Automating the P2P process with document management

21 December 2011

By Julian Buck,
managing director,
Version One

Amidst a turbulent economic climate, UK businesses are looking at ways to cut costs while ensuring greater control over spending. Procurement is under close scrutiny in many UK organisations, however somewhat surprisingly, some companies’ procure to pay (P2P) processes remain paper heavy and labour- intensive. As well as proving costly and manually-intensive, P2P processes are inefficient, open to errors, vulnerable to fraud and do not provide the necessary controls to ensure smart and cost-effective procurement.

To ensure greater control over P2P, manual processes need to be replaced with automated procurement solutions, such as document management and imaging systems. They deliver a multitude of benefits from cost and efficiency savings through to the elimination of maverick spending.

Manual procure-to-pay

The P2P process varies from organisation to organisation. However a typical P2P process involves raising a purchase order (PO), authorising the PO, sourcing and selecting the goods/services, provision of the PO to the chosen supplier, receipt of the goods/services, receipt and authorisation of the supplier invoice and then paying the supplier.

This procurement cycle can prove labour intensive with organisations typically printing and circulating paper POs and supplier invoices for authorisation. These are often physically signed and returned to the requisitioner or the procurement/finance department for actioning. Printing, photocopying, posting and filing reams of paper documents is not unusual during the P2P process.

The purchase invoice processing stage alone is surprisingly expensive, costing as much as £50 per transaction. Receiving purchase invoices into the organisation, entering the data into the accounting system, photocopying the invoices for the files, sending paper invoices around the business for authorisation, returning these invoices to accounts payable for payment and sending out remittance slips can all prove extremely costly. These manually-intensive processes are also leaving organisations vulnerable to inefficiencies, errors and fraud.

Automating P2P with document management

The P2P process can be automated significantly using electronic document management and imaging solutions that are tightly integrated with the organisation’s accounting or enterprise resource planning (ERP) system.

These solutions enable the electronic creation, delivery, authorisation, processing and storage of documents and can be used to effectively authorise POs, process supplier invoices and communicate with suppliers.

When a purchase invoice arrives into the organisation, it can be scanned and automatically tagged to the appropriate record in the finance system. Optical character recognition (OCR) technology reads and verifies the data on the invoice before being uploaded to the core finance system, reducing manual data entry by up to 80 per cent and the associated errors. At the same time, using authorisation software and pre-defined authorisation routes, the imaged invoices are automatically emailed to the relevant approvers for them to approve, reject or query on-screen (or on their smart mobile devices). The approvers can also view all associated documents on-screen such as purchase orders and proof of deliveries to aid invoice authorisation. Once the invoices have been authorised, the finance department can pay the suppliers (ideally using electronic payment technology) and a remittance advice can be automatically generated and emailed to the supplier advising them of payment.

By automating the supplier invoice process using document management software, the production, circulation and duplication of paper is eliminated. As well as cutting costs (due to the eradication of pre-printed stationery, photocopying, printing, storage and postage costs), staff are no-longer occupied with mundane administration tasks such as producing and posting copy invoices. This enables them to be redeployed on more value-adding tasks. Taking full advantage of the workforce’s skills and knowledge while minimising the number of mundane administrative tasks, is especially important during a time when people are nervous about job security.

Benefits of automating procurement with document management

The decision to go down the automated procurement route using document management and imaging removes time-consuming administration and paper-intensive P2P processes. However, this is just the tip of the iceberg. These solutions can deliver a multitude of organisational benefits, including the following:

Cost cutting and greater control over spend

Savings can be realised by automating procurement and ensuring greater control over purchases. Stationery, printing, photocopying and postage costs can be significantly reduced by moving to electronic document management with many organisations enjoying thousands of pounds of cost savings every year. Most organisations that have implemented document management report a payback within just six months.

In addition, automation means that all spend is documented and there is an audit trail of who has raised which purchase orders, who has approved what, the goods bought and when the payment was made. Having total visibility of spend leads to much greater control over procurement, smarter procurement decisions and reduced maverick spend.

More efficient purchasing

Less administration and manual intervention throughout the procurement process results in more efficient purchasing. Purchases can be procured in less time so that day-to-day business operations are not impacted by the slow procurement of new or replacement goods and services. More efficient purchasing also means that organisations are more able to take advantage of early payment discounts while avoiding late payment penalties.

Corporate governance

Stringent procurement processes ensure that an organisation’s procurement framework and polices are adhered to. Manual procurement processes are extremely difficult to control and manage, leading to loopholes for errors and fraud.

Elimination of filing cabinets

By electronically storing all financial documents, filing cabinets full of paperwork can be eliminated, freeing-up storage space. Also, replacing paper with electronic documents means that documents, such as invoices, purchase orders and credit notes, can no longer be lost or misfiled.

Summary

In the current economic climate, it is particularly important for organisations to cut costs, make smart procurement decisions and maximise efficiencies. It is therefore worrying that many UK organisations are still without automated procurement processes. With document management and imaging software being a low cost and yet incredibly effective means of streamlining P2P, there is really no excuse for organisations in the 21st century to still have paper-based procurement processes.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development