Top Reasons for AP Inefficiency and Missed Discounts
Technology is the biggest driver to automate various business processes. Today large enterprises are saving millions, cutting costs, and increasing their bottom lines. However we all know savings that result from invoice automation alone are dismal when compared to the return of any other automation program such as early payment programs.
But what’s a little less known is that in order to achieve these high returns, you’ve got to speed up invoice processing, which could mean getting rid of paper invoices and automated routing processes because paper invoices are inefficient, painful, slow, laborious, difficult to manage, and expensive.
Interestingly enough, organizations started eliminating these inefficiencies and recognized the importance of working capital tools. Last year, less than 1% of organizations (and we are talking about the big ones as well) were using a working capital solutions (technology solutions). But a recently that has changed little bit, although still less than 1% mark.
Early Payments, Dynamic Discounting, Factoring, or Reverse Factoring are there is India for ages, but so far Banks are controlling them. And if we look into the digital finance landscape today, banks are the slowest to adapt to the digital world. The best an secured digital payment solutions and digital inclusions are being done by the new entrants to the market. This explains why Financial Supply chain including working capital management is so broken and unorganized. Anything that directly deals with banks are slow and painful.
So we decided to talk to those suppliers and buyers who needs such an automation the most. And we understood that, although various tools to manage working capital through banks are available, most of them are either not being used or being used to it’s absolute lowest capacity. As we go further, the following reasons come out as the most influencing ones towards this inefficient management.
- Lengthy invoice approval cycles (72%)
- Manual routing of invoices (67%)
- Missing information on invoices (65%)
- Decentralized invoice receipts (45%)
- Large number of exceptions (36%)
We believe technology itself can solve large portion of this problem. And the other piece in the puzzle is education. In India less than 20% of all businesses use any kind of technology to operate their businesses and to educate that population is a really tough — but not impossible. Paper is still the most used commodity to run business documents. And it doesn’t need to be like that — demonetization and subsequent legislations pushed the digital payment agenda, and we believe GST and subsequent policies are going to push business digitization agenda as well.
Business connecting another business and sending each other documents electronically is the basic form of digitization that one can think of. eInvoicing is just one of them. Although eInvoicing program itself cannot save lots of money, but it’s interesting to see how eInvoicing can facilitate to automate the working capital management process dramatically.
At the as-is technology landscape, embarking on a discounting program might seem daunting, but all these challenges are ones that need to be addressed at some point in order to promote a profitable and efficient supply chain. There’s never a better time to commit to automation and early payment discounting, the longer you wait, the more automation and financing savings you miss out on.
