I know - there is never enough time, money, or resources to do everything we would like to do, so we compromise and focus on the “must have” at the expense of the “really nice to have”. Usually, that means purchasing and accounts payable activities often sit at the bottom of the pile of “really nice to haves”, such as actually undertaking spend management instead of just accounting for it.
In terms of tail end spend – the high volume of low value invoices (that make up a significant proportion of the accounts payable process), every CFO has a mental handle on the value of that spend, it is not strategic, does not fluctuate much and therefore is simply ignored.
But that is now a serious mistake, and every CFO needs to wake up to this fact because they and their business are literally wasting everyone’s time and the corporate money through inaction.
Accounts payable automation has already gone mainstream – it is now on the “must have” list for almost every business that is looking to upgrade their accounting / ERP software.
But you don’t have to change your accounting / ERP software to achieve this, you can simply bolt it on.
Why has accounts payable automation become so important to spend management?
Simply because of the huge time savings it can deliver. Every automation project will deliver between 65% - 95% of the time currently being spent, both inside and out of the finance department, to diligently account for it.
And that equates to freeing up 65% - 95% of everyone’s time to focus on more important work – or what really matters to them. No sensible CFO would ignore this potential productivity gain anywhere else in the business, so why do so many continue to overlook it within their own department?
Perhaps it is the implication that a 65% - 90% productivity gain has on their hard working, loyal, and diligent staff that currently do this work? But that would assume that there is nothing else that could be done within finance with this additional time that would deliver a lot more value, both to the individual in terms of their progression, but also the business.
It also, possibly selfishly, ignores all the time being wasted by everyone outside of finance involved in these tedious manual processes and what they could achieve with the additional time spend management would deliver to them.
So, this is where spend management gets interesting.
What should the accounts payable staff do with this additional time? Here are the top three:
First and foremost, focus your time on managing important business enablement processes to buy as much as possible through online vendors/suppliers websites. In terms of tail end spend, almost all of this spend can be bought online from Amazon Business and multiple other similar vendors/suppliers.
There are so many benefits straight out of the box. It consolidates the current vendors/suppliers from many, down to a handful, cutting out all of the continual interruptions from credit control, managing exceptions, making payments, spend management, etc.
Second, not only does it deliver the most productive experience to the people placing the orders, but it also provides finance total visibility and control over that spend before it takes place – that is called spend under management.
And because all the work to approve and code the spend for the general ledger has already taken place, the invoice is digitally captured and matched on receipt, with the option of one final step to confirm delivery and the invoice is posted into your finance system. That delivers the 95% plus productivity gain.
Finally, prioritizing your spend management through buying online is almost always cheaper. Think about the supplier/vendor experience. An order is received from the website, it is then picked and shipped, and an invoice generated and sent. The invoice always matches the order, so as long as they delivered correctly, these orders have the lowest possible cost of sales – and that is reflected in their pricing.
We all buy online at home, don’t we?
We all know from our personal lives that online buying has gone mainstream, it is time to do the same for our businesses.
So, that tidies up all the tail end spend and once done, the time becomes free for the next step down the automation journey.
Spend Management with Advanced Spend Analytics.
So now think about what becomes possible as a byproduct of this automation process. You automatically received advanced spend analytics reporting.
This is where every vendor/supplier you use is automatically allocated the appropriate Spend Category code, making it incredibly simple to look at spend by supplier category – being the very first step in every spend review to look at achieving savings.
What if this reporting capability also included your general ledger analysis coding allowing you to review spend by company, location, general ledger code, and by spend category and by suppliers within each category being used?
What if you were also able to add a unit of measure to this analysis, such as the number of pupils for schools, number of beds for care homes, or hospitality – the list is endless.
For example, spend management offers you the visibility to simply compare the costs of facilities management, ICT, food, by each school, and by student numbers. Accounting for which school is doing the best, which one the worst, and, most important, instant access to the information on why.
This Spend Analysis totally transforms every general ledger and enables every business to immediately focus in on areas for potential savings and then deliver these savings, usually by buying online from the preferred supplier/vendor. Otherwise known as spend management.
For our customers, accounting for savings run into £10,000’s ($13k+) per annum, for other larger organizations, it is millions per annum.
It is time to re-evaluate your priorities. Accounts payable automation is no longer a “nice to have” because the value it offers the staff and the business are far to larger to be ignored.
But sorry, I forgot…
Focusing on improving the way you buy and account for it isn’t worth the effort.
So, one a final question: then why are you currently wasting so much of the business’s time and money on it?