3 Steps to Improve your AP Invoice Process

3 Steps to Improve your AP Invoice Process (and be an AP Hero!) Does it take your team more than 4 days to process an invoice? Are you missing early payment discounts? Is it costing you more than $3 to process a single invoice? If you answered yes to any of these questions, your accounts payable (AP) system might need a new solution.

One more question: Are you ready to become an “AP Hero”? This is the name we give people who had the foresight and initiative to make their AP process better. Anyone can be an AP Hero, even if you’re new to your team, or not even in the AP department. If you put the work in now, it can lead to changes your entire company can appreciate, like saving time and money.

I. What is AP Invoice Processing

Invoice processing is the entire workflow that’s in place to manage invoices. Across different companies, the start (receive invoice) and finish (pay invoice) are usually the same. But there are minor process differences depending on the people involved and steps required to get from “procure-to-pay.”

Some key elements of the AP Process

People involved

  • The “decision makers” (i.e. CEO, CFO, VP of Finance)
  • Accounts payable team
  • The “approvers”
  • Suppliers and vendors

Types of invoices

  • PO matched: Invoices that match an existing purchase order and receipt of goods.
  • Recurring: Invoices you expect from the same vendor(s) on a regular basis.
  • Utility: Invoices for any items you use for production.
  • Credit: Invoice issued back to you from the supplier.
  • Non-PO invoices: Often a result of indirect purchases by non-AP employees.

Procedures you can put in place

  • Smart routing. Invoices are automatically routed to the proper recipient(s) each and every time.
  • Three-way-matching. Automatic matching of the PO, receipt of goods, and the vendor invoice.
  • Exception handling. Rectifying the situation when a PO number and invoice do not match.
  • Centralized billing. When billing for multiple branches or locations are consolidated and handled in one place.

Possible roadblocks

  • Manual entry. You can only manually enter about 1,000 invoices per month. A fully automated system can enter 5,000 invoices per month. Manual entry can also result in mis-keyed information ending up in the system.
  • Unorganized office. If an invoice is mishandled or lost, the timeframe of resolving errors could add an additional 3 – 7 days on average.

II. A Closer Look at Workflow

All the people, tools, and processes we mentioned in Section I should be working together seamlessly. A well-managed and automated AP process accounts for roadblocks, and if an error does appear, it’s immediately seen and fixed.

Who’s in charge of managing invoice processing Invoices can come in from any department – Marketing, IT, Administrative Staff, and everything in between. Every company’s workflow with vendors and suppliers is different, though the accounts payable department is usually in charge of getting invoices in and processing them for approval.

Is automation right for your team

Invoice Automation: every step in your AP process, from procure-to-pay, is taken care of automatically.

Did you know that that fully automated companies are 7 times more likely to capture early payment discounts than companies still using paper? That’s because their invoices are getting paid on time, every time. Everything is accurately entered, matched, and accounted for.

Before automation, the AP department is just the team that pays your bills. Automation allows them to be a strategic asset, working smarter to analyze business processes, as well as negotiate and consolidate accounts.

If you’re not convinced your team will be sold on the idea of changing your process yet, or you’ve sold it and need to know what to do next…jump right in to getting it done!

III. 3-Step Process to Improve Invoice Processing

Automating your process can save your team time, money, and headaches. Be the AP hero who figures out how it’s done!

Step One: Do an internal audit What does your current process look like? If you’re still using paper, then there’s so much room for improvement. Take a close look at your workflow and map each step in your process. Consider all the procedures and roadblocks we laid out in chapter I. Here are a few questions to guide your audit:

  • Where do invoices come in?
  • How are they entered into your current system?
  • Are they PO matched?
  • Who needs to approve them?
  • How are exceptions being handled?
  • Who is ultimately paying them?
  • How many days does it take between each step? What about from start to finish (procure-to-pay)?
  • How many invoices are being processed per month?

Looking for a more in-depth audit? Check out our entire questionnaire for processing invoice performance.

