In many organizations, on-time payments remain mysterious in their procurement process. Although significant investments in technology implementation and process digitization, businesses find that manual processes persist due to exceptions and country-specific processes. There a few common problems that the businesses come across when transforming their procurement function. While a few of these issues are process related, and some are related to decisions made during the implementation of new technologies.
In this context, we present certain best practices that businesses can adopt in a digital procure-to-pay function.
Motivating Employees about Digitization
Digitization of transactions and information should be the top priority in the P2P transformation process. Employees should be trained on how to purchase specific goods and services, the drawbacks of paper-based transactions, and establishing governance for continuous change management.
Onboarding vendors to the digital platform is another crucial aspect of the transformation. Ensuring correct and updated vendor information on the solution, training them in digital invoicing and the use of the self-service portal are essential elements.
At last, constant governance to find problems, including goods and services received late, invoices sent to the wrong location, and late approvals are significant. Consequences should be clear for failure to comply with contract terms to motivate behavioral change.
Businesses should ensure that the vendors update their product catalogs on the solution with products mapped to categories and pre-defined rates so that requisitions can automatically be transformed to purchase orders. Enable centralized invoice visibility and control; invoices that are not uploaded to the solution should be emailed to a single e-mail address.
Implementing Electronic Payments
Configure regulatory requirements such as payment indicators and tax codes into the ERP design; gather necessary data to capture accurate and timely payments of receipts, and verify the consistent definition of on-time payments between contracts and systems. Sometimes, contracts specify payment terms based on the date of receipt of the invoice, where systems calculate the terms from invoice date. Implement early payment discounts as per the contract or dynamic discounting by the number of transactions.
Implementing an Online P2P Solution
The procurement process can use different levels of technology benefits based on the maturity of their processes and users’ adoption of digital solutions. Benefits can be achieved in the early stages by ensuring the digitization of data flowing through the process.
An online procure-to-pay solution helps in effective end-to-end reporting to drive governance, eliminate manual efforts, and control leakages. Automation and advanced analytics can be implemented once most transactions are digitized and streamlined. Advanced data analytics enables procurement managers to forecast demand with greater accuracy, negotiate better contract rates through tail spend management.
With most companies determined to achieve on-time payments today, it is a clear call for them to find and address the constant process and technology gaps that are holding the procurement process back. They should first determine their procure-to-pay maturity level before they can benefit from the upcoming technological innovations such as blockchain and artificial intelligence.