How buyers can improve their operation
“The opportunity is often lost by deliberating.”
How true. Especially in the modern world. Each day we encounter more and more conflicting information whilst the demands to improve increase. How can we make sound decisions in the face of an onslaught to our senses? The pressure can often leave people in a state of inertia where nothing actually gets done.
The challenge for all finance and procurement teams is to improve the efficiency of their operation without the loss of control and visibility. We’ve all experienced the mind numbing frustration when things don’t go to plan. I wonder if any of this sounds familiar to you.
- Too many manual tasks for my team.
- Difficulty juggling the cashflow of your organisation.
- Mismatched items in the purchasing cycle and the