Purchase to Pay

The correct steps to take to implement holistic P2P very much depend on the starting point. An immature organisation may have to work hard simple to get to the starting line. Others may already have reached a high level of maturity, but whatever the starting point, it is worth going back to basics and beginning with a high level audit assessing your level of P2P maturity.

It doesn’t take a mathematical genius to understand the business case for some purchase to pay initiatives. Dynamic discounting - exchanging a discount in return for early payment - can give a return on capital of over 30%. Reverse factoring and other supply chain finance methods can substantially increase DPO and AP automation can reduce costs by 50%. But despite the compelling business case, most organisations remain firmly in the 20th century when it comes to purchase to pay optimisation. If the benefits are so great, why are more businesses not grasping the opportunity?

The purchasing card is a great business tool. It empowers people to make purchases without the need for a complex and often expensive purchasing process. When a low value item costs less than the cost of the purchasing process itself, it makes sense to cut through the purchase to pay red tape. But the purchasing card is beginning to show it age.  It hasn't really kept up with technological change surrounding it. The merchant fees are excessive, in a low interest rate economy the business case makes no sense and as far as reporting goes, purchasing cards have been trumped by electronic invoicing. Is it the end of the road for the purchasing card?

The relaxation in the regulations on electronic invoicing in Europe will allow more organizations to take advantage of the lower business costs and greater control and efficiency that they allow but – as Ernst and Young point out in an insightful piece recently – a relaxation in the rules doesn’t mean than “anything goes”. Indeed, care needs to be taken to ensure that e-invoicing systems, whether managed in-house or out sourced, need to be thoroughly audited to ensure that they comply with the regulations.

The spotlight has fallen on the paper invoice as an entirely unnecessary source of green house gases in recent years and the rapid evolution of the regulations in many parts of the world is removing the barriers to change to electronic invoicing. But the paper invoice is only part of the story and it seems that the purchase to pay function is one of the worst culprits when it comes to the unnecessary use of paper.

Enterprise purchase-to-pay specialist Palette has extended its partnership with ReadSoft, a world leader in document process automation, to provide advanced, closely-integrated solutions to customers internationally. The partnership will integrate PaletteArena, a complete purchase-to-payment suite, with ReadSoft’s advanced document capture solutions.  This will enable users to achieve rapid, significant cost savings and efficiency gains by automating their supplier invoice and sales order processing, from scanning through to approval and archiving.