Business process management software maker Global 360s VP for Asia Pacific, Lloyd Parata spoke to Computerworld Singapore recently about the finer points of what he calls financial supply management and the transformative power of accounts payable management.
Computerworld Singapore: Why the heightened interest in financial supply management today?
Lloyd Parata: In the current economy, visibility and control over the processes that drive a company's cash, accounts, net performance and working capital have never been more critical. And while inventory and receivables continue to be important levers for cash flow, cost-cutting demands are causing this renewed focus on financial supply management.
What are enterprises doing to improve their financial supply management?
Companies are taking the opportunity now to improve their procurement to payment process by transforming accounts payable, A/P. Those that are successful will make a significant contribution to cash flow and the bottom line.
Why the focus on accounts payable?
When it comes to buying goods and services, businesses face significant, costly, and flawed A/P processes, so improvements there can have a big impact for the corporation. Consider that accounts payable professionals process more than a billion business-to-business invoices each week, and 97 per cent of those are still processed manually. The average cost to process and pay a supplier invoice is between US$5 and US$15, with ten per cent processed too late to be paid within discounting terms, and nearly two per cent containing errors. Not only do these manual processes slow down productivity across the entire organisation, long cycle times mean late payment penalties and an inability to take advantage of negotiated payment discounts.
Improvements in the A/P process itself, and better integration across functions in procure-to-pay, can help companies achieve a much higher degree of reliability and confidence in supply decisions, as well as lower their costs and maximise service delivery.
How does the current global recession affect the way organisations today run the A/P process?
Most organisations have negotiated favourable terms and prompt payment discounts from their vendors, often two to three per cent. The recession has further strengthened negotiating positions according to a recent global study done by independent researcher Loudhouse across Chief Purchasing officers and directors of large organisations. In fact, four out of five purchasing professionals they surveyed have seen unexpected supply management opportunities as a result of the economic downturn. More than 50 per cent believe they are now in a stronger negotiating position with suppliers and 48 per cent state they have more flexibility when it comes to reviewing existing contracts.
Yet organisations find that they are unable to actually process invoices within the designated time period and qualify for negotiated discounts. Further, the majority are unable to systematically prioritise invoice processing to ensure those with favoirable terms are processed first.
What should enterprises be doing to fix these problems?
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