The operational benefits of automating the procure-to-pay (P2P) lifecycle are proven and compelling.
Procure-to-pay organizations with a high level of automation process invoices cheaper, faster, more accurately, and with greater transparency than their peers with little or no automation. Businesses typically achieve payback on their investments in procure-to-pay automation in a year or less, according to the Association for Intelligent Information Management (AIIM).
It is no wonder that automation is a top budgetary priority of finance leaders.
Providers of procure-to-pay solutions can help their customers achieve five times more value by combining invoice processing automation with working capital improvement strategies such as electronic payments, card rebates, early payment discounts, and extended Day’s Payable Outstanding (DPO).
Best of all, P2P solutions providers can achieve all this without pulling development resources away from core solutions. Integrated payables solutions can be combined with procure-to-pay platforms to deliver the operational and working capital benefits customers crave.
P2P Solutions Can Achieve 5X The Payback On Automation
The financial benefits of automating procure-to-pay processes are impressive.
But automating the procure-to-pay lifecycle end-to-end – from purchase order requisition through payment settlement – builds on these financial benefits in five significant ways:
1. Reducing Payments Costs
Paying suppliers with paper checks can be just as costly as manually approving invoices. Just think about all the labor associated with printing and mailing checks and reconciling payments, the cost of postage, check stock and printer ink, and the losses from fraudulent payments. By extending their automation efforts to supplier payments, accounts payable departments can reap significant incremental operational savings.
2. Extending DPO
DPO is a measure of how long it takes a business to pay its suppliers. Paying suppliers too fast sends cash out the door that a business might need for strategic initiatives. Paying too slow can strain supplier relationships and weaken a business’ position during contract negotiations. CFOs are looking for the middle ground. And automating supplier payments helps them get there.
Certain card programs enable buyers to instantly extend their DPO, without changing their payment terms with suppliers. The funding for the payment program is provided by the buyer’s payments provider via card. As a result, buyers can extend their DPO by days or weeks, freeing up cash to make investments, reduce borrowing or pay down debt – all of which have a significant impact on a business’ financial position.
3. Creating More Early Payment Discount Opportunities
Cash is the lifeblood of any business. That’s why CFOs are so keen on receiving payments as quickly as possible. Many suppliers will exchange a discount on the amount-due on an invoice for earlier payment. While can typical for suppliers offer a discount of 2 percent for early payment, some cash-strapped suppliers will offer bigger discounts. These discounts reduce buyer’s net cost for purchases.
Automating invoice processing speeds up the approval of invoices, opening the door to more early payment discount opportunities. But buyers can capture even more early payments by eliminating the bottlenecks caused by check processes and paying suppliers electronically.
4. Generating Rebates On Card Spend
A big part of the appeal of paying suppliers with a virtual card is the opportunity to earn rebate based on spend. It is not uncommon for businesses to earn rebates on 30 percent of their accounts payable spend.
Some businesses use rebates to fund procurement or invoice processing automation initiatives. Other businesses are earning enough money each year in rebates to offset the operational costs of their accounts payable department, transforming the function into a profit center. While invoice processing and P2P solutions reduce costs, they cannot transform procure-to-pay into a revenue-generator like card rebates can.
5. Providing Leverage During Contract Negotiations
Attracting and retaining valued suppliers is critical to business growth. And nothing makes a business more appealing to suppliers than consistent and timely payment of invoices. Electronic payments help suppliers get paid faster, streamline their receivables processing, and offer them flexibility as their business needs change.
Strengthening supplier relationships with electronic payments can lead to supplier pricing concessions during contract negotiations – which can add up fast.
P2P Solutions That Deliver More Value
The payback on automated procurement and invoice processing solutions is proven and compelling. But buyers and the P2P solutions providers that serve them can achieve five times the benefit by extending their automation initiatives to include electronic payments.
If you are a P2P solutions provider that wants to deliver more value to its customers, WEX wants to speak with you. Get in touch to learn how we can help.