EXECUTIVE SUMMARY
For many organizations the order-to-pay cycle is still littered with
paper. Checks are the favored payment method, while the majority
of invoices continue to be paper-based. But, with the advances in
technology, all that is changing, and for companies looking to make
their order-to-pay cycle more efficient, the tools available are much
more sophisticated than in the past.
Companies are facing a challenging business environment with
lower revenue growth and demanding shareholders which are
driving management to push for cost savings through process
improvements. As a result, more organizations are tackling process
automation projects in payables, putting treasurers on notice to help
deliver results. So why isn’t it easier for them to automate?
While organizations focus on vital success drivers like technology,
internal change management, cost structure, and coordination with
internal stakeholders, they often neglect a key stakeholder — the
supplier. Being able to gain the acceptance and participation of
suppliers (also known as enablement) and leveraging supplier
networks to drive enablement are crucial keys to success.
TAblE of ConTEnTS
Barriers to Automation . . . 2
Overcoming the Barriers . . 2
Know Your Suppliers . . . . . 4
Making the Move . . . . . . . 4
Choosing a Provider . . . . . 5
Conclusion. . . . . . . . . . . . 5
Driving automation in the payables processSupplier enablement and supplier networks
JUNE 2012
DriviNg AUtOMAtiON iN thE PAYABlES PrOCESS. 2
bARRIERS To AUToMATIon
While there are many internal barriers to automation, often the greatest obstacle
for companies wishing to adopt electronic payables solutions (such as card or
ACh) is reluctance to participate on the part of their suppliers. For suppliers
accustomed to receiving checks, paper purchase orders and mailing invoices,
stepping outside the comfort zone can be unappealing. Factors of suppliers’
resistance to accept electronic payables may include concern or unwillingness to
give out bank account details, cost associated with certain electronic payment
vehicles, belief that electronic payments appearing in the account may not
give enough remittance data to identify what the payment is for, familiarity with
receiving paper documents, or simply reluctance to change processes that have
been in place for years.
Even where suppliers are aware of the benefits of electronic payments and
invoices in principle, they may have reservations about the practical requirements
of managing such a project. in particular, they may be concerned about the
technical resources that may be needed to enable their accounts receivable
systems to send electronic invoices or receive electronic payments — particularly
when the supplier is a small or medium sized organization.
Aside from supplier reluctance, organizations aiming to put in place electronic
order-to-pay processes may encounter other obstacles. the organization may feel
that they have insufficient technical resources available, or may perceive that
they lack the resources needed to engage suppliers in order to set up electronic
processing. the inability to exchange the right electronic information with the
payment or invoice is another often-cited concern.
oVERCoMInG THE bARRIERS
Organizations can draw upon different tools and techniques designed to
make the transition to electronic order-to-pay smoother for their own benefit
and their suppliers’.
the first key is choosing the right solution and ensuring that it fits with the
existing infrastructure and provides options to meet organizational requirements.
Modular and flexible
As it resources are often a constraint from the purchasing organization’s point
of view, best in class solutions provide flexibility in terms of how clients can
integrate by supporting a variety of format types for the sending and receiving of
payables data. these solutions can be implemented regardless of the Accounts
Payables or ErP system an organization is leveraging. Solutions should also
provide options to support specific business processes and goals. A modular
DriviNg AUtOMAtiON iN thE PAYABlES PrOCESS. 3
solution will allow organizations to automate the parts of the payables process
that have been identified as a key area of focus. this allows the potential to
automate the payment processes, while building a foundation on a solution that
gives the ability to add on electronic invoicing with online approval workflow and
early payment discounting.
Outside of decisions on providers and integration, successful electronic
order-to-pay migration is dependent on supplier enablement.
1. offer multiple options to meet supplier needs
Where electronic payments and invoicing are concerned, there is no one-size-fits-
all. Different suppliers have different needs — while the buyer may wish to make
as many payments by card as possible, the cost to suppliers may mean that
only a small percentage of them are willing to accept card payments. As such,
companies wishing to move as many suppliers as possible to electronic payments
should incorporate ACh and wire payment options into their program — as well as,
inevitably, checks. the chosen solution should also give the supplier multiple ways
to invoice electronically including manual invoice templates, the ability to create
an invoice from an electronic Purchase Order they have received along with file
uploads and transmissions of invoice data.
