In an era where cars now drive themselves and robots are exploring the surface of Mars, one has to wonder how many companies are still relying on paper-based processes to run their day-to-day operations.
How can companies rely on such an antiquated system in a time of such rapid technological development?
The European Union has tried to address this by creating a ‘Digital Agenda’, which will include shifting paper-based P2P processes to digital by 2020. One of the aims is to roll out broad-scale adoption of electronic invoicing – which can only be good news for Europe’s SMBs.
Currently, poor controlled cash management via inefficient Purchase-to-Pay processes poses a real and costly challenge to SMBs. Generally speaking, P2P is split into two areas: the purchasing process, where goods and services are requested and arranged, and then the process of receiving and paying for them via the accounts payable (AP).
Why SMBs are at risk
Managing paper-based documents for P2P activities require physical filing systems and paper archives, as well as hard drives or a complex intranet set-up. This not only increases manual data input, it also increases the risk of errors and a sequence of minor mistakes can gradually spiral out of control and result in escalated costs –harmful for a budding business.
One of the serious costs SMBs face comes from a lack of visibility. As a result, getting an overview on upcoming payments and cash outflow in real time is practically impossible.
Consequently, a lack of accurate real time information means SMBs are unable to plan cash flow reliably. If missing information leads to late payments, SMBs could face penalties. The biggest cost here though, can be disgruntled suppliers and damaged business relations.
Precious time and money spent (and lost) on lengthy paper admin means SMB leaders can’t fully focus their attention and funds on the right areas, which will eventually affect profitability. One of the biggest frustrations for business owners is dedicating time to admin, with nearly a third admitting that they spend too much of their time on paperwork instead of generating new business*.
Awareness is the key
Opting for automated P2P means opting for reduced costs. By improving internal visibility and accessibility of financial information, operations can be boosted. A web-based P2P platform can act as a central secure network for everyone to access, from procurement to AP, and manage accordingly.
SMBs can benefit from this complete overview with the live analytics and reporting tools that leverage the link between procurement, finance and IT processes under the one shared network. It aligns the vendor’s invoice, the purchase order and the receiving report automatically in real time, giving workers the opportunity to review the cash flow and general business activities.
In this ‘marketplace’, procurement processes can be carried out much more effectively. The optimised workflows are easily populated and shared, and thus comparisons and decisions can be made much quicker.
This will not only boost security across the sensitive financial data and files, it allows employees to work flexibly and remotely, as they can tap into the platform from any location.
Automating the P2P process reduces admin costs through optimised processing, particularly in AP. For instance, key invoice data (which can be received from multiple sources in both digital and paper format) can be automatically extracted via Optical Character Recognition (OCR) technology. Once the invoice data is digitally captured, its handling can be automated for straight through processing up to the final posting into the Enterprise Resource Planning (ERP) system - achieving faster payment approval cycles.
Seize the day
If the P2P process can be accessed and monitored instantly, behaviours will change for the better. Internal productivity will be enhanced, with time being spent on the right projects instead of the paper trail.
P2P technology can provide a growing business with a wealth of data and insights, which will build up knowledge, increase awareness of business activity, and inform key planning and strategy. Most importantly, spiralling costs related to poor cash control will be a thing of the past.
Entrepreneurs start their SMBs up with a ‘Carpe Diem’ style of thinking, and to put simply, automated P2P frees up the day so it can be seized.
* ICM research on behalf of Canon based on SMBs and SoHos in Europe, 2014