European businesses have been pursuing paperless invoicing for years to increase efficiencies, reduce errors as well as the data that must be interpreted and re-keyed. And yet the growth remains somewhat constrained as countries struggle with the implementation and nuances of compliance.
There’s no question of the potential benefit of paperless invoices for business, but how it’s applied is vital to achieving maximum savings.
Reverse Purchase-to-Pay
I like to think of it as a “reverse” Purchase to Pay program that basically creates a closed loop process by reducing the variation upstream with your suppliers.
How do you accomplish this? By collaborating with your varied suppliers to create a streamlined, standardized automated system for everyone – one that places a priority on matching orders to a goods receipt.
To understand it better I’ll use an example. If you ordered five widgets at $10 from your supplier and he sends you an invoice for six widgets for $12, in an automated system that hasn’t taken this reverse purchase-to-pay approach, it’s not going to match and won’t load Thus, it becomes an exception and the payment cycle slows down.
Now imagine you’re a large company who processes 50,000 invoices annually. If only 3% are in error, that’s 1,500 incorrect invoices. And that is the problem. Computers can’t resolve issue arising from an invoice in error. Only people can do that. If it takes 20 minutes to resolve one issue, that’s almost 62 days worth of time during the year just to resolve mistakes.
What happens if you can eliminate or even reduce that number to 1%? Then the impact to your business is 20 days or a savings of 42 days.
Collaboration is the Key
That’s been the one distinct feature I’ve noticed when it comes to automating invoice and P.O. systems. Those companies who collaborate and work to create standardized easy-to-use process with their suppliers take advantage of the full suite of e-invoicing services and create the closed loop process that virtually eliminates the exceptions and errors.
And it works on both ends too. Suppliers can monitor the progression of POs and invoices throughout the purchase-to-pay process, eliminating uncertainty with respect to status and required actions on their part. And to them, the most important goal: They can receive payments with even greater speed and reliability — improving trust and enhancing valued relationships.
The company that employs a Reverse Purchase to Pay strategy has a much better chance of reducing the administrative processing, time and expense, as well as minimizing inquiries, errors and cycle times, the need for human intervention, most notably for the matching and reconciliation of POs, and invoices. This is turn allows personnel to focus exclusively on the highest-priority, business-critical tasks.
I would say that’s a win-win for everyone.
Tags: Purchase to Pay