Purchase to Pay Automation Solutions the key benefits

Cost Reduction

How many staff work in your finance department? How many in Accounts Payable? For many mid-sized businesses, with a turnover of £100m or more, it’s quite common to see four A/P clerks, and with salaries averaging £24,000, any accountant will recognise that the true cost will be four times higher. The level of automation through deployment of a Purchase to Pay solution delivers a 75% reduction and, with a Return on Investment measured in mere weeks, it’s no surprise that the finance community is transitioning fast.

From printing, copying, storage, archiving and more, the costs of not modernising are like icebergs: your true overheads are hidden from sight. Consider your software licenses, workstations, IT support, HR support, pensions, and overall office real estate. Then factor in the costs associated with document storage, filing, retrieval, management, errors, and the inevitable invoice fraud you hadn’t realised was happening.

With 2021, we’re seeing a continuation of drive to create leaner, less administrative heavy, enterprises. It’s no wonder, given that to offset £1,000 in overheads can demand five times as much in sales to compensate.

Fraud Prevention

The pandemic has proven to be a boon for fraudsters: it’s far easier to submit a duplicate or entirely fake invoice when you know accounts departments are stretched to breaking point. Invoice fraud is a plague, to which every business is likely to fall victim in any three-year period. The average scam nets almost £2,000 per instance, but remember Dell Computers who fell victim to an internal scam costing more than £1m, conducted over the course of several years.

How easy is invoice fraud? Strangely, with the shift to digital invoices invoice fraud is child’s play. By looking at your firm’s website, the fraudster can see your highest profile clients and create a convincing fake in minutes. Intercepted emails – yes, it happens a lot – give criminal gangs the template to edit for perfect frauds: edit the PDF to replace the payment details, and submit a stream of minor invoices. Invariably, they’ll be paid.

A Purchase to Pay software solution overcomes the threat with absolute reliability. These systems work by querying stored payment details and identifying variances, while simultaneously checking for duplicate invoices. With automated checks, your staff are able to focus on core tasks, and one more aspect of risk has been eliminated.

When considering fraud, let’s not overlook the cumulative nature of petty fraud through the abuse of employee expense reimbursements and the more sinister use of dishonest suppliers. The beauty of Purchase to Pay solutions is that they can force almost all expenditure to pass through a formal purchase order requisition system, again speeding up expense management while deterring fake claims.

As to dishonest suppliers, remember that these include those suppliers who offer kickbacks to a complicit liaison within your enterprise. Here, the Purchase to Pay solution can force only qualified suppliers to be utilised, while also providing the cross-checking utilities to highlight items at a line level which are outside of standard deviation.

Business Continuity

If there’s one defining feature of finance departments, from the SME to corporate headquarters, it must certainly be the sheer volume of paper. Things have progressed from 30cm stacks of green bar computer paper (remember that?), but lever arch files remain ubiquitous.

Bulky, unsightly, and consuming absurdly expensive office real estate, such filing systems are expensive sacred cows: they create nothing but risk, and the multiple copies of documents they contain all had to be printed or copied at your expense. Document retrieval times are slow, too, and the risk of misplaced documents is all too familiar.

However, the real risks of paper-based storage systems are that they are immovable and subject to loss. From a business continuity perspective, you should be seeking flexibility of data access, so that all staff can access the documents and data wherever the user is based: and nothing has exemplified this so well as the coronavirus induced lockdowns.

In terms of risk of loss, your paper files (and the onsite of off-site storage of your archives) are a clear liability, and business continuity planning centres on reducing inherent liabilities across your business. Such records are easily misplaced or destroyed – it’s all too common – and while fire and flood are real factors, it’s usually human error which creates the gaping holes in your critical company records demanded by HMRC: either your storage contractor destroys them in error, or your staff accidentally commit them for disposal.

Your modern digitally driven Purchase to Pay solution will preserve all data in digital form, backed up in the Cloud. You save money on document storage, printing, filing, office space, archive management, document retrieval and more.

Equally, a purchase to pay system provides secure access for all authorised staff, with granular security to ensure each employee can see only those purchase orders, invoices, or approval workflows to which they have a business need to access.

From a business continuity perspective, we want to consider liabilities in a broader context too: tightening procurement and payment process controls is essential to good financial management, and in times when there may be increased staff turnover, or fewer staff, the risk of fraud increases. As a consequence, your business continuity planning should recognise these risks in your formal Risk Register and seek to mitigate the threat. Your Purchase to Pay solution plays a central role in fraud prevention and, thus, in making your organisation stronger and less likely to become a victim.

Improved Cashflow

There are many strategies used by businesses to delay payment against invoices due. These range from denying receipt of an invoice, through to raising queries against individual line items. Both document management and Purchase to Pay solutions ensure instant access, and with the best of breed, even live access for your suppliers.

The more subtle reason as to why P2P systems improve your cashflow. Is that those staff whose roles were 90% dedicated to Accounts Payable are now freed to work on Accounts Receivable, and since getting the money into the business is the cornerstone of being a good Financial Director, this can only be a positive!

Purchasing Efficiency

The more staff, the more suppliers will be used. And with multiple suppliers, the more certain it is that you’ll be diluting your purchasing efficiency. A quality purchase to pay solution presents accepted suppliers for any category of goods, so instead of your IT department sourcing from here and there, you can concentrate your spend on a single or preferred suppliers.

The instant advantage is that you should be able negotiate a discount across the board. Let’s assume your spend is modest, and you get 5%. So now your supplier can update your P2P system with new items which match your criteria. Take it further, and show your P2P solution to them, and by highlighting how the electronic invoicing works, and how the P2P workflow can prioritise invoices for approval and payment, you can probably secure an early or prompt payment discount – typically worth 2.5%.

Following up on the efficiency theme, did you know that some systems enable you to offer staff the option to purchase items from your preferred suppliers by uploading purchase orders to fulfilment sites – such as Amazon – directly? For certain businesses, this works brilliantly as it further reduces your administrative overhead.