Purchase to pay

Benefits of purchase-to-pay automation

• Reduce operational costs

  Automating procurement (for indirect spend) and invoice processing (for both direct and indirect spend) can reduce the operational costs of these processes. Automation of the p2p process often starts with accounts payable. The process of manually receiving invoices, coding them, validating them, getting them approved by budget holders and submitting them for payment can be replaced by an automated process. In this process, invoices automatically reach budget holders, who can approve (or reject) invoices from a laptop or mobile phone, after which the invoice is submitted for payment. If procurement is also standardized and data-driven, approval can even be automatic. After all, there is no need to manually approve the invoice if it matches an order or contract that has been approved.

• Improve agreements with suppliers

  Negotiate lower purchase prices

  When visibility, and therefore control, of order and invoice flows is gained, a critical look can be taken at how these flows relate to suppliers. For direct spend this will be clear, but for the long-tail to suppliers where stuff for the maintenance of company buildings, office supplies and marketing materials are bought, the challenge is greater. When orders and invoices are managed systematically it does become possible. The supplier base can be rationalized and pricing and delivery arrangements can be made with preferred suppliers.

  Take advantage of early payment discount

  By automating invoice receipt and invoice processing, turnaround time is reduced and a supplier can be paid more quickly. This, of course, calls for a reward. A large proportion of companies in the Netherlands suffer from invoices that are paid late. To encourage buyers to pay earlier, many suppliers give discounts for early payment of invoices. A payment discount of 1 percent is not unusual; 2 percent is also common. This may not seem like much, but the savings can add up nicely. Forrester research shows that companies with an annual spend of 300 million euros over a three-year period miss out on an average of about 400,000 euros in payment discounts. That makes a business case for purchase-to-pay automation a lot stronger.

• Prevent invoice fraud

  A PDF or XML invoice passes through several email servers of which only about 50% are encrypted. On every other server, criminals can intercept invoices, modify them with their own bank account numbers and forward them. Through address spoofing, it is even possible to send an email on behalf of someone else. Criminals can also sling a phantom invoice into the market where the value is only a few hundred euros so that there is little manual check with recipients and payment is usually automatic. Companies and institutions can prevent this with automated control mechanisms on XML invoices (or paper or PDF invoices converted to XML). The content of an XML invoice is then compared with the supplier data as known to the customer. If the combination of name, VAT number and IBAN on the invoice does not match the data in the system, an invoice sent by criminals with a modified IBAN will automatically fall out.

• Strengthen CSR position

  By paying suppliers on time and thwarting fraudsters, you are already demonstrating good behavior. And that data-driven working reduces the use of paper is, of course, obvious. But data-driven working also provides transparency and traceability of work.