As the world is going digital at a fast pace, businesses are trying to keep up with the trends by implementing the latest technologies in their processes. These changes are now necessary for a business to operate in a highly competitive market.
Only those who are able to cut down costs, increase savings and cope up with the dynamic market needs efficiently can survive in the ever-changing landscape.
This is causing a shift in how tasks are carried out, particularly in procurement and finance, where processes are repetitive, time-consuming, and tedious.
In order to achieve the best results, the two departments must work together and align their goals. Organizations that allow departments to collaborate as partners gain a competitive advantage and frequently see improved business performance.
If we talk about connecting these two functions, procure-to-pay software, in particular, is in high demand as it provides the efficiency and cost control that every company needs in today's constrained economy.
What is P2P software?
The process of integrating purchasing and accounts payable systems to increase efficiencies is known as procure-to-pay. At its most basic level, this involves creating requisitions, placing orders, and then paying for the orders using invoices from the supplier.
Procure-to-pay software solutions can help you improve compliance and control among vendors, contracts, regulations, and accounts payable by digitizing your procurement process.
In addition, it can also help organizations manage their procurement processes and finances without the manual paperwork and spreadsheet headaches.
An automated P2P system reduces risk at every stage of the procurement lifecycle by eliminating unnecessary costs in manual procurement processes and increasing visibility, compliance, and sourcing velocity.
Both buyers and suppliers benefit from automation because it allows them to obtain real-time, accurate data in order to make informed decisions. In addition, removing manual tasks from the equation boosts processing efficiency.
An automated system provides end-to-end visibility between POs, invoices, and goods receipt notes to ensure that goods have been properly received before issuing payment. As a result, it guards against making cash-flow decisions based on incomplete information.
In a nutshell, P2P refers to a set of tools that businesses can use to manage spend in their organizations as far as payment transactions are concerned.
Why is it no longer in question?
With systems now depending more on technologies, procurement and finance processes are no longer an exception. A procure-to-pay software helps businesses manage their suppliers and transactions by streamlining approvals, requisitions, purchase orders, and invoicing.
A Deloitte survey revealed that 58% of CPOs aligned their digital strategies to their own goals and the overall business strategy. In comparison, 74% of top-performing organizations indicated that those who can align digital tools with business priorities would be the most successful.
Here is why adopting P2P software for your business is no longer an option:
1. Changing Business Goals Post Pandemic
The COVID-19 pandemic has forced businesses all over the world to strike a delicate balance between protecting their employees' health and continuing to operate.
Even as companies are managing the immediate challenges of dealing with the economy's phased reopening, decision-makers must consider what to do next and beyond the crisis — and how they can assist the company in preparing and pivoting for growth.
The impact of the global pandemic on supply chains continues to be one of the most reported and immediate consequences of the COVID-19 lockdown. From procuring critical goods to moving them from one place to another - one way or another, COVID-19 has disrupted the process.
Yet, ingenuity and resilience were required to resolve these short-term impacts to ensure that global supply chains functioned well enough to support communities and commerce.
This has resulted in significant changes in how suppliers are managed and the repurposing of existing management tools and practices to align with the new stresses and strains placed on people, businesses, and interconnected supply chains.
Businesses are now evaluating whether or not they have the necessary mechanisms in place to assess financial and operational risks and respond appropriately. One thing that became evident was that businesses need to be efficient while saving costs to cope with the posed challenges.
According to a recent Gartner report, more than 50% of organizations worldwide will have implemented a cloud-based procure-to-pay suite by 2025. As companies learn more about the benefits and cost-saving opportunities of using procurement software, cloud-based procurement tools are gaining traction.
With today's software solutions, it's possible to improve procurement management and gain cost-effective efficiencies by digitizing procure-to-pay processes. First of all, procurement automation software speeds up the procurement process by eliminating paperwork and mundane tasks, which usually require lots of resources and time. Previously, the processes were slowed down, waiting for the necessary approvals to move forward.
For example, without P2P software, procurement managers have to approve the requisitions from the upper management, match POs with invoices and again send it for approvals in order to release payments. This not only requires time but also demands the efforts of the multiple individuals involved in the procurement process.
With P2P software, approvals are made easier as the concerned individual receives automatic notifications and reminders to approve the documents digitally. This also saves businesses from paying fines on late payments and helps them maintain a good relationship with suppliers.
Not only that, but according to McKinsey & Company's research, procurement automation can save up to $70 million per year in profit leakage for a company spending $2 billion per year.
2. Remote/Hybrid Work Environment
Another drastic change that COVID-19 has brought on businesses is how they operate. Before the pandemic, everyone worked under one roof, making it easier to communicate and keep track of the assigned tasks.
However, now that most workers are working from their homes to limit the spread of disease, it has become difficult to ensure necessary checks and balances.
With the distributed workforce and remote work, most procurement departments rely on email and Excel spreadsheets. Unfortunately, despite the fact that Excel is excellent in theory and gets the job done, it actually hinders collaboration and isn't suitable for larger organizations or data sets.
Imagine sending a requisition email for approval then sending it to the procurement manager, who then has to look for suppliers and collaborate with the finance department as well. Multiple emails for a single task can become confusing.
Adding up to the problem, updating all this massive load of data in excel becomes hectic.
Sticking to a chair for hours in a distracting environment also disturbs the work-life balance. This irritates the people involved and leads to stress and burnout if the task is not accomplished on time.
Furthermore, hundreds of emails in the procurement manager's inbox for requisitions and payments make it difficult to track which one is legit and which one is not. This can increase maverick spending throughout the organization and cause businesses to spend unnecessarily.
