As a process consultant at Efima, Jesse Ahokas helps companies streamline their financial processes. In the following blog, Jesse shares his insights into the purchase-to-pay process and tips on how companies can gain greater efficiencies.
It’s no wonder that Black Friday and Cyber Monday are the busiest shopping days of the year as many of us look to get the very best deals on products. The same motivation to get the most for our money plays out at the enterprise level as well, where business professionals look for the best vendors and find the greatest value. While decision-making processes are very similar for consumers and businesses alike, the similarity often ends there – the payment experience couldn't be more different.
For example, imagine a family buying a new television to replace a broken one or simply to have a larger screen to watch Netflix. Once they decided to buy a new TV and chose the model they wanted, they likely looked for the lowest price. At the point of purchase, they decided whether to visit a store and walk away with the item, or agreed on payment and delivery terms and bought the TV online in just a few clicks.
The process of buying a TV in this example is straightforward and easy. While the decision-making process can be equally as simple at the enterprise level, the rest of the corporate purchase-to-pay process – especially invoice management and processing – is often considered very cumbersome and complicated.
Taming the Wild West of the Purchasing Process
A family making the decision for a purchase would most certainly have fewer decision makers than a company would, adding to the simplicity of the process. Business purchases on the other hand typically require a large number of decision makers, so it becomes very important to create a clear and comprehensive procurement policy that sets forth the framework for corporate purchases
Choosing a store that supplies a TV is relatively low risk, unless a consumer decides to order it from an unknown website. Conversely, company purchases are larger and the suppliers may be less known, so the risks are greater. For this reason, a good procurement policy not only guides who can make purchases, but also from whom. Unfortunately, many companies’ procurement practices are like the Wild West because maverick buying is the norm. But this can be corrected by fixing the procurement policy. And once that’s done, things become so much easier, more visible and controllable.
Approving Purchases Once
When the TV purchased online is delivered to the family a few days after the purchase, it's typically already been paid for and there is no need to worry about an invoice. Even if the family purchased the item on credit, payment is typically straightforward and the new TV already sits in the living room ready to be used.
Similarly, in the corporate world, the decision about an acquisition is made before receiving the actual goods – often long in advance. However, this is where the similarities end. Businesses spend an unnecessarily large amount of time and resources to review and approve invoices. Taking a step back, it’s worth considering where in the process the actual decision and control belongs. For example, when it comes to purchase orders and contracts, the purchase decisions have already been made by the authorized decision-makers in the company. Because there is no need to approve the same purchase twice, these invoices should be automatically processed, and that’s just what modern invoice automation solutions can do.
Strategies for Optimizing Your Processes with Existing Tools and Systems
A best-in-class modern invoice automation solution that complements the existing ERP of an organization can do a lot more than just automatically process invoices based on POs or contracts.
Because the purchase-to-pay process cuts across the entire organization, optimizing and automating it benefits all employees and often brings with it- considerable savings.
The following five tips will help you do just that and maximize the potential of existing and best-in-class tools:
- Establish an effective procurement policy. A clearly defined procurement policy is the basis for a smooth purchase-to-pay process. Who is allowed to make purchasing decisions and from which vendors? Then, build in rules to enforce these policies.
- Fix broken any broken processes. Before you automate anything, make sure your AP process is sound. Otherwise, you’ll just create problems faster.
- Automate as much as you can. Just as it makes sense to automatically process invoices that have already been approved, you can find other ways to expedite invoice handling through automation. By letting the system handle as much as possible, you can free up employees’ time so they can work on more productive tasks.
- Use the full potential of available tools. Evaluate current systems and their role in the purchase-to-pay process. Consider best-in-class AP systems to enable the highest level of automation and make employees’ work easier and more efficient.
- Focus on change management and process discipline. Acquiring a solution only solves part of the problem; you need the solution to be adopted across the organization in order for it to deliver benefits. Implement change management practices to ensure adoption and effective use of the solution. Process discipline is key, but, once your colleagues experience the ease of use that modern AP automation provides, they will appreciate how easy it makes their jobs and will want to continue using it.