- The Emerging Company – Many companies begin working toward purchase-to-pay improvement by automating processes. For example, by automating the invoicing process they can reduce the inefficiencies of manual processing, reduce paper and gain greater visibility into their invoices—the actual spend and cash commitments the company has made. Automation enables companies to also improve supplier relationships, and gain greater control over their payment commitments.
- The Aligned Company – At this stage Procurement and Finance become more closely aligned. By working closely together, Finance is able to establish robust compliance procedures that reduce maverick spending by up to 40% and Procurement begins to enable and integrate its supply base via direct goods requisitioning systems, ensuring that purchase-to-pay accountability is enforced at the point of need.
- The Networked Company – The Networked Company has progressed toward implementing a fully integrated model that brings together Finance, Procurement and external suppliers. This approach enables strategic sourcing and management of the full contract lifecycle. Using open networks to connect buyers and sellers of all sizes is a win-win proposition. Procurement benefits from collaboration by having improved supplier relationships, seamless cash flow and an enhanced ability to forecast. Suppliers can reduce costs, obtain greater process visibility and potentially collect payment faster.
- The Agile Company – This company can operate with the greatest financial and organizational agility. It has fully optimized processing costs throughout the purchase-to-pay cycle and has reduced the cash-to-cash flow. It has full cash flow visibility, allowing the company to lower the cost of capital and optimize its working capital positions. Finance and Procurement work collaboratively to implement innovative payment strategies to maximize discounts, while optimizing DPO (days payable outstanding) and DSO (days sales outstanding) performance.
By focusing on continuous improvement throughout the purchase-to-pay process, companies are able to quickly see significant results throughout their organization. While the ultimate goal is fully agile operations that provide maximum visibility, control and collaboration across the financial value chain, both internally and externally—it’s important to put a stake in the ground and start somewhere. Benefits will be realized in all stages of improvement as companies work to achieve stronger supplier relationships, and tightly align Finance with Procurement to work toward common business goals. They will be able to more effectively manage spend, cash flow and working capital—the hallmarks of solid financial operations that create strong competitive advantage.
Bob Cohen is Vice President, North America for Basware, a provider of software solutions that automate the purchase-to-pay process for enterprises around the world. For more information, contact email@example.com, or call 203-487-7900.