Why even medium-sized companies need P2P software to ensure operational efficiency
When SMBs launch, they tend to have informal procurement processes. This informality might work with four to five employees and a handful of customers, but it simply isn’t practical for a growing business.
When growing from SMB to mid-market, companies face significant growth in the volume of purchase orders and purchase requests. This increased business activity leads to extensive financial records, client communications, personnel details, and legal obligations. Consequently, it becomes impossible to track this data without proper systems, let alone to use it efficiently.
A well-developed purchasing process is essential to successfully manage increased volumes of PRs and POs. That is where procure-to-pay solutions come into play. They eliminate repetitive manual processes, connect all your data, allow trackability of purchasing documents, enable collaboration with internal and external stakeholders, and provide integration with accounting.
Reasons why P2P software makes sense for Medium-Sized Companies
A 2019 study from Ardent Partners discovered that leading organizations gained a considerable edge over their competitors following the successful implementation of procurement technologies.
Implementing an integrated procure-to-pay solution is a necessary foundation for any business aiming to match industry leaders’ performance, efficiency, and profitability benchmarks. Transitioning to P2P software is essential for medium-sized companies for the following reasons:
Eliminates repetitive manual processes
As organizations grow from SMB to mid-level, the burden of manually processing increased transactions falls to procurement. P2P software can help managers operate more efficiently by:
- Minimizing human errors and delays on time-consuming, high-volume, low-value operations through automation
- Reducing the need for document storage/organization, saving time which can be utilized for value-added tasks
- Reducing cycle times for POs and invoicing by providing complete, clear, and correct data
- Eliminating redundant, incomplete, and missing POs to save time and increase overall efficiency.
- Standardizing forms, workflows, and internal processes helps eliminate waste and supports iterative improvements.
Enables Supplier Collaboration
P2P is a multifaceted process that consists of a lot of internal and external communication. Each activity or function of the process must be completed on time, with numerous stakeholders participating.
Supplier portals allow procurement to adopt a collaborative approach with suppliers to maximize efficiency for both parties.
If there are avoidable expenses, such as unnecessary custom specifications, neither side ultimately profits. Strong communication channels mitigate the risks of such unnecessary transactions for both parties, hence improving overall efficiency.
In addition, data integration improves transparency by providing more data to evaluate. It also increases the chances to cooperate on new products and methods to achieve the best pricing and terms with each supplier.
Speeds up the Approval Process
P2P automation speeds up the purchasing process by automating:
1). The process of manually filling out purchase requisition forms
2). The supplier selection process by centralizing the pricing, remarks, deals, and discounts needed to make purchasing decisions.
3). Purchase order approvals as soon as the purchase request is authorized
Automates 3-way Matching
A three-way match verifies the purchase order, the goods receipt note, and the supplier’s invoice before approving a supplier’s invoice for payment. It can help determine whether the invoice should be paid in full or in part.
Manual invoice matching is a laborious, time-consuming, and inefficient procedure. In addition, it can be tough to gather all of the information required to complete an invoice, which frequently results in late payments and disgruntled suppliers. By automating the invoice matching process and guaranteeing an exact three-way match, procurement departments may cut invoice processing times by up to 70%.
Improves Trackability of Purchasing Documents
SMBs have fewer specialized business processes and resources; thus, the management focuses on the company’s overall operations rather than specialized functions such as procurement. However, as companies expand to the mid-market level, there is increased business activity in response to elevated consumer demand.
To keep up with the increased volume of documentation, the traditional processes used in SMBs would lead to hours spent tracking down supplier information via email chains or spreadsheets, analyzing contracts, and manual sourcing.
However, with Procure-to-Pay software, procurement can track the whole lifecycle of purchasing documents from issuance to acknowledgement and delivery to closure. It ensures POs are routed to the right individual for approval on time. It also tracks changes to the PO during the process and helps ensure that it complies with organizational rules.
Procurement is the beating heart of any company’s financial efficiency, accuracy, and strength. Investing in a procure-to-pay software can help formalize and centralize purchasing to get a better ROI and generate lasting value and competitive advantage for your company.
Through Procure-to-Pay software, users can take advantage of invaluable insights, spend analysis, forecasts, and automated processes, ensuring that the organization grows more profitable and productive every day. The capabilities mentioned above provide medium-sized companies with the opportunity to improve overall operational efficiency and reduce the quantity of human capital required to manage procurement operations.
Source: buyersmeetingpoint.com, 15/12/2021, written by MOHAMMED KAFIL
Recommended reading: Top Procure-to-Pay Risks During Project Implementation