Payments to suppliers are a major part of the procurement-to-pay ecosystem.
Implementing electronic payment of your invoices from suppliers provides significant cost saving opportunities but other hidden benefits also flow from this automation
Business growth, increased cross-border activities, an increasing supplier base, and business volatility means the increase in the number of transactions and the risks of manual errors.
International payments involve even more complex and lengthy processes and Forex complications as well as bank fees. Fraudulent payment behaviour that is difficult to recognize and cope with.
The speed of operations is also particularly important since the organization has a critical issue when payments are held up in a process stage and fall behind the required payment cycle.
It becomes crucial to make this process operate in the correct and timely manner, to sustain good relationships with suppliers, to receive better prices and higher service levels.
Automation has not been implemented by numerous organizations, who are still using traditional ‘manual’ payment execution processes, i.e., use multiple different systems and numerous manual touchpoints. Therefore, Payments Automation can be one of the most important “system” tasks for the organizations that operate payments manually.
Source to Pay (S2P) Process Workflow
What Account Payment processes and operations can be suitable for automation?
Modern ‘best in class’ systems can electronically create Purchase Orders (POs), (with or without a requisition), and automatically route them for approval and transmit to suppliers. These systems are designed to accept electronic supplier invoicing. If suppliers still send invoices via email, the system can perform incoming emails monitoring and classification, recognizes invoices and using intelligent Optical Character Recognition (OCR) which extracts the needed data from the invoice, codes it and compares it with PO for verification.
Account Payment systems should have seamless integration with ERP and other legacy systems of your organization.
These systems convert the invoices into a standard digital format, automatically enter data into accounting systems, push them through a digital workflow and execute payment through e-banking direct to the supplier bank.
The software can automatically validate discounts and handle exceptions if the invoice does not match the purchase order. These ‘errors’ are then re-routed to the authoriser to investigate and resolve
It can also have advanced artificial intelligence options to identify market dynamics, financial and consumption patterns and convert data into insights, dashboards, and analytic tools, supporting decision making and allowing improved financial control.
An automated electronic solution should be able to support different payment methods, different currencies, perform payment execution on scheduled dates, approve invoices and send out automated notifications to all involved parties. They also can flag up anomalies in the processing steps that could warrant closer investigation to avoid risk.
This means that payment processing can become ‘touchless’ and eliminate the need to manually interfere or input any data, at any stage except with the tick at the invoice approval stage.
Among other Payment Automation Benefits are the following:
- Strict control of how and when payments were processed to better ensure business continuity
- Quicker Cash to Cash (C2C) cycle times
- Reduces DSO (day’s sales outstanding) or “past due” invoices rate (volume and value)
- Low transaction cost
- Reduced manual work and less manual mistakes with less re-work
- Fraud prevention and identification
- Reduced Payment Errors & duplications
- Faster financial closure, eg. month end, quarter end and financial year end
- Improved visibility for analytics
- Additional Discounts where the supplier has benefited from the lower transaction cost
- Fewer inquiries from suppliers and improved supplier satisfaction
- Centralized data that leads to data insights and cash tracking
- Compliance with Company’s policies and Financial procedures
Four (4) steps how to Select electronic payment Software
- Project planning:
- Create a cross-functional team to define the company’s goals and resources for electronic payment automation. This describes the ‘desired outcome’.
- Collect requirements:
- Describe and create a workflow of the current manual payment process in the organization.
- Create a list of requirements for an automation solution against that workflow.
- Develop request for proposal (RFP) and send it to suppliers that meet mandatory criteria.
- Vendor evaluation:
- Compare features from the suppliers proposals against our ‘desired outcome’, costs, implementation approach and post purchasing support from the potential suppliers.
- Vendor selection.
- Compare suppliers’ proposals, rate and score the submissions, create short list, request recommendations from existing users and system demonstrations
- Identify where gaps still exist to your ‘desired outcome’.
- Resolve gaps with short listed suppliers
- Re-score shortlisted suppliers against your desired outcome
- Negotiate all the commercial elements of the offer, eg. license fees, user fees, maintenance fees, support, training and help-desk.
- Select supplier