As per the most recent survey done by Deloitte CPOs main interest and goal is still to achieve cost reduction (79%). Their research also discovered seven main areas that are of major interest for high-performing procurement leaders:
Photo credit: The Deloitte Global Chief Procurement Officer Survey 2018
In this article, we’ll try and address the digital procurement problem, especially the digitalisation of the payment process.
One of the areas where digital technologies have a big impact within finance is the automation of the purchase to pay system. With a ‘best in breed’ P2P system in place, organisations can transform and improve the overall procurement function. When the purchase to pay system becomes automated it can serve a decent amount of procurement’s needs such as:
- Improving cash flow/EBITDA
- Standardisation of the payment processes
- Reducing risks of late payment
- Improving ‘payment on time’
Digitalisation of the payment process – what does it mean for your business?
Most companies already have in place some form of digital technology or digital strategy regarding payment processes. Organisations also tend to deploy several forms of core procurement technologies. These platforms usually include a combination of spend analytics, eSourcing, contract management and eProcurement (eCatalogs, eInvoicing) among others.
There have been recent discussions around paper waste and a lot of conversations around how to go paperless and the inefficiency of different existing payment structures. In general, people agree that there are a lot more benefits in digitising your payments when upgrading to e-invoices. Whether you have a P2P system in place or you are in the process of going live, e-invoicing will likely be an area that could still need improving.
Some organisations have held back on a P2P system because they fear changing that much at once would have a dramatic impact on staff and suppliers. But by implementing a P2P system correctly, an organisation could have a very smooth and easy transition.
Digitising the payment process should be a key factor in your overall digital procurement transformation. Organisations have started embracing these benefits and even some governments are trying to eliminate paper-based invoicing from their entire system. The digitalisation of the invoicing system also allows more precise forecasting of supply, demand and delivery of goods and services.
There are a number of techniques and solutions on the market to achieve automation across supplier payments. Increasingly, these solutions include dynamic discounting and supply chain financing solutions, making it very straight forward to enhance working capital and support your supplier’s cashflow.
Recent studies have shown that larger business have ‘moved towards digitising their procure to pay procedures, with a 93% share of transactions being made electronically’, according to the Deloitte digital payments study.
Digitising your payment processes can deliver a significant increase in profitability and overall growth by offering:
- Increased efficiency and reduced operating costs
- Improved supplier relationships
- Ability to transform and update your business
Digitising your payment processes should be the first step into your digital procurement transformation journey. It is important to match your business objectives with KPIs in order to have a better understanding on what needs to be improved and tracked.