Despite the continuing rise in attention being given to purchase to pay (P2P) processes, there are still a large number of organizations who are reluctant to automate, let alone optimize, these business activities. Indeed, it’s almost strange that the P2P process has flown under the radar for so long, when it’s so well suited to automation and significant improvements in speed and accuracy.
Economies of scale
When the purchasing manager has the ability to easily bundle purchase requests together, he’s in a strong position to secure discounts from single or small groups of suppliers. Having a wider overview of purchasing patterns and history allows purchasing professionals to effectively pursue attractive pricing agreements, strengthening their negotiating position and allowing them to be more aggressive in pursuing the best deal.
In short, consolidating multiple suppliers and ranges of prices wherever possible can have a significant impact on the profit and loss report. Being able to pay your bills quickly can then lead to yet more discounting from suppliers appreciative of how quickly they get their cash in.
The reduction in maverick orders is also relevant here. Many of these unapproved orders include a hefty premium over the price offered by a preferred supplier through the correct channel. Not having access to a fully negotiated price, maverick purchases are normally much closer to a standard shop fee. A fully automated P2P system will help ensure that everyone makes use of the carefully negotiated rates organized by the purchasing team.
It’s unfortunately the case that almost every major change within a large organization is met with a degree of resistance by at least some of the employees. Indeed, there are library’s filled only with management textbooks on how to guide change effectively.
Luckily, when it comes to automating P2P, not a great deal has to change for the employees who are involved in creating purchase order requests. They still have to create the same requests, but are guided, given a simplified, standardized framework to use instead of ad hoc forms or emails. They are still busy with the same activities, but have a quicker, simpler way to carry them out – making buy-in to new methods significantly less difficult than with other process changes.
Short implementation, long ROI
The majority of SMB organizations have already automated many of their business processes. If that’s the case, it’s usually a relatively small task to add purchasing to the list of activities covered by the scope of their IT implementation.
In many situations, it’s usually a simple case of coupling the new purchasing solution to the existing ERP set-up and making use of the existing data. And from day 1, there will be concrete time and money savings to be had. A short, simple implementation time, in combination with immediate savings, means that many businesses are also able to see their investment returned in a relatively very short space of time.
In summary, there are at least 8 clear reasons to think very seriously about streamlining your purchasing processes with a P2P automation system. Whatever an individual’s role within an organization, they stand to benefit from a business that can handle its acquisition of materials and services quicker, cheaper and with fewer mistakes. If your organization, as many others, has overlooked the purchasing department in the past in favor of other business improvements, now is the time to think careful about just how much of a difference automated Purchase to Pay could have.
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