Step Two: See how you measure up Still entering invoices by hand? Even some of the top performers are still manually keying in 42 percent of their invoices, wasting time, and increasing the chance for human error. But there’s always opportunity to improve. Check out this chart to see the best-in-class stats:

Fully automated companies take 3.9 days on average to process and approve an invoice. Whereas companies still manually keying everything average 17.6 days from manual processing. And with the cost-per-invoice at almost $16, manual processing can cost companies a lot of money.

1.  Find out how much you pay (on average) per invoice:

Everything is digital, no paper invoices Some invoices are on paper Even split between paper and paperless Most invoices are on paper All invoices are on paper.
$3 $6 $9 $12 $16

2.  Volume of invoices you process per month: ____________

3.  Now multiply those two numbers to find out your cost per month. $____________

If you process 2,000 invoices on average every month, you could save your company roughly $24,000 a month by switching from paper to automated paperless. Now that sounds like an AP Hero move!

Step Three: Identify and improve

Determine what your ultimate goal is. Cutting costs? Saving time? Greater visibility?

Look back to your audit and determine if any of the touch points in your current workflow can be removed or improved. In other words, does each step contribute to your bottom line? This is the part of the process where you could bring in other members of your team to get their opinions, too.

And a few more things to consider with your team:

  • How long would it take to implement the change?
  • How many people would need to be involved in the change?
  • How would this workflow change impact suppliers?
  • Do we have the support of executives?
  • Do we have the budget for improvement?

IV. Conclusion

Congratulations! You’re one step closer to becoming an AP Hero just by reading this article. We hope it helps you choose a better solution for your company.

Here’s the thing, not every company is the same. Some businesses don’t process enough invoices to need a fully automated process, but they can still automate some parts of their process. For example, you can still set up automatic timely payments even if you need your payments to be manually approved. The industry mostly offers end-to-end rather than piecemeal solutions, but that doesn’t mean you can’t make it work if that’s what you need.

When you propose these changes, explain that you won’t need to throw everything out and start over from scratch. You can always add on to your existing process, and enact changes one at a time. The “right” solution boils down to whatever is right for your team.

Rescue your department with the knowledge, tools, and experts they need to soar.  Earn your cape.

If Time is Money…What is the Real Cost of Your Transaction Processing?

Measuring the cost of your AP and AR processes is more than just a matter of dollars and cents…it’s also a matter of time. See how much time your transaction processes are costing your business.

Measuring the cost of your AP and AR processes is more than just a matter of dollars and cents…it’s also a matter of time.

When it comes to today’s global business environment, the tortoise and the hare fable is no longer applicable. “Slow and steady” doesn’t win the race…it just gets left behind. Staying ahead in that race to profitability and productivity relies on using technology, which is constantly evolving. This reality has left CFOs in a position where, although they play many roles, a primary responsibility is overseeing and controlling spend and managing the organization’s working capital. And that necessitates streamlining, digitizing, standardizing, and automating many of the finance functions, especially accounts payable and accounts receivable.

Maximizing time and talent

CFO publishes a monthly article based on metrics released by APQC research. May’s article, “Metric of the Month: Transaction Processing,” reveals the inordinate amount of labor and time spent on the steps within the transaction process. In their survey of 1,594 companies, APQC found that while top-performing companies spend 30 percent of their time on transaction processing, laggards (those at the bottom) spend approximately 56 percent of their time on the same tasks.

The article notes, “For years, CFOs have talked about the importance of moving finance out of the transaction-processing business and towards a more strategic role.” Companies often have a reservoir of talent within their finance sectors; talent that could work with data and analytics to help improve performance and achieve company goals. But spending time opening envelopes, keying in invoices, tracking approvals, and answering phone calls from suppliers looking for payment doesn’t leave much time for things like analytics and strategy. The key is to transform these time-consuming processes, to eliminate inefficiencies and thereby reduce costs.

