training materials for use of the e-invoicing platform 4. Offer training sessions for your suppliers
Procurement Engagement
E-invoicing might be driven by Finance but procurement has a role to play. In theory your buyers should be the key contacts for your suppliers so any grumblings about being asked to invoice electronically will probably come through them, meaning the buyer should be on board with the project.
Procurement can also help by adding an e-invoicing clause to new and existing supplier contracts and by managing any commercial discussions the supplier might bring up as a result of the project. Ensuring that any new suppliers automatically have an e-invoicing clause is also a sensible move.
Accounts Payable (AP) Engagement
A successful e-invoicing project will change AP processes and the skill sets required in the team, moving from invoice processing to exception handling and proactive capital management. The efficiencies could mean that you’re able to reduce head count in AP, or at least avoid an increase when you grow.
Planning for and selling these changes to your team is therefore crucial. AP become more strategic, this should be an opportunity for your team members. Inevitably, not everyone can make the transition, so work with HR to plan for this with training and re-skilling.
Measuring Progress
As with all projects, a business case should be produced to ensure it works for your organisation at this time. In order to measure progress towards this business case, Xoomworks recommend a number of basic KPIs that should be measured at the outset and on a regular basis to demonstrate progress and help identify any possible areas for concern:
What Next?
So, now you have your suppliers sending in e-invoices. Your match rate is higher, exceptions are lower, suppliers happier, and your AP team with less manual effort. One of the key areas of benefit can be to apply your freed-up AP resources to help manage working capital.
Management of working capital utilizes surplus cash in the business and the incentive for the supplier of increased cash flow to produce beneficial returns. These opportunities are setup by agreeing payment terms with the supplier so that a discounted price can be paid for their product or service if payment is made within X number of days.
It is important that implementation of early payment discounts is a collaboration between both finance and procurement. Finance will define the value to the business of having £1 in the bank per day and procurement will then be able to use this value to propose a percentage discount for early payment that will yield a positive return for the business. Procurement will then have the responsibility of negotiating with the supplier and agreeing a contract containing the new payment terms.
The freed-up AP resource will be able to focus their time on ensuring that invoices are meeting their early payment discount targets by prioritising invoices that have an associated early payment discount and by closing down invoice exceptions efficiently and quickly.
Conclusion
Embarking on a mission to remove (or at least reduce) paper invoicing should not be under estimated. It’s not easy but then nothing worth doing ever is.
Here we’ve explored why you should do it, what it might cost you and some practical advice on how to do it effectively and efficiently.
In short, ensure that your business case stacks up by calculating the benefits to your company – not those quoted by e-invoicing software vendors. Plan the initiative as a project and think about the impact on your organisation. Finally – realise the benefits by making use of things like early payment discounts.
If you would like further information on any of the aspects discussed in this paper then please leave us a message here.