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” for the purpose of spend management. 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 to spend management instead of just accounting for it.
Because tail-end spend is not strategic, does not fluctuate much, and hence is simply ignored, every CFO has a conceptual hold on the worth of it in a digital procurement strategy.
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 resulting in loss of cost savings.
Accounts payable automation and Accounting payable systems have already gone mainstream – they are now on the “must-have” list for almost every business that is looking to upgrade their accounting/finance 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.
For an organization, the cost of an inefficient finance and operations process is a drain on the bottom line. It takes valuable resources to manage and execute all of these generally accepted accounting principles and manual processes, lowering the amount of time and money the organization can spend on more crucial areas of its business such as spend management.
So, this is where spend management gets interesting.
What should the accounts payable staff do with this additional time? Here are the top three:
- 1. 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 many benefits of using a single business-wide payment platform. For example, companies can consolidate the number of vendors and suppliers from several different vendors and suppliers to just a few. Additionally, they can lower the amount of time spent on purchase requisitions, credit control, tail-spend management, managing exceptions, making payments, spend management, and more with one system.
- 2. 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.
- 3. 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 packed and shipped, and an invoice is generated and sent. The invoice always matches the order, so as long as they are delivered correctly, these orders have the lowest possible cost of sales – and that is reflected in their pricing.
Procurement automation also allows brands to make better use of their inventory through purchase to pay. When you buy online, the invoice matches the order. So as long as your vendor delivers correctly, you have the lowest possible costs of sales. These low costs are reflected in vendors’ prices, meaning you get the best deals for your inventory.
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.
Online Buying saves time & makes it easier to use preferred vendors, resulting in bundles of savings & great supplier relationships! Ready to see the future of purchasing?
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 is 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 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 final question: then why are you currently wasting so much of the business’s time and money on it?