The Advantage Of Moving B2B Procurement To The Cloud

Procurement is due for a digital makeover — away from manual processes as well as paper-based communications and payments.

Mohammed Kafil, senior product manager at Kissflow, told PYMNTS that the cloud can help smooth that transformation for enterprises.

At a high level, procure-to-pay (P2P) exists as a workflow that involves significant collaboration, both across internal enterprise departments and between the enterprise and its supplier partners.

That collaboration can face challenges due to a lack of collaboration, he said.

“While most companies focus on digitizing only their side of business activities, it solves only a part of a bigger problem. So it is essential to bring your suppliers into your digital transformation journey as well,” Kafil said.

When suppliers are spread across countries, interactions become evermore virtual and there are more chances for the relationship to turn transactional rather than strategic. This re-emphasizes the need for a digital procurement system, he said.

Increasing The Throughput

“Compared to processing invoices manually, eInvoicing increases efficiency and throughput by ten times,” Kafil told PYMNTS. “In P2P, if teams are handling everything manually, moving to a cloud procurement system enables eInvoicing and improves the overall efficiency, frees up the AP [accounts payable] team to focus on value-added activities like working capital management and treasury services instead of AP settlement activities.”

The interview came against the backdrop where the software as a service company said earlier this month that it had debuted its Kissflow Procurement Cloud (KPC), a cloud-based P2P solution. The solution, the firm has said, targets small to mid-sized firms that want to streamline and automate procurement activities.

Procurement teams, Kafil said, need to move away from enterprise resource planning (ERP)-based settlements and clearinghouse systems and instead embrace “unified payment interface systems that can leverage real-time API [application programming interface] integrations.”

In terms of mechanics, the solution, according to Kafil, offers pre-built functionality but is also customizable. Users can choose between reconciliation options that span two-way and three-way matching. OK-to-Pay invoices are sent to ERP systems for actual payment.

Asked by PYMNTS why customization is important, Kafil said that, in general, cloud-based P2P software offers a standardized way to optimize procure-to-pay workstreams in an organization.

“However, it does not account for real-time process deviations that occur for multiple reasons. Instead, it forces procurement teams to live with product limitations,” he said. Low-code and no-code platforms (Kissflow’s offering stands among them), can offer both out-of-the-box and customizable options that can change as companies, for example, change their bid and buy processes.

For example, in sourcing, typical out-of-the-box tools preempt a template for the bid and buy process without accounting for real-life deviations such as a digital provision to capture negotiated price on top of the best bid.

Customization involves the ability to build product suites to match customers’ business needs and to apply module-specific learnings and capabilities across spectrums of work, he said.

Digitizing transactions takes an organization one step closer to its digital transformation goals, Kafil maintained. Electronic settlements also provide users with an audit log and timestamp for future investigations.

“This will be a key differentiator in terms of establishing mutually beneficial, efficient and trustworthy business activities across the trading parties,” he said.

The cross-dialogue improves as transaction records can be cross-referenced with the invoice settlement records and can help firms assess certain metrics like parameters for time taken to settle, successful first-time settlements and bounce back rates.

These data points become very helpful in predicting annual working capital requirements and pattern analysis at the transaction level, he told PYMNTS.

The Efficiencies

With a nod towards the streamlining that automation brings, he noted that a single full-time equivalent (FTE) employee can handle more than 30,000 invoices per year if the organization uses eInvoicing.

“However, the efficiency should not outweigh the risks and compliance with the law of the land,” he added. “It is a welcome move that many countries are adopting digital invoice systems.”