Transforming processes, step by step:

  • Process standardization – Companies first need to map their existing processes in order to identify bottlenecks and redundancies, as well as which employees may require additional training. They also need to look throughout their organization to identify disparate finance data and systems and standardize those as well; seeking out holistic P2P solutions that can easily integrate with the company’s ERP system.
  • Process benchmarking – Once the problems have been identified, it’s essential that management create benchmarks to measure finance’s performance and progress. This means identifying reductions in time and cost realized through the steps taken and solutions implemented. This will also identify issues that are not improving and therefore indicate deeper problems that need to be addressed sooner rather than later.
  • Process improvement – If you limit yourself to simply standardizing processes while maintaining the manual component, you will not realize significant improvements. In order to substantially improve processes, a company would need to digitize and automate them. But just adopting any automated solution will not provide maximum benefits. Companies should look for a cloud-based solution, on either the AP or AR side, that provides real-time visibility into all transaction data and invoice and payment status. The solution should also include a robust analytics and data capture capability.

Calculate the savings in time

If you question how much savings can be realized through digitization and automation, the APQC research offers a stunning statistic. Just in the AR function alone, top performing organizations revealed that they receive 93 percent of their payments electronically or automatically. This enables these organizations to process $1 billion in AR revenue with only two employees, while low performers needed ten employees for the same task.

Assuming that those additional eight employees are valued, talented people, imagine what they can contribute in terms of better forecasting, performance analytics, and providing the data necessary for finance executives to gain greater control over spend management and working capital.

Do the numbers now with our easy-to-use ROI calculator to see what happens when you automate your financial processes.

5 Steps to Zero Touch Processing

5 Steps to Zero Touch Processing If you’re still processing invoices manually, maybe it’s time to institute a “hands off” policy. In the age of automation and at a time when companies are looking for ways to increase efficiency and decrease costs, Accounts Payable departments are evaluating the benefits of automating their invoice approval processes. Manual processes and multiple human touches decelerate the speed at which invoices are approved. This affects your ability to manage cash flow, decreases your discount capture, and can adversely affect your relationships with your suppliers. Late pay is never a prescription for good relations. Now imagine if you could accelerate your approval process by getting the number of human touches down…way down. With the right AP automation solution, you can accomplish this goal and many companies have already done so. In fact, an Aberdeen Group study, “AP Invoice Management in a Networked Economy,” estimates that best-in-class organizations can have between 70 to 80 percent of their invoices go through the approval process with no human touch…”zero touch.” There are 5 steps that an invoice goes through from the time it’s received until the moment payment goes out and at any one of those junctures, human error can intrude and create roadblocks. But digitizing and normalizing all data and automating the approval process makes those roadblocks disappear. Zero-touch, step by step

  1. E-invoicing – For suppliers who have signed on to your AP automation solution, their invoices are entered into the system where all data is standardized and normalized and begins its journey through the approval process without any processor opening an envelope or downloading a pdf. For suppliers who still to use paper or email, the right solution will offer a scan-and-capture capability that will render the invoice into an e-invoice.
  2. SmartRouting – Since the parameters have been set for formatting prior to implementation of a solution, the system will be able to discern the appropriate approver and send the e-invoice directly to that station, again with no human touch.
  3. Approval Workflow – For those invoices that require multiple or hierarchical approvals, the system will continue to directly move that e-invoice through the approval process. Pre-determining and configuring those approval controls means AP has to make no touches throughout the process
  4. 3-Way Matching – As in every part of life, nothing is perfect and not every invoice will be able to be sent, straight through to payment, with no human intervention. When an e-invoice enters this step in the process, it’s matched against the original PO and the Receipt of Goods. When setting up the system before implementation, you should determine what your “workable tolerances” are when it comes to your matching tools. Should the match fall within that tolerance, it will be sent straight through to your AP or ERP system for payment. Otherwise, an exception will be notified and the e-invoice will be routed to the authorized person for further action. That authorized person will either approve the e-invoice and re-send it through for payment, or will mark it for further action. It’s only at this point that any interaction and “touches” may occur.
  5. E-payments – ACH or virtual card payments can be sent directly into your supplier’s AR system. No paper checks to process. No envelopes to address. No postage to pay. NO TOUCH. Again, nothing is 100 percent. You may still have some suppliers who insist on paper checks. Make sure you work with a solution provider who can provide that service when necessary.