2. Simplify supplier enrollment
As previously mentioned, getting suppliers on board is typically the biggest issue
that companies face, both for electronic payments and e-invoicing. technology
has a tendency to drive solution selection, but it is just as important to identify
a provider with experience and expertise in marketing to suppliers. in order to
facilitate the process, best in class providers offer services designed to identify,
engage and onboard suppliers — on behalf of the client. Marketing campaigns
should include such activities as online education and enrollment sites for
suppliers along with e-mail, letters or phone calls to suppliers to introduce your
new electronic payables program to suppliers.
3. Access your provider’s network
Some payment providers manage a network of suppliers which are already set up
to do electronic processing. By tapping into this network, purchasing companies
can identify which of their suppliers are already receiving electronic payments or
sending electronic invoices. this allows for quicker adoption and lower costs for
a project and gives suppliers a platform that they can use for multiple buyers.
the best networks will have thousands of active suppliers transacting business
over the network and come at little or no cost to the supplier.
DriviNg AUtOMAtiON iN thE PAYABlES PrOCESS. 4
KnoW YoUR SUPPlIERS
When it comes to implementing an automation program, it is essential to give full
consideration to how suppliers will be brought on board. Performing a deep spend
analysis is invaluable: companies should take the time to understand factors such
as how much an individual supplier is paid, which payment method is currently
used, which suppliers accept cards, and which ones require financing.
By answering these questions, companies can segment their suppliers into
different ‘buckets’ and then devise a suitable strategy for each bucket, rather
than attempting to deal with the whole supplier base in the same way. Clearly,
suppliers that already accept card payments are the easiest to onboard in a
new card program. Suppliers currently paid by check that offer early payment
discounts would be ideal candidates for enrollment in a card program.
Meanwhile, other suppliers currently paid by check might be unsuitable for card
payments for a number of reasons — they might be averse to accept cards, or the
size of the spend might be too great for this payment type — but those suppliers
might nevertheless be suitable for another type of electronic payment.
the more information that can be gathered up-front, the more strategically
suppliers can be segmented. For example, once suppliers have been classified
as eligible for a card program other factors might come into play: some of the
suppliers might be taken out of the invoicing process altogether, while others
may still need to send invoices and might therefore be suitable for inclusion
in an e-invoicing program. Meanwhile, suppliers that are found to be good
candidates for e-invoicing might be included in a supply chain finance program.
As this level of analytics can be labor-intensive for the organization to undertake
on its own, it may be more effective to outsource the task to a third party which
can analyze the organization’s annual spend. Some banking providers can draw
upon their own intelligence database or network in order to source much of the
necessary information, such as the payment types that particular suppliers are
willing to accept. the same network can also be leveraged for the e-invoicing
program and potentially an early payment discount program.
MAKInG THE MoVE
Once the decision has been made to proceed and automate the order-to-pay
cycle, organizations must decide how to approach the project. By looking at the
order-to-pay cycle and the options available on a holistic basis, organizations are
in a better position to identify the biggest areas of opportunity or the biggest
pain points, and to make a more informed decision about the best approach.
For many, a best practice might be to automate payments first using cards and
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DriviNg AUtOMAtiON iN thE PAYABlES PrOCESS. 5
ACh payments, as this area tends to involve fewer stakeholders and may be
an easier project to complete successfully. Once this has been achieved, the
organization can then look at implementing an e-invoicing solution.
it is important to maintain good communication with internal stakeholders to
align goals. getting buy-in from executive management is equally important
and can be supported by communicating the quantifiable goals and savings
potential of the project and providing regular updates on its achievements.
CHooSInG A PRoVIDER
When looking for a provider, organizations should focus on the strength of
the provider’s existing supplier network and their track record at bringing new
suppliers into the network. While a supplier network will never contain every
supplier the organization wishes to bring on board, the provider should have a
documented and proven methodology for contacting and educating suppliers on
the benefits of joining their network and a quick and easy way for suppliers to
sign up. A key point of differentiation is that some providers charge suppliers a
fee for joining their supplier networks, which can be a significant barrier to entry.
ConClUSIon
A full scale order-to-pay automation project can be transformational for your
business and have significant positive impact to your cost structure and ability
to manage working capital. With checks and paper invoices declining steadily,
suppliers are becoming increasingly comfortable with automated solutions.
there are many providers that offer a comprehensive range of products and
expertise to support these projects. Whichever approach an organization
ultimately takes; looking at the order-to-pay cycle holistically from the outset
will allow the organization to identify the areas that most need to be addressed
and the greatest potential benefits.
KEY PROVIDER ATTRIBUTES
FOR SUPPLIER ENABLEMENT
Strong existing supplier network
No charge to suppliers for joining
supplier network
Proven track record at bringing new
suppliers into the network
Documented methodology for
supplier outreach and marketing
Simple process to on-board
suppliers into the network
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