As the pressure to drive cost and time savings intensifies, finance leaders realize they need to be agile. Business models, budgets, and processes are constantly evolving and successful finance leaders are adapting through busy growth periods.
A recent survey by Deloitte found that a top priority for more than half of CFOs is to reduce costs. Increasing cash flow was on the minds of 45% of CFOs in the last quarter of 2019. If you’re interested in Cash Flow Management, you’ll want to read this blog.
Alongside all of these demands, the role of a finance leader has evolved into a more strategic one. CEOs now want visibility into all aspects of the finance process as well as recommendations based on data and trends. As a result, an increasing number look to modernize their Procure-to-Pay (P2P) processes.
Why are organizations modernizing their P2P process?
Firstly, modernizing a P2P process does not mean that a full ERP replacement is needed. It is simply leveraging technology to streamline the process of a company buying and paying for goods and services. Companies who have successfully modernized their P2P process are experiencing significant benefits:
Automating the process allows a CFO to better understand how an organization is spending its money. This information allows finance leaders to negotiate better pricing, stop maverick buying and prevent vendors from overcharging.
Save Employee Time
P2P automation will eliminate a number of manual tasks. This gives back more man-hours to the organization allowing employees to focus more time on different activities.
Finance leaders often have very little visibility into the finance process. Many have no idea where a particular invoice is at any given time, or if a PO was fulfilled and received. It can be difficult to complete timely accruals or to promptly resolve queries. By automating the P2P process, a finance leader can manage the entire P2P process on one system with one single interface. Decision-makers will have access to trends and the department’s progress towards goals.
Decreasing the risk of human error
In addition to cost savings, the risk of human error is dramatically decreased. In cases where the process is fully automated, human error is eradicated entirely. Examples of human error within an un-automated P2P process include; duplicate invoicing, paying an incorrect amount, or paying the invoice to an incorrect supplier.
The 5 Stages of P2P Automation
The P2P process ranges from the request for the product to the issuance of the PO, receipt of the goods, and finally the processing and payment of the vendor invoice. Successful organizations are modernizing their P2P processes by automating each of the steps involved. P2P automation can be achieved by transforming the following tasks:
Requisition automation ensures that an organization is always in complete control of company spend from the start. Finance leaders can create predefined catalogs with approved vendors. Requisitioners can choose products and services directly from this collection. This means that full visibility is maintained over what is being purchased and why.
All types of invoices (including paper, PDF, fax, EDI, XML, and email) can be automatically captured through automation. Touchless processing for most invoices through capture, matching and approval means that only exceptions need to be handled by AP team members. Problems such as duplicate invoices, missing PO numbers, and unregistered vendors are stopped at source before they cause bigger problems and more work downstream.
Automated matching of POs, invoices, and goods received notes eliminates manual paper-based processing. Technologies such as Optical Character Recognition (OCR) typically result in the straight-through processing of up to 80% of all invoices.
Approval automation allows for invoices to be routed electronically which reduces approval times. Complex rules based on roles, hierarchies, and varying approval limits can be configured to ensure adherence to company spend policies. Sophisticated workflow automation can even enable approval routing across multi-entity organizations.
P2P automation software integrates seamlessly with an organization’s existing ERP system. This ensures full visibility of the entire P2P process along with a complete audit trail for every transaction. Reporting analytics enables finance leaders to continuously monitor and improve the operational P2P processes while also delivering timely and accurate month-end reporting.
PWC found that over 70% of CEOs see digital technology and automation as an opportunity to enhance operational efficiency, customer experience, and innovation capacity. CFOs need to leverage technologies that are available to seize these opportunities or else risk being left behind by competitors.