Across industries, procurement has become one of the most complex business functions, an enabler of operational efficiency and also a prime target for cost reduction strategies. Due to this changing business landscape, Chief Procurement Officers (CPOs) are now focused on improving productivity, managing risk and compliance, and optimising spend.
This is where managing the most common challenges in the procure-to-pay process can make a significant difference! Although this process starts with the requirement for a goods or service and ends with payment, its smooth functioning is essential for the success of any business. In current times when businesses are being driven by efficiency and automation, there is a critical need for modernizing the P2P or procure-to-pay process.
So, let us get started on the common P2P challenges and how digital procurement can help you succeed!
Why Do Procurement-to-Pay Challenges Arise?
Here are some of the common reasons why companies face procure-to-pay challenges.
- Lack of compliance: Compliance is the key to controlling maverick spends and the lack of it can impact your cash flow and working capital or budget.
- Ineffective tech adoption: Many businesses are reluctant to adopt P2P automation as they find these systems difficult to use. However, that is not always the case and issues typically arise when there isn’t enough user training and the team is not adequately aware of the procurement policy.
Lack of unified systems: In many organisations, accounts payable, procurement, and sourcing are managed by different departments which makes it difficult to consolidate data for a single source of truth. Moreover, the use of more than one ERP software creates issues in integrating business and supplier data. This results in information silos, increasing processing times and costs.
Why Isn’t Your ERP Enough in Handling Procurement-to-Pay Challenges?
Traditionally, paper-based manual methods for procurement and accounts payable have resulted in a lack of visibility, long approval and processing times, as well as high costs. Although many businesses rely on ERP or enterprise resource planning software for managing procurement processes, there are certain drawbacks to it.
If your team is involved in any of the following scenarios, then there is certainly a need to improve or enhance your ERP with procurement automation software.
- Team members who are still completely handling paper documents.
- Additional expenses in terms of paper usage, archiving and distribution.
- Difficulties in capturing data from invoices regardless of the format.
- Low or lack of visibility on your spend and purchase requisition.
- No or limited capabilities for reporting, auditing, etc.
- Missed opportunities when it comes to early payment discounts.
- Problems in approval or purchase requisition process when not in the office.
End-to-end automation is a very effective solution for organisations that are inundated with paper-based processes. Digital procurement can help streamline your P2P workflow to enhance productivity.
Most Common Procure-to-Pay Challenges and How a Procurement Platform Can Help
Most of the challenges in the procure-to-pay process are related to ineffective communication, lack of transparency and redundant manual processes. When teams spend their time on low-value tasks such as getting signatures for approvals, adding invoices into the ERP, or just getting documents from the file cabinet, the problems can not be ignored. Since these issues can result in extraneous costs or risk credit ratings or compliance, they need to be addressed well in time.
Challenge 1: Non-PO (Purchase Order) Invoices
Agree or not, non-PO invoices are still a thing in businesses and require a lot of manual effort. This results in not only maverick spends and problems for accounts payable but also increases the costs associated with the processing of the non-PO.
Adopting a policy that prevents the payment of non-PO invoices is a good starting point—without any PO in place, the payment won’t be made. With an effective procurement software in place, you can automate and streamline internal requisitions to RFQ or PO with just one click. Moreover, these software make it easier to track POs status.
Challenge 2: Slow Approvals
It takes a long time to get approvals on purchase requests which in turn can increase turnaround time to process the documents. This can lead to missed early payment discounts and also affect supplier relationships.
Procurement software can house all your documents including vendor contracts, invoices, etc. and processes at a centralised location, ensuring easy access to everyone. Moreover, some platforms also offer mobile access through an app or web, so your team can complete the approval process anytime, anywhere, reducing the turnaround time.
Challenge 3: Lack of spend visibility
When you have to access and consolidate data from multiple systems for reporting and auditing, it can get very tedious. Additionally, with manual systems, information isn’t accessible quickly which can lead to lack of control and visibility.
Many procurement platforms offer reporting capabilities to generate automated, custom reports, reducing a lot of unnecessary manual effort. Plus, it brings in complete visibility and a single source of truth to empower decision-making.
Challenge 4: High costs on invoices
Processing errors can lead to increased cost per invoice as well reduced employee productivity. Also, as discussed above, paper invoices and POs increase cost due to physical storage/archiving.
Procurement automation software acts as a centralised repository for your processes and documents, eliminating the need for physical storage and enabling remote, easy access.
Challenge 5: Manual errors
Paper invoices and manual data entry increases the risk of redundancy and errors. This can have an impact on your working capital and also put your transactions under scrutiny by auditors for compliance.
Procurement software makes it easier to access POs and other related information for processing for reporting. Also, the platform houses detailed audit trails for each purchase requisition and invoice including dates, steps, etc. from RFQ to invoice processing.
Automation is the proven solution for overcoming challenges in your procurement-to-pay process. A procurement platform such as Induzbuy integrates easily with your existing ERP system, enabling you to automate all the key steps of your P2P process including internal requisition to RFQ, quotation request, pricing comparison, GRN generation, reconciliation, vendor management, contract management, and much more!
Plus, Induzbuy is an affordable solution that offers unique features over your ERP platform.
Key Differentiators Induzbuy Versus other ERP
To know more about our solution and how we can accelerate your procurement-to-pay process, schedule an expert consultation with us today!