By implementing a procurement automation system, businesses can get a consolidated view of actual expenses, making it easier to make data-driven decisions for new purchases. It also contributes to ongoing cost reduction by assisting in identifying gaps, such as consolidating suppliers that offer related products and services.
Procure-to-pay software also aids in the improvement and preservation of high-quality data. All the purchase requisitions can be made through the software and sorted on a priority basis, making it easier for managers to approve them.
Once it is approved, procurement managers can procure the required items through the vetted supplier base. This way, it provides businesses with a detailed account of previous purchases, contracts, order history, and supplier quotes.
With the finance function integrated into the software, wherever they may be, the finance team knows which payments are to be released before the due date. Ultimately, the P2P software saves money and streamline spend management and analysis processes.
3. E-invoice Mandate Introduced by Governments Across the Globe
In the past few years, governments have been implementing e-invoicing and real-time reporting to streamline tax payments and move away from manual processes.
Paper invoices that leave no trail to verify are now being discouraged throughout the globe. With increasing frauds and tax-related issues, governments worldwide are introducing mandates to promote e-invoicing in every organization. Apart from providing transparency, E-Invoicing helps in tracking every penny that a business spends.
When it comes to having an invoice management system, procurement teams are all too familiar with poorly managed purchase orders, missing good receipts, irresponsible spending, and submission delays.
They may also have to deal with complicated spreadsheets and a lack of transparency regarding spend culture. Managing invoices manually usually results in late payments and compliance issues, irritating vendors.
High invoice processing costs, duplicate payments, paying for goods that were never received, and the possibility of making late payments to vendors can cost businesses massive amounts of money.
Through P2P software, procurement managers can approve invoices that match the purchase order and goods receipt. This verification step helps businesses ensure that they are releasing payments as per the request generated by the team and the goods received.
E-Invoicing also helps calculate the withholding tax and the actual tax amount that the business is liable to pay. P2P software can also be easily integrated with other accounting and finance tools like QuickBooks that can be used to add more functionality and streamline the process.
4. Gen X Workforce Who Are Tech-First Generation
Gen X is the generation that saw their parents work extremely hard and for long periods, only to be unhappy and unsatisfied in the end. This drives Gen X to seek a healthy balance between work and life, ensuring that their financial, family, and personal needs are met.
They are the first generation to have access to computers at home and in school. In addition, they've grown up in a time of rapid technological and social change, so they're tech-savvy and adaptable.
They thrive on variety, challenge, responsibility, honesty, and the ability to contribute creatively. They are also more peer-oriented than previous generations that did not mind doing desk jobs.
Today's generation does not like sitting behind desks and doing tons of paperwork. They look for shortcuts using technology that helps them achieve more in less time. If they are supposed to do the highly repetitive tasks involved in procurement, they could be easily bored.
In order to motivate the coming generation, companies need to have software that not only makes business processes smooth but also makes the life of their employees exciting and fun.
Gen X now has more exposure to different eCommerce sites, enabling them to explore, buy and sell in a single click. As a result, maintaining heavy excel sheets is becoming obsolete. With procure-to-pay software, users can manage suppliers, requisitions, approvals, purchase orders, and invoices while providing the same user experience.
Gen X can concentrate on more productive and meaningful work by automating repetitive, low-value, labor-intensive tasks. A seamless and friendly interface can also aid in high user adoption rates among Gen X.
The rich user experience provided by good P2P software can ensure that the employee stays engaged and motivated to work. With the shorter attention span of Gen X, it is critical that they interact with systems that they love to use.
Let’s take an example of providing a typewriter to Gen X to draft documents. With them being used to editing and erasing documents in soft form on a computer, imagine their frustration when they had to discard the whole page just because of a slight mistake.
Likewise, if you give Gen X to file documents, fill out forms and make manual entries, they will be more likely to quit it. This can not only lead to additional hiring costs but will also lead to lack of creative human resources in the organizations.
5. Procurement is expected to play a strategic role than a transactional role
Procurement's transformation from a transactional to a strategic function is becoming more common in organizations and industries. As a result, procurement's profit-generating potential has now been recognized by top management.
Being an essential part of a business, procurement is expected to save costs to an organization and provide the businesses with a competitive edge in today's dynamic market. This requires carefully analyzing the data and devising strategies to leverage the existing supplier base.
But as the procurement to payment cycle involves hundreds of repetitive tasks that require a significant amount of time of multiple resources throughout the organization, most of the procurement teams are spending their valuable time and talent managing the tasks a software can efficiently perform.
This also means as your business grows, you will need to hire more resources to perform mundane and dull tasks. The traditional procurement practices are wasting the talent of the new hires and hindering their potential to perform creative tasks.
P2P software helps in processing data and removes human interaction from the process. This means workers can focus on more creative tasks and less time-consuming, robotic work.
With the help of automation, businesses can focus on strategic procurement decisions that involve monitoring the current trends, forecasting changes in external source markets, and setting priorities and business goals to become market leaders.
Moreover, procurement managers can leverage their analytical skills along with the insights provided by the software in identifying key suppliers that can support product design and contingency plans to develop new products.
Over the years, there has been a greater emphasis on improving the Procure-to-Pay process. CFOs and CPOs are always looking for ways to cut costs and increase savings through increased efficiency. Unfortunately, manual and paper-intensive P2P processes present a slew of issues, including inefficiency, a lack of spend management visibility, the inability to ensure contract compliance, and so on.
On the other hand, automation enables firms to understand their spending better, boost contract compliance, negotiate better pricing, and reduce ad hoc spending, to mention a few benefits. In today's environment, the requirement for P2P software is self-evident. It is no longer a question to consider P2P for the procurement function.