The saying goes that the only certainties in life are death and taxes. And, the Coronavirus disease (COVID-19) pandemic has showed the bills (invoices) never stop coming either.
For years, companies have been digitizing finance operations. These transformative efforts take time though and can still depend on how the companies they do business with settle their invoices.
Despite even the best digital finance efforts, the reality is 80% of businesses still use paper checks to pay invoices. Well, do the bills stop coming when companies are forced to move 10-plus-person payables teams to remote work? No. They pile up, and if they’re lucky, one person is able to drive to the office and physically pick them up once a week.
Fortunately, there’s been a heightened sense of camaraderie and leniency amongst partners in the business world this year by recognizing the backlog of invoices and cash flow concerns. In fact, the industry has seen a historic percentage of contracts renegotiated and payment terms extended since March. As businesses move forward and reopen, they grapple with ever-changing local and federal safety guidelines. This means getting their hands on personal protective equipment (PPE).
The global shortage of PPE has exposed newly identified constraints within supply chains. For many companies, PPE is considered indirect spend, meaning they don’t have strong supply chain relationships or strategies to procure these products. A few organizations have gotten creative with bartering PPE for supplies or services they need to stay running, but most are looking to establish new supplier relationships and leverage a group purchasing organization (GPO).
This is why most PPE moves in bulk – with companies striking when the opportunity arises. For example, one retirement community received board approval to spend $1 million on a bulk PPE purchase. Leveraging these types of cash reserves is not the norm; companies are finding ways to make the investments now.
Organizations experience supply outages because most disaster recovery plans don’t account for global catastrophes – they’re typically focused on regional issues or acts of god. The conversations are already happening and will continue at the executive level, but expect a new element of disaster recovery planning tied to localization and self-sufficiency. Organizations are now cognizant of how quickly production can be shut down on a global scale and why there is a need to find ways to keep individual locations operational.
For the teams in charge of digital finance transformations, the tune evolved this year from focusing purely on ROI and efficiency gains to now understanding the bigger digital finance transformation picture, including cost reduction. The conversations have transitioned from “Here is how you can reduce the price of your invoice from $12 to $2” to “Here’s how you’ll be able to automate payables department tasks and allow your teams to take on more strategic roles.”
With a heightened focus on both top and bottom lines, the COVID-19 pandemic has made the digital finance conversation a top-line agenda item with the past six months exposing the bottleneck with paper-based invoices and highlighting opportunities for fraud, time lost and payment term issues. It’s 2020, regardless of COVID-19, the fact that some companies are still physically managing thousands of invoices per month sent via snail mail is a tangible problem that warrants a discussion at the executive level.