While there is no certainty as to how permanent some of the changes are from the disruption of COVID-19, the digitization of procure-to-pay (P2P) functions has become more important than ever. This unexpectedly came to me over the July 4th weekend on my way to a family retreat in Michigan. Driving through downtown Chicago on I90/I94, you can’t help but be greeted by skyscrapers adorned with corporate logos.
This got me to thinking; what will become of the corporate office in the age of COVID? How many people will go back in the corporate jungle or do they plan to stay remote? Will the extension of a remote workforce require new ways organizations manage their back-office operations?
As a recent article in the Chicago Tribune highlighted, the challenges local government and businesses face in major metropolitan areas is how to get back to work. While there is no certainty as to the permanence of changes like social distancing, temperature gauging or the return of closed offices, COVID-19 has tasked businesses, big and small, to discern how to manage business continuity and keep the business running.
Out of sheer operational necessity due to COVID, digitizing core essential operational functions like procurement and AP is critical to not only support business needs for those workers who return to “work,” but also to support the growing permanence of a remote workforce. So one may ask, what are the essentials? Even though e-Procurement and e-Payables technology have been around for almost two decades, the past several months of the COVID lockdown have taught us lessons that demonstrate key areas most important for business continuity. In this regard, a recent Corcentric-sponsored research study from The Hackett Group specifically calls out four dimensions of how leading companies are distinguishing their P2P digital progress in the era of COVID-19
1st – Buying Through e-Catalogs — Even though buying online has been an upward trend since the early days of the internet, most of us cannot imagine getting through the ups and downs of the COVID pandemic today without access to online buying. Until recently, for most of us, going to the store was becoming increasingly inconvenient, causing us to wait in line only to find necessities out of stock, in addition to taking a risk of contracting the virus in a brick and mortar store.
In a similar vein for business, the ability to buy critical items through an e-catalog has been an indispensable way to get what is needed for the business, all while ensuring purchasing is being made against pre-negotiated contracted suppliers. It should therefore be no surprise that The Hackett Group research found the percentage of indirect transactions through an e-catalog is at 45 percent for top performing organizations compared to 25 percent for peers.
2nd – Removing Paper — Another determining factor of success in the world of COVID is not only how you buy, but whether or not you have the ability to track the process digitally. For years organizations have been calling for the reduction of paper. Not only has this been in the form of a demand to understand the state of the procure-to-pay process, but also in the need to manage an audit trail to improve compliance. These steps would assist in reducing the carbon footprint for meeting sustainability objectives. But in a remote workforce, perhaps even higher on the list has been the ability to reduce fraud through the creation of an electronic audit trail of all P2P transactions.
That being said, the Hackett report points out the divide between top performers and their peers, where the percentage of procurement processes that are fully automated is above 80 percent for most areas that include digital requisitions, purchase orders, change orders, invoices, and payments. The greatest difference between leaders and peers exists in the generation of electronic purchase orders, with 96 percent of leaders having automated this process compared to 36 percent in the peer group.
3rd – Paying Your Bills — Another realization during COVID is the increased awareness of how digitizing affects the ability to work with and pay suppliers. When business can’t run and pay their bills, there is an increased chance of ruining corporate credit worthiness. As organizations have been stalled in their normal business routines, working capital challenges have also pushed the needle on buyer-seller relationships to be better engaged digitally. While being remote, AP departments that have not automated AP processes will not have direct access to documents, meaning invoices can sit on a desk for weeks.
Along these lines, leading organizations are more adept at not only reducing paper, but in lowering the cost of managing invoice transactions through automation. The Hackett study shows leaders process 85 percent of purchasing transactions through electronic and invoice-less channels and the number of electronic invoices processed per AP FTE for top performing organizations is nearly 3x the number of paper invoices.
4th – Knowing Thy Supplier — As the COVID pandemic lingers in one form or another, new pressures have also been put on traditional supply chains to reassess where you buy and who you buy from. While there is a general sense of “think global and buy local,” there is an impending sense that organizations have a lower tolerance for risk, especially for supplies that once were taken for granted and now are considered to be essentials – PPE, cleaning supplies, Infrared Fever Scan Systems (IFss) or other health assessment measures, etc. Moreover, going to market when demand is high lends itself to fraud and lack of trust in the supply chain. This can lead to higher costs and other challenges related to safety and security.
With this in mind, leading organizations tend to have a more consolidated supply base. While this may seem risky at first glance and counter-intuitive with tight supply chains, the notion of a consolidated supply base promotes better and more trustworthy “buyer-supplier relationships” That directly translates into supply chain integrity and efficiencies in the purchase-to-pay process and related areas such supplier on-boarding, credentialing, and performance management. Again pointing to the Hackett study, 80 percent of invoices are from 3.4 percent of active suppliers compared to 10.7 percent from peer groups. As the research points out, consolidating the supply base not only helps close the digital gaps by simplifying processes, but also makes it less costly to manage supplier master data and reduces the potential for purchasing errors.
These examples point to core imperatives for pursuing digital transformation for your procure- to-pay function. While this is not an exhaustive list, the research is an essential guide by calling out key pillars and best practices that have only been accentuated during these challenging times. To learn more about Corcentric and the Hackett Group research study, we encourage you to download your free copy today.