The procurement process is one of the most crucial parts of a business. Efficient procure-to-pay (P2P) is essential to keep up with the competition, as well as to ensure you have a good level of working capital on hand, but it’s an area which many companies could do with some improvement.
The chief area in which this improvement can be most keenly felt is speed. The slower your P2P process is, the less working capital your company is likely to be working with. Global industries are still recovering from the lowest working capital performance on record in 2016, and faster P2P systems are helping them to bounce back from this.
With automation becoming more accessible as time goes on, speeding up P2P processes has never been easier. While doing so will require some investment, it will be more than worth it in the long run as your business saves time and money. Here are just a few of the reasons you should be looking into upgrading your P2P system:
The gulf between best and worst performers is huge
If you’re wondering how much of a difference something like automation can make, then there’s no exact answer. Different studies have yielded different results, but overall it’s clear that implementing a more efficient P2P system can have a huge impact on time and money saved.
For example, one study found that invoice approvals average 45 days when there’s no automation, but this drops to just five days when an invoice management solution is put into play. This makes early payment discounts more likely, which just 18% of businesses regularly achieve.
The Open Standards Benchmarking established by the American Productivity and Quality Centre, on the other hand, ranked companies by how far along the P2P automation process they were. The organization found that top-performing companies average a maximum of five hours to place a purchase order, while the low performers averaged around two days. It’s clear that automation can vastly improve P2P.
Small changes can have big impacts
It might seem like changing a P2P system would be an enormous task, but often a few changes can make huge differences. ISS group estimates most organizations can increase their P2P efficiency by between 20% and 30%, and this can reduce transactional costs by as much as 50%.
This kind of gain is common when businesses upgrade their procurement processes. Boston Consulting Group, for example, estimates that implementing digital P2P solutions can reduce procurement time by 80% for simple items and 40% for complex ones, and this in turn can increase cost savings by as much as 3%.
IBM implemented a robotic process automation system to deal with the number of blocked invoices it was dealing with, taking up a significant amount of time. By doing so, it reduced the number of invoices needing manual attention to just 10%, with the time taken to resolve a blockage falling from an average of 32 minutes to just 90 seconds.
Procurement is vulnerable
The automation of P2P processes in order to speed them up has a few extra benefits in addition to providing your company with extra time and money. It also helps to close a serious security gap that many firms have, as the procurement process is one of the most vulnerable aspects of business to fraud.
This isn’t just speculation; a survey from the Oracle Applications User Group found that procurement was the business process most vulnerable to fraud, waste and errors. Potential fraudulent activities include employees submitting fictitious or erroneous invoices, which the Association of Certified Fraud Examiners found was responsible for 24.9% of fraud cases with a median loss to businesses of $100,000.
Automation helps reduce risk by cutting out the middle man, reducing the number of employees who have contact with invoices or purchase orders. This not only makes fraud less likely, but also makes it much easier to track down the perpetrator if such an activity is found to have occurred.