The old adage is familiar: The light at the end of the tunnel could be daylight — or another train headed one’s way.
When it comes to invoicing, micromanagement stands in the way of corporate progress, and is the false light at the end of the tunnel. Nowhere is that more apparent than when the CEO or other executive in charge of approving transactions examines every invoice, whether in paper form crossing their desk or through emailed PDFs. Micromanagement, in short, leads to friction in the payables process, and throws a wrench into efficient cash flow management.
In an interview with Karen Webster, Matt Clark, president and chief operating officer of Corcentric, said changing the mindset of and approach to invoicing is a significant issue for many companies.
“The longer a company has been in business, the bigger this issue is,” he said. “You have this ingrained mindset that takes hold of how things are done, especially back-office processes. If there’s not an acute pain being felt, and it’s more of [a] soft-dollar savings (or, at least, is viewed that way), it is hard to overcome the inertia that exists.”
The pain builds up within the organization, and has ripple effects on suppliers, vendors and other payees, Webster noted, especially as payments are delayed. To move forward, said Clark, education is key — which means informing the CEOs, chief financial officers and controllers that, with technology and automation, there are better ways to speed the procure-to-pay cycle.
“I talk about education from the perspective that you don’t know what you don’t know,” said Clark. “And, in many cases, they do not know there is a better way, and don’t realize the positive impact that better way can have on staff, and the effectiveness and health of their supplier relationships.”
After all, reputation matters across the whole supply chain, he noted, including whether or not it is easy to do business with a customer or supplier. This can affect everything about a B2B relationship, even how goods and services are priced.
The relationships between buyers and suppliers have become much more collaborative in the digital age, Clark added. In the past, larger suppliers and customers were able to dictate the terms of payments and processes by sheer leverage — a “hammer-and-nail” approach that served no one well.
There are inherent differences between B2C and B2B transactions, he noted. In the case of the latter, B2B transactions are relatively complex.
Now, he said, technology fosters the ease of doing business across both parties, and helps information flow bi-directionally in an efficient manner, boosting transparency into everything from shipments to invoicing to payments. In other words, that means digitizing instructions, authorization and all the steps that lead up to payments.
“You eliminate the ping-ponging of phone calls and emails, which does not do any good,” Clark told Webster.
The collaborative effort can be seen internally at many firms, too, he noted — especially between the procurement and finance departments. The silos are breaking down, and joint efforts mean all parts of the procure-to-pay cycle are mapped out with precision and forethought.
When asked about the triggering events that may lead to a firm’s self-examination of in-place processes, Clark pointed to envy.
“Executives are acutely aware of what their competitors are doing in a given industry,” he said. “They may hire away employees from a competitor, and perhaps they gain some intelligence into what that peer has been doing, including what automation they have in place. Now, the executive is sitting there with a known competitive disadvantage. That doesn’t last very long; … that leads to action. Companies want at least a level playing field, and do not want to be three or four steps behind.”
There’s at least some acknowledgement that change is necessary: As found in the Invoice Processing edition of PYMNTS’ Payables Friction Playbook, more than 67 percent of firms surveyed are interested in invoice innovations that reduce manual processes.
Fear Of Change
Yet, for now, and in some corners of the B2B arena, the inertia remains. The drive to approve invoices through manual means points to a worry that control is delegated away.
As Clark said, “A CEO’s mindset is, ‘I want to know how every dollar, theoretically, is going out the door.’”
However, he noted, Corcentric and other firms strive to point out that tech-enabled, digital solutions — those that track and match invoicing, authorization and spend — can be much more effective for cash management, especially when it comes to spotting anomalies across thousands of payments done monthly.
Even companies that have seen and embraced the benefits of automation are looking for more of the same, he added. Then, the attention shifts from simply cutting costs to leveraging the power of data and analytics well beyond the purview of the final stages of the payables process.
“When customers have gotten down from 10 processes to four, you can only imagine the positive impacts they see,” Clark said. “So then, they start thinking ‘Okay, how do we do this in other areas, and scale automation further, deeper and wider in our organization?’”
The firm that plans to grow revenues by, say, 10 percent to 20 percent over the next few months (maybe even by acquisition) will have to manage the cost of that growth.
“There has to be a holistic view of all parts of the source-to-pay process,” said Clark, “including figuring out where optimization can take place at every step along the way.”