Accounts Payable automation is witnessing a paradigm shift as enterprises strive to move towards touch-less payments. Enterprises leveraging AP automation as part of a larger F&A transformation practice want to streamline beyond the traditional procure to post process. A Digital Procure to Pay (P2P) solution will enable enterprise to unleash the next generation AP Transformation.
Digital P2P- Moving beyond Procure to Post
A Digital Procure-to-Pay Solution is designed to provide organizations with control, visibility and financial agility over the entire life cycle of a transaction by linking purchasing and payables to maximize the return on invested capital. It creates a complete lifecycle for enterprises to manage it’s procure to pay processes, making the whole experience touch-less.
Invoices are received through an integrated, vendor portal and routed for auto data extraction, 3-way verification, intelligent duplicity check, inter & intra departmental approvals, exceptions management, tax & data validations, right on till postings to the general ledger. Once approved, the invoice is introduced into the ERP and presented for payment. An underlying BPM process orchestrates this entire process.
The payment is done with the help of integrated Virtual Account Number facilitating early guaranteed payments to suppliers and extended payment time to organizations. Rich transaction details are embedded within the unique VCN, like invoice number, cost centre and tax, which simplifies reconciliations.
The Digital P2P model offers several benefits to both enterprises and vendors including:
The P2P framework cuts across the challenges of a manual or semi-automated AP process. This streamlines the entire process from receiving of invoices to the final payment and reconciliation. Cycle times across the spectrum are reduced along with errors caused by manual systems. Overall, it creates efficacy throughout the process and also brings down cost and effort per invoice processed.
A P2P model relies on a web-based vendor portal offering quick and easy self services to vendors. They can leverage the portal to submit invoices. The underlying BPM framework helps align invoices submitted to the right procurement. It also provides visibility on the status of an invoice. Vendors can leverage the portal to interact, redress concerns and raise queries on their payments. This proves to be a great way to enhance vendor management and boost vendor satisfaction.
Rich transaction details are embedded within the unique VCN, like invoice number, cost centre and tax, which simplifies reconciliations. Lack of visibility into the payment status forces suppliers to constantly enquire with their buyers or banks about their scheduled payments, which is no longer required in the P2P model.
Cash Flow Management
Early payment discounts can provide a tremendous return on investment if suppliers are willing to engage in these discounts to avail payments on time leading to extension of payment time for buyers. With a virtual card technology, banks can engage in supplier discounting facilitating on time payments for them. This ensures better cash flow management for buyers leading to improved Days Payable Outstanding(DPO) and avoiding late payment fees.
Reduced Payments Costs
The average cost of processing an invoice in an environment with a low level of automation can be up to 20 times greater than the cost of processing in an environment with a high level of automation*.
A Digital Procure-To-Pay Solution can substantially reduce these expenses by cutting down on the time spent fielding payment inquiries and at the same time protect against payment fraud by virtually eliminating duplicate payments.
Overall, a Procure-to-Pay Solution provides a platform to evolve from a manual process to an automated and analytic one that provides visibility of spending to the organization and highlights opportunities for cost reduction by linking the people, processes and technologies involved in a complex network.
*Source : Overcoming the Top Pitfalls of Manual Invoice Processing – A Whitepaper