What’s not noted in the above steps is the enormous benefit to stakeholders, from procurement to AP to supplier that is a result of the 24/7 visibility into invoice status that an automated AP approval process allows. It all adds up to less errors, greater efficiencies, lower costs, more information, and faster payments. Download our webinar to see how Zero Touch Processing can help you plan, build, and optimize your invoice approval process.

How an Automated Accounts Payable Solution Can Make ERP Integration a Non-Issue

How an Automated Accounts Payable Solution Can Make ERP Integration a Non-Issue There are ways for your ERP and your automated AP solution to exchange data seamlessly, without the need for full integration. When companies start to consider implementing a third-party AP automation solution, they want one that integrates with their ERP system. But what if a solution works with your ERP system rather than fully integrating with it? Which serves your AP needs better? People traditionally think that when it comes to integration, you need to find a company that’s ERP-certified for your specific system so it can read the tables inside your ERP. What most companies don’t realize is: there is an integration process required to read tables that requires significant involvement from IT. And there can be a lengthy implementation process, so we’re talking about a significant outlay of time and money. In addition, you need to open a portal on your network so the AP automation system can read the tables in your ERP system for that specific AP solution. This can cause a red flag to pop up from a security perspective, due to the opening of network ports to outside solutions. If you’ve decided that this is still the way you want to go, consider this: upgrading your ERP will necessitate major changes in the AP solution and integration – and that means additional time and expense. Or even more of an issue…what if you totally change your ERP, say, from SAP to Oracle? This can happen during a merger or consolidation, or it can be due to a change precipitated by any number of executive decisions. The result is, if your AP automation solution provider is ERP certified and only reads the tables in a specific system, you essentially have to start from scratch…and potentially find a new provider. That’s definitely not an expense most companies want to absorb. So what’s the alternative? If you’re reluctant to give a third party direct access to your ERP system; if you anticipate ongoing upgrades; or if you’re just looking for a simplified implementation, without losing the benefits of AP automation, then you might want to look for a solution provider that’s essentially ERP-agnostic; one that gives you all of the services and functions your department needs through simple integration done through file sharing – and not reading tables directly in your ERP system. Working with the provider, you can establish a frequency and format that work for you, then share the files through a secure file transfer protocol, or sFTP, process. With this approach, your solution provider never touches your ERP. This may sound like a multi-step process but, in reality, it happens automatically with simple export files and scripts to automatically export and import the files. And, when it comes time to upgrade your ERP, a simple modification of the AP automation solution means no disruption in your invoice approval process –and only requires minor changes to the files being shared between the two solutions. A solution that utilizes file sharing requires minimal investment and, just as important, minimal involvement with your IT department. You’ll get all of the efficiency, accuracy, controlled cost, and visibility into data that you would from a solution that reads the tables in your ERP. It will take less time to implement, require little time from your IT resources, cost less to comply with ERP upgrades and keep a third party-provider from having direct access to your ERP system. Simply put, there is less risk due to the inevitable changes that face your company in the future. Get all the benefits you need from your AP automation solution without the need for full ERP integration.

5 Biggest Trends in Procure-to-Pay

A recent IOFM white paper, sponsored by Corcentric, follows the challenges and trends transforming the role of procure-to-pay in the enterprise. Every department in every business today needs to prove its value to the enterprise. Simply performing a function is no longer enough, especially when it comes to the finance functions of accounts payable and its interaction with procurement. These departments both need to become strategic players, providing the means for company growth and profitability. The APP2P Network of the Institute of Finance & Management (IOFM) recently published a white paper “The State of Procure-to-Pay in 2016,” that illustrates how the role of procure-to-pay has changed, due in part to globalization, advances in technology, and a growing focus on financial visibility and reporting. The paper identifies the five major trends in procure-to-pay.

