Digital transformation from
purchase to pay

Digitization in purchase to pay

Digital transformation in business is often explained in terms of necessary cost savings and gaining a competitive advantage. But in fact, it is a reflection of the "digital revolution," which took off from the Great World Wars in the last century. 

OCR software 

The digital revolution hit business in the 1980s with the advent of computers and the Internet. Accounts payable was introduced to accounting systems, to e-mail and to Object Character Recognition (OCR) software that converts scanned paper invoices and pdf bills into a data file. Information transformed from analog form to digital form. Communicating, clocking in, storing and retrieving invoice information became much more efficient with digitization.

The Internet revolutionized corporate procurement with global sourcing, e-procurement platforms, visibility into the supply chain. This meant, among other things, better selection and stronger bargaining power.

An employee requests an order in a central purchasing system, after which the request is automatically submitted to budget holder(s) for approval. Upon approval, through the central purchasing system, the employee automatically enters a preferred supplier 's web shop, where the product is ordered and the order is automatically formalized in the central purchasing system as PO.  

• More about procurement automation 

The supplier sends the product to the specified address and the invoice to the accounts payable department. The invoice automatically enters the invoice processing system and is automatically coded and approved based on the purchase order and receipt, if applicable.

The invoice is sent in a certain form and standard by the supplier, but converted by an e-invoicing network to a form and standard that is automatically encoded, matched with -among other things- the PO, and submitted for payment. 

• Read more about automation of invoice processing 

Automation and productivity

Of course technology can get in the way of itself, but when it runs, it runs full-continuous at high speed and also cheaper than manual work. People work about 8 hours in a day, 5 days a week, with varying motivation and fatigue.  

The Forrester Consulting Group outlined the Total Economic Impact of purchase-to-pay automation at 6 corporates and concluded: Processing 160,000 incoming invoices was reduced from 15 FTE to 3 FTE.

The biggest added value of the digital transformation of the purchase to pay function, lies in getting the (indirect) expenses under management. This reduces ordering costs and enables automatic approval of incoming invoices. You can download the full report here:

• Download the forrester report 

Automation and standardization

All in common, then? Not exactly. Despite the fact that all the technology is there for the taking, a recent survey by agency DirectResearch, shows that digital transformation is going by fits and starts.

The firm surveyed 200 finance and procurement professionals and concluded that only 1% of corporate Netherlands, receive and process all invoices fully automatically. 

If the technology is already there, where does it go wrong? In our experience, data management, both at the external and internal chain level, is the biggest stumbling block. And in its wake, there are the interests and constraints of the various stakeholders in the chain.

External chain integration

Enterprises easily have thousands of customers and suppliers. And each of them also has thousands of customers and suppliers. And they work partly with similar standards and partly with different standards.

Ordering by mail or receiving a PDF invoice, then, offers a solution. After all, mail and PDF we can all get along with.

In the field of purchasing, we see in practice the use of a uniform, central order form, through which all orders must pass. This already offers many advantages, especially when the order form is linked to a supplier database, but still offers much room for improvement. 

In the field of invoice processing, there are many initiatives to move beyond the clutter of standards. Instead of working toward one, global standard, standards are being translated to the recipient's desired standard.

Internal chain integration

Internal data management is a challenge. Especially in an international playing field with an acquisition-based growth strategy, the data management issue looms immediately.

Who is responsible for data management or is responsibility shared? Is there a central single point of truth where data quality is assured, or are different systems linked together using business rules? And is such linkage scalable enough to hook up other systems in the future? 

In practice, automation projects, mainly issues of data management and process optimization.

Automation and process optimization

Error automation

In practice, automation by no means always has the intended effect. And above all, we spend a lot of time on the automation software itself. 

The crucial mistake is to think that a piece of software by itself is the answer. With the transition to cloud SaaS solutions, a subscription is so connected. But if the software doesn't mesh well with existing processes and data structures, automation won't deliver the desired returns. 

You can't go for a solution if you don't really know the problem. In fact, you are then going to automate existing errors. 

Process optimization with lean agile

Automation should be the impetus to first take a critical look at one's own processes. Before a process is automated, the playing field must be mapped. Which processes affect the process being targeted for automation? And what do we expect for the future? 

Once this is clear, we can optimize the process. In a way that is in line with automation. This optimization is also likely to have implications for other processes. These should be included for the optimization.

Once processes are optimized, then the intended process for automation can be automated. 

•  Read more about process optimization  

Automation and control

Ask finance executives about their biggest wish in the purchase-to-pay area, and chances are they will express that they want much more control. 

An additional benefit of process automation is the transparency of processes. The benefit of transparency is twofold.

On the one hand, it provides visibility into data flows and these data flows are also logged. Working in compliance with regulations or labels benefits enormously from this.

• Read more about compliance in purchase to pay 

Having visibility into data flows also supports reporting and decision-making related to spend. This can lead to better control over cash flow and reduce financial risks to the company.

Choice of purchase-to-pay technology

Automation solutions for purchase-to-pay were developed in the 1990s as an extension of the purchasing modules of older ERP and accounting systems. Early solutions were mostly locally installed, with few of the "ease-of-use" features used today.

Purchase to pay systems are integrated solutions that particularly support "transactional" or "operational" purchasing (long tail spend), but take care of all invoice processing.

SaaS revenue has surpassed on-premises licensing and maintenance revenue. Buyers are embracing the cloud because it offers faster deployment, faster vendor onboarding, better vendor collaboration and faster access to innovations and enhancements.

What does ICreative do

We are purchase-to-pay partner for organizations, institutions and governments. We feel particularly at home in large and complex administrations, such as the use of multiple ERP systems.

Exchange views on purchase to pay? 

  or stay informed by email