Increasing profitability – improving supplier relationships, eliminating inefficiencies and maximising savings
October 2017 | EXPERT BRIEFING | BOARDROOM INTELLIGENCE
Organisations are looking for every opportunity they can to reduce costs, improve cash flow and increase overall profitability. As the business landscape continues to evolve, this can be a difficult undertaking. Improving supplier interaction is one simple way companies can eliminate inefficiencies, capture available discounts and drive greater profitability without increasing risk.
There are several ways that companies can reduce the various friction points that exist between its procurement and accounts payables departments and its suppliers. Some of the most effective strategies are noted below.
Improve the quality of supplier information
Inaccurate supplier master data is one of the most common problems in the ‘procure to pay’ process. Often, enterprise systems contain multiple records for the same supplier or invoices arrive with incorrect or incomplete supplier information. Therefore, it can take time for the accounts payable department to reconcile an invoice against the supplier master data in enterprise systems. By putting a supplier information management strategy in place, companies can increase the quality of supplier information and reduce the number of exceptions in the ‘procure to pay’ process. While the ultimate responsibility for supplier data lies with the procurement team, the accounts payable team can be an important part of this process by putting procedures in place to quickly identify and correct supplier information on invoices. If the accounts payable team automates this process using intelligent workflows and robotics, it can improve the quality of supplier information and can eliminate the supplier-related exceptions that can cause payment delays that frustrate suppliers.
Enable supplier self-service
The ‘procure to pay’ process requires constant collaboration between a company and its suppliers. Enabling online collaboration will significantly improve the speed and accuracy of supplier interactions, resulting in faster invoice processing and faster payments. Even in industries with many small suppliers that send paper-based invoices, it is possible to provide suppliers with a website or portal where they can check the status of invoices. Just this simple change will reduce the number of inquiries the accounts payable department receives about supplier invoices, which, in turn, will enable the team to spend more time ensuring the invoices are actually getting processed and paid.
Adding more supplier self-service capabilities can provide additional benefits. For example, a comprehensive e-invoicing submission process is an efficient and cost-effective way of eliminating time-consuming errors and supplier inquiries. E-invoicing ensures the accuracy and consistency of data and documents and eliminates the manual touch points that slow down invoice processing with automated invoice capture. The system should be simple and cost-free to the supplier to encourage adoption by even smaller vendors. Start by requiring all suppliers to send invoices by email. It may be necessary to integrate scanning and optical character recognition (OCR) to streamline the processing of these invoices, but it gets suppliers familiar with a more electronic invoicing process. The ultimate goal should be that all suppliers, regardless of size, submit their invoices electronically, through a standardised online process.
A supplier portal provides a more feature-rich self-service environment for suppliers, and creates more opportunities to gain efficiencies. A portal will not only enable suppliers to assess invoice status but will provide them with a wealth of self-service capabilities and allows them to easily ‘flip’ purchase orders into invoices. It also provides an effective channel for two-way communications with suppliers and partners so everyone is aware of what is happening from the moment an invoice is received until the moment it is paid. Suppliers have real-time visibility into their receivables and the accounts payable team can quickly manage disputes and inquiries and provide updates to suppliers directly through the portal, instead of over multiple communication channels, for example, phone, email and more.
Increasing ‘procure to pay’ automation with workflows and robotics
Manual touch points in the ‘procure to pay’ process slow down processing and can introduce errors which then delay payments to suppliers. While many companies have introduced automated workflows to handle invoice approvals and exception handling, robotic process automation (RPA) takes the level of automation even further. RPA can be used to completely automate, without any human intervention, any task that can be done by applying simple business rules and data validation. Companies should carefully evaluate the ‘procure to pay’ processes and identify areas where RPA can be used in place of workflows or manual tasks. For example, RPA can be used to automatically post invoices that have a three way match (purchase order, invoice and goods receipt). When RPA is combined with intelligent workflows, the ‘procure to pay’ process becomes faster and more efficient. It also ensures that the highly skilled procurement and accounts payable staff have more time to work on more complex tasks that require more intervention and that, in turn, will maximise savings for the company.
What are the benefits to buyers?
Simply put, companies save money on each invoice paid early. Holding onto your money for as long as possible is no longer a viable strategy because of the near-zero interest rate environment, and capturing available discounts provides companies with a proactive way to generate the highest return possible with no risks associated.
Additionally, buyers benefit from stronger supplier relationships by providing suppliers with quick, easy payments. Buyers can leverage these strong relationships to negotiate for future discounts, faster delivery times and other advantages which will improve the company’s competitive position.
What are the benefits to suppliers?
When suppliers are paid earlier on approved invoices, they have quicker access to funds. All suppliers appreciate this, but it is particularly advantageous for smaller suppliers that often have no choice but to finance their receivables or turn to expensive short-term funding options while they wait for payment from buyers.
Real-time access to information is also valuable for suppliers of all sizes. With portals, suppliers have access to real-time information on invoice and payment status, eliminating the need to call the buyer. Having this information on demand gives suppliers more peace of mind and saves the supplier time and effort chasing down payments.
Finding ways to reduce the friction points that can exist in the ‘procure to pay’ process between suppliers and the procurement and accounts payable team will save time and effort for both buyers and suppliers. Three ways to do this are to improve the quality of supplier information, introduce supplier self-service capabilities and increase the level of process automation with workflows and robotics. By putting these strategies in place, companies will not only be able to increase efficiencies and maximise savings, they will also be able to strengthen supplier relationships which will pay dividends for years to come.
Brian Shannon is the chief strategy officer at Dolphin. He can be contacted by email: firstname.lastname@example.org.
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