  1. Migration to the cloud – One of the main concerns of companies looking to automate their AP departments was cost and time concerns. But the growth of Software-as-a-Service (SaaS) providers has made that concern all but disappear. Today’s cloud-based solutions need no upfront investment in hardware and software and require minimal involvement on the part of IT. Both customers and vendors benefit from this technology as many solutions include portals that give both buyers and sellers 24/7 visibility into their invoicing and payment status.
  2. Move to mobile devices to approve invoices. – The growth in PCs and laptops has been bypassed significantly by the growth in smartphones and tablets. As people depend more on these devices, they’ll need to be able to perform their job functions on those same devices. That includes invoice approval. According to the white paper, 37 percent of businesses expect to use a smartphone or tablet to capture supplier invoices within the next two years.
  3. Growth in purchase of goods electronically – Automation speeds up every part of the procure-to-pay process; that’s why 82 percent of respondents to an Ardent Partners survey now use e-procurement solutions. Automation cuts in half the average time to place a purchase order and more than doubles the number of POs now processed by FTEs. This practice also guarantees price validation and contract compliance and the normalization of POs, ASNs, and invoices.
  4. E-invoicing is now mainstream – Companies and their suppliers are acknowledging the value of electronic invoicing. That’s why it ranks among the highest priorities, according to the IOFM 2015 Accounts Payable Technology Survey. By streamlining the workflow approval process, approval times can be cut by over half. The same holds true for the cost of processing an invoice; e-invoicing cuts costs by more than half.
  5. Increased focus on reporting and analytics – Those in the C-suite are ultimately held responsible for the up or down trajectory of a company. That’s why an increasing number of those executives are now looking to analytics and reporting to give them more “precision and efficiency in working capital management, cash forecasting, period end close, and reconciliation and consolidation activity.” Automated procure-to-pay solutions include robust reporting and analytics for working capital management, regulatory compliance, auditing, and operational improvement.

Download the white paper today!

Procure-to-Pay 101: Defining Transaction Efficiency

Procure-to-Pay 101: Defining Transaction Efficiency Everyone talks about P2P, but what is the procure-to-pay process, really? What is Procure to Pay? When searching for a definition of the Procure-to-Pay (P2P) process, I found this in businessdictionary.com, “Procure-to-pay is the process of buying goods which includes the initial decision to make the purchase, the process of selecting the goods, and the transaction made to pay for the goods purchased.” Meanwhile, the Chartered Institute of Purchasing and Supply defines P2P as a “seamless process enabled by technology designed to speed up the process from point of order to payment.” Seems straightforward enough…essentially every B2B transaction that involves a buyer and a seller is a procure-to-pay process (aka, purchase-to-pay). But technology has transformed this process, starting with the tearing down of inefficient and time-consuming silos. In the past (and in the present for many companies), Procurement (those who order the goods) and Accounts Payable (those who pay the suppliers for those goods) rarely collaborated with one another. Each had their appointed tasks and their individual processes. By digitizing and automating processes for AP and Procurement, this has helped to create an automatic communication between the departments. Automating the Procure-to-Pay Process, Step by Step

  • When an electronic PO is generated by procurement, all the parties involved (procurement, AP, and supplier) have visibility into that PO and the subsequent actions (receipt of goods and invoices).
  • Suppliers then send invoices, either as e-invoices which automatically appear in the system, or as paper, fax, or other format which are scanned and the appropriate data is extracted and normalized. At this point, the invoices go through the accounts payable processes.
  • Matching the invoice to the PO and receipt of goods takes place within the system.
  • If matches are confirmed (within tolerances pre-set by procurement), the invoice is sent straight through to the company’s ERP system to process a payment.
  • Rules may have been stipulated that certain invoice amounts require higher level approvals. That approver would be automatically notified and, upon approval, the invoice would go into the ERP to process a payment.
  • Many P2P solutions also offer a payment component which can deliver electronic payments to suppliers once they’ve been approved.
  • Since all documentation and information are captured and stored within the system, AP has visibility into invoice status, allowing them to get better control of outgoing cash flow; procurement has visibility into supplier history, allowing them to negotiate contracts more effectively; and suppliers are able to see where their invoices are in the payment cycle.

