Digital Transformation of the Purchase to Pay Process is easier than you think

Mar 28 2019

84% of procurement organizations believe that digital transformation will fundamentally change the way their services are delivered over the next three to five years. Yet only 32% have developed a strategy for getting there.”


2017 Key Issues Study, The Hackett Group

It has long been the case that when it comes to purchasing, as consumers we often experience far better processes and workflows than businesses do. You would think it would the other away around - given the amount of money invested in IT systems and finance departments - but the fact remains, commercial purchasing is far more cumbersome and complicated than it is for private individuals.

In business-to-business scenarios, the purchasing process is more complex. Decision making groups include members from technical, commercial, financial and operational departments, depending on the type of purchase. Often, the person selecting a product may not have authorisation to actually purchase it, or may not have responsibility for making the final purchasing decision. A large capital purchase, for example, normally requires authorisation at senior management or even board level.

Even so – does it really need to be that difficult?

It is not as if we haven’t tried to use digital technology to help us with the ‘Purchase to Pay’ process. We started by scanning our invoices, sending emails to the relevant people to approve them - and we may even have found a solution to send orders electronically to the supplier. We may also be able to import the product catalogues from our suppliers to help us select what to buy and from which vendor.

Then comes the fun and games of placing the order in the ERP system. On a good day it can be done without needing to contact IT, but typically also without knowing if the goods are in stock or when they could be delivered. If you’re lucky, you will receive an order confirmation - but not for sure. As for being notified when the goods arrive, you might get an email from the reception desk, if they’re not too busy.

But what if it was different?

Compare this to the process of purchasing something as a private customer. Most of us would not consider purchasing from a supplier if the items are not in stock or if the delivery time is unacceptable – at least not before checking alternative options. When the purchase is completed, all confirmations and relevant information would be on a ‘My Account’ page in the web shop and we will be kept informed via email or SMS, according to our preference, about the progress of the order until the goods are received.

In the business world a purchase order is normally required to initiate the order process, but so often when the invoice arrives no purchase order can be found to link this invoice to. The inefficiency begins here, and their impact is felt across the entire supply chain on a daily basis.  Many of our customers reported a PO to Invoice match rate of between 30% and 60%, figures which generate considerable manual processing and wasted hours for the accounts payable team.

Benefits of P2P transformation

That is why transforming cumbersome procurement processes into seamless digital workflows is at the heart of every businesses’ drive for improved operational efficiencies. In a short time frame, digitalisation can reduce errors, free up human resource to focus on more complex or strategic tasks, speed up essential operations and unify back office processes. Little wonder, then, that digital transformation is a key objective in many organisations.

Nevertheless, such transformation takes time, requiring both financial and human resource investment. As a result, many businesses continue to operate with substantial paper-based processes, especially in purchase to pay (P2P).

It is well known that financial reporting, cash and treasury, corporate accounting and order fulfilment are the business processes most vulnerable to fraud, time wasting and errors. When invoice payments or employee expenses requests are reviewed via a series of manual approvals, for example, there are countless opportunities for basic human error – or more malicious activity intended to commit fraud. 

Then, there’s the impact on operational efficiency to consider. The more time accounts staff need to devote to managing the purchase to pay process manually, the less time they have to dedicate to more strategic financial management. In an increasingly competitive business landscape – and one in which talented staff will move elsewhere if their work feels mundane and repetitive – it is not a strategy that can work for the long-term.

 

A customer example – Teknos Group Oy

The Finnish company Teknos has recently addressed these issues. Teknos adheres to a policy whereby all supplier invoices must be posted and accounted for within just a few days of month end. They use the ERP system from IFS and require all information to be ready for management reporting from the ERP system at the start of the month. Traditionally, this has been a manual, time-consuming task for the entire finance department, so they were keen to explore the potential to implement a more digital process that freed-up time and made the process faster and easier.

Using IFS Applications and DinERP’s Supplier Invoice and ApprovIT solution, they have realised significant time savings in their approval processes and have far greater control over their supplier invoices, with more accurate financial data available to management more quickly than ever before. 

DinERP offer standardised products that can be easily configured to the specific needs of any business – and can even be customised if necessary and beneficial. The upside for Teknos was that they were able to implement the solution just 4 months after making initial contact and saw the benefits immediately. Focusing on the end-user ensured quick adoption by the key stakeholders and the relevant employees without complex training, so this transformation was fast and painless. Teknos now have a happier work force, enhanced management information and a lower cost per invoice processed.

The next step would be to implement a Business to Business supplier portal which will enable their suppliers to self-serve the information they need, which will improve information flow between Teknos and their suppliers whilst also reducing the time Tekno's employees spend handling supplier calls and updating supplier information in the ERP system.

Kirsi Kreander, Group ERP Solution Manager at Teknos has been able to transform the P2P process at Teknos and has delivered wide-ranging and far-reaching benefits throughout the organisation.

On April 10th Kirsi will join DinERP at the Scandinavian IFS Customer Day at the Clarion Arlanda Hotel in Stockholm, to show how small changes can make a huge difference when it comes to Digital Transformation.

Join Kirsi and Roger Ugedal from DinERP to find out exactly how it is done: Sign up for the event here.

Send an email to Roger Ugedal, Regional Manager at DinERP (press the link) or call on +47 98 23 48 30 and to discuss how you can drive digital transformation within your financial processes, using modern tools from DinERP.