30 Jul 2012 The purchase to pay burning platform

There are two significant business solutions that are gaining traction globally: AP automation solutions such as e-invoicing and supply chain finance and businesses that overlook these opportunities could pay a very high price.

For years there has been more hype than reality about e-invoicing but the reality has now taken hold. E-invoicing is mandated in much of Latin America and in Europe, following the lead by Denmark, the rest of the Nordic countries are following suit. Austria is the latest European country to require all suppliers to public sector to send invoices electronically and the network providers continue to drop their transaction fees (many now offer free use of their network) and as governments see the importance of e-invoicing as a means better to control the collection of VAT, the use of electronic invoicing is likely to become the norm over the next few years.

e-invoicing and supply chain finance synergy

Supply chain finance and e-invoicing are not unconnected. The biggest e-invoice networks in the world all now have credible SCF offerings aiming to cash in on the synergy of AP automation and financial supply chain management. The combination of constrained liquidity and virtually zero return on cash for business has created a kind of perfect storm that has created win-win opportunities in many industries.

But there is a big challenge facing those organisations that are looking to take their share of the spoils of these opportunities. In order to take discounts for early payment for example, businesses need to be able to pay early. And to automate AP processes, it’s not just the AP processes that need to be robust. Purchasing processes need to be slick to allow automated matches and efficient workflows are required to manage exceptions. Organization-wide purchase to pay process need to be in place and failure to support such processes disallows a business from taking advantage of the reduced cost of doing business that AP automation and SCF offer.

There’s a burning platform for these ill-equipped businesses. The longer they remain out of the game, the further their cost base falls behind their competitors. But not only will their cost fail to fall, as more of their customers and suppliers place demands to accommodate new financial supply chain management requirements, so they will be forced into developing multiple, reactive, short term solutions. Companies need to make a strategic response. Without an end to end purchase to pay strategy that accommodates automation of AP, automation of purchasing processes and financial supply chain management, their business processes will price them out of the game.

Pete Loughlin can be found on twitter @peteloughlin