Finding the right solution will enable you to streamline your entire procure-to-pay process flow for easier purchasing and faster processing of supplier invoices. Learn more about the Procure-to-Pay process and how automating it can help you optimize your cash flow.

Convincing Your Suppliers to Come Aboard with E-invoicing

Convincing Your Suppliers to Come Aboard with E-invoicing Now that you’ve automated your accounts payable processes and implemented e-invoicing, how do you get your suppliers to comply? Show them the benefits. Companies that exhibit reluctance to e-invoicing often cite the expected lack of compliance by suppliers as a primary reason for their concern. So being able to convince suppliers that they will also experience significant benefits by submitting their invoices electronically is a big step in moving the process along. We’ve talked before about the main benefits of e-invoicing: faster processing and approval cycles, reduced cost, greater accuracy, increased visibility, discount capture, and improved dispute handling. What suppliers need to realize is that they can also reap rewards from these same benefits, especially if the e-invoicing solution implemented by the customers includes a supplier portal. A supplier portal is, quite simply, a Web-based, self-service interface that automates invoice submission and allows suppliers to view invoice status and payment information, 24/7. Suppliers can now see for themselves which invoices have been received, which have been routed to the appropriate approvers, which are being held as exceptions, and which have been submitted for payment. That results in a marked decrease in phone calls to the AP department (which makes for a happier customer…and supplier). This also gives both parties the information they need to better manage their cash flow. So why the resistance? Let’s deal with a primary human characteristic…people, by and large, resist or fear change. But for suppliers, the resistance is more than just a reluctance to change (although that is still a factor). Additional barriers include potential fees, tech implementation, and a sudden lack of human contact. Depending on the e-invoicing solution implemented, a supplier’s resistance can be mitigated. Fees: Suppliers don’t want to pay to submit their invoices. Force them into that situation and they’ll stay with the status quo. Some supplier e-invoicing models require suppliers to pay a percentage of spend; some require a flat monthly fee; but the path of least resistance tends towards those e-invoicing models where suppliers pay nothing. Make sure when evaluating a solution, there’s no charge to suppliers. Tech Implementation: Hardware, software, training: these are all expenditures that suppliers don’t want to incur, especially since many of them are still comfortable with using paper invoices. A cloud-based, SaaS solution eliminates the first two concerns, since there’s no cash outlay necessary. Confirm that the solution you’re considering includes onboarding and training suppliers to use the system, and that the solution is easy-to-learn and easy-to-use. Human Contact: Some people just like to talk to other people. No automation solution can answer that need; but that’s not the purpose of business. Suppliers, like their customers, look at the bottom line, not at social interaction. Time spent on the phone tracking down payments or discussing disputes is time likely not spent on more productive tasks. Here’s a fact that you should remember and suppliers need to realize. The business world is changing; supply chains are often global in nature; and throughout a growing part of the world, e-invoicing is mandated. So whether your suppliers like it or not, e-invoicing may well become a significant part of their business dealings. The important thing is for you to communicate with your suppliers early on, to relieve their fears and concerns, and to convince them of the benefits they’ll realize. One of the ways to allay fear is to remind suppliers that many are already submitting invoices electronically as PDFs or TIFs, so they’re already part of the way towards full e-invoicing. Success, however, will likely depend on which accounts payable automation solution you choose, so make sure of the following when talking with your provider:

  • Supplier portal is included
  • No charge to suppliers
  • New suppliers are easily added
  • Easy to implement and use
  • Secure log-in for vendors
  • 24/7 visibility

If the solution includes all of the above, you could be well on your way to breaking down the barriers your suppliers have built and giving them the all clear to come aboard. Learn more about e-invoicing and supplier networks.

Group Purchasing Organizations Provide Great Procurement Opportunities

group purchasing image   Membership in a Group Purchasing Organization (GPO), as part of your supply chain strategy, can have multiple advantages for your procurement department…and your overall business. You can add to the old ‘safety in numbers’ adage, ‘purchasing power in numbers.’ In a time when procurement managers are dealing with shrinking margins, increased competition, and the need to  negotiate more advantageous terms and prices, GPOs (also known as co-ops, buying groups, consortiums, and other terms) give companies of all sizes a chance to compete with their largest competitors. By aggregating the purchasing power of large groups of customers, a successful GPO is able to negotiate competitive pricing from multiple vendors for a wide variety of products and services. In addition, since all billing is centralized through the GPO, your invoice and payment processes become more efficient and less labor-intensive. Usually one check covers all of your purchases. GPOs are hardly a recent phenomenon. In 1910, the first healthcare GPO was created in New York and healthcare has been a dominant participant in this type of procurement ever since. Today, many different industries are taking advantage of these groups, especially in the food, industrial manufacturing, and legal sectors. And, although the perception is that smaller businesses would benefit the most from this manner of procurement, a Spend Matters study found that 15-20% of Fortune 1000 companies avail themselves of some form of buying consortium. So why isn’t every business “buying into” a buying group? It seems like a no-brainer. Someone outside of your organization is doing the sourcing, contract management, supplier management, and payments for you, while leveraging the purchasing power of the group to get better pricing than you could get on your own. This is especially true when it comes to indirect spend. Often decentralized and fragmented, these operational expenditures can take a disproportionate amount of time to oversee, affecting the amount of time you need to focus on negotiating your direct spend. Yet, there are a number of issues that make procurement teams reticent about joining a GPO; among these, a sense that no one can negotiate as well as you and your team; that the supplier base is limited to those vendors the GPO has contracted with; that pricing may not be the same throughout different regions of the country; and that new hardware and software may be needed, which will entail significant IT involvement. Breaking down the barriers For each of the concerns listed above that may cause companies to be overly cautious about joining a GPO, there are easy assurances. First and foremost, before anything else, you need to make sure that the buying group you join has enough members to allow for significant savings. But once you’ve done that, here are the answers to any reservations:

  • I can negotiate better on my own – Maybe you’re a great negotiator, but is the best use of your time negotiating and managing contracts with hundreds of different vendors involving myriad products and services? A good GPO has a supply management team with domain expertise in a wide variety of areas and good relationships with many large suppliers. No matter how good you are, it’s going to be hard to compete with the volume buys made by large corporations and buying groups. And when exceptions or disputes arise, the GPO has the responsibility of resolving any issues.
  • Supplier base is limited – Since GPOs regularly represent companies across the entire country, they traditionally negotiate contracts with suppliers that have distribution capability that covers that wide a range. That encompasses most major suppliers, and probably involves most of the products and services you need, including office and warehouse supplies, uniforms, MROs, travel, and more. Will there be the one-off you need to handle on your own? Yes, but those should be few and far between.
  • Pricing may not be the same for everyone and everywhere – With contract pricing and price file validation, members get consistent pricing every time they purchase from an approved supplier, regardless of where the purchase is made. And this reliability allows procurement specialists to accurately forecast spend.
  • New hardware and software are needed, which means high upfront costs – Since members’ ERP systems are connected to the GPO’s technology platform, there is no need for any investment in IT and manpower. You are able to make straight-through purchases with suppliers, just as you always have, except now you don’t have to validate pricing, search for documentation, go through multiple levels of invoice approval, handle disputes, and manage rebates. It’s all done for you. You just place the order and make one payment.

There are two additional benefits to being a member of a GPO. First, their technology platform gives you access to valuable analytics and insight. With the full visibility these platforms provide, you’ll now know what you’re spending, month over month, year over year, and that gives you the ability to forecast. Second, you bid a fond farewell to the inefficiency, inaccuracy, and cost of paper, from purchase orders to payment, you’ll be paper-free. See how a GPO can give you the purchasing power you’ve been looking for. This original post can be found on the AmeriQuest Blog Website.