Procurement processes don’t begin and end with a purchase or a payment. For large corporates working with hundreds, sometimes thousands of manufacturers, the procure-to-pay processes is a long, drawn-out one, with plenty of room for data bottlenecks, errors and late payments.
For organizations’ direct spend needs, supplier collaboration is an increasingly critical part of smoothing out those friction points. In a recent interview with PYMNTS, SourceDay founder and CEO Tom Kieley explained why buyer-supplier connectivity — in real-time — is essential for the entire direct spend and procurement process, from sourcing through to payment and beyond.
From Quote To Pay
The the beginning of the procure-to-pay spectrum, there’s the request-for-quote (RFQ) process, for example. According to Kieley, even large, multinational organizations not yet large enough to deploy SAP or Oracle ERPs continue to rely on manual quote management processes.
“Our customers were managing RFQs and quoting in Excel sheets,” he said. “There was no visibility, no historical tracking or recording against what suppliers had quoted, and it was really challenging, from a management standpoint, to consolidate supplier responses.”
The RFQ process is about more than finding vendors with the most affordable offer, he noted. It involves assessing and comparing lead times, delivery schedules, product quality and more.
At the other end of the spectrum is the payment process, again traditionally riddled with friction points as companies are often forced to rely on manual processes to match data between an invoice, a receipt, and a purchase order in preparation to pay the vendor and generate an invoice voucher. Often, said Kieley, that manual process leads to errors that can slow down the process through which companies pay their invoices.
Automation’s Bottom Line Impact
The financial consequences of manual RFQ and accounts payable processes can be significant.
The most obvious impact on the bottom line includes automation’s ability to provide greater visibility into vendor quotes for companies to better analyze their price options. Accelerating the invoice-receipt-PO matching and invoice voucher generation process also leads to faster payments to suppliers — and the ability for businesses to capture early payment discounts.
But there are less obvious ways that automation in the procure-to-pay process can boost bottom lines.
One of organizations’ largest challenges in direct spend, Kieley explained, is in their tendency to keep capital stuck in inventory. Greater visibility in the RFQ process means greater ability to assess vendors’ lead time track records, and greater predictability into delivery reliability.
“Fluctuations will create a dynamic lead time that is ever-changing,” Kieley said. “Buyers overcompensate for those unknowns simply by over-buying — which means they have cash sitting in inventory, where they potentially might not ever need it. They know the supplier can be unpredictable on delivery, so rather than get caught without a part, they want to make sure they have it.”
Kieley also pointed to the tendency for manual matching to cause businesses to overpay on their invoices, which creates a greater procedural burden when they try to recover those costs — or forces companies to simply write that overpayment off as a loss entirely.
From Vendor To Partner
SourceDay is working to round out its procure-to-pay offering, having recently added RFQ and AP Collaboration capabilities to its service suite — with plans to integrate payment functionality some time next year, said Kieley.
While automation is essential to accelerating processes and even saving buyers money, he also emphasized the impact that real-time collaboration has on unlocking capital for both buyers and suppliers as B2B relationships become more strategic.
“Buyers are looking at suppliers more as partners, rather than just vendors,” he explained. “They’re more prescriptive with how they want to collaborate, and bring those partners closer to their business.”
Facilitating real-time visibility into procure-to-pay processes for both buyers and suppliers supports faster, more accurate payments to suppliers, which can further cement a strategic relationship between trading partners.
At a broader level, said Kieley, real-time collaborative capabilities can not only lead to faster supplier payments, or more predictable lead times and deliveries, it ensures business partners are on the same page and can be held accountable for the agreements made to each other.
“There are a lot of sourcing tools in the world, and a lot of AP automation tools in the world,” he said, adding that for SourceDay, real-time collaboration is the differentiator between a process-driven platform, and one that promotes strategic buyer-supplier relationships. “The ability to have accountability on both sides — not just the customer or the supplier — drives hard dollar value to organizations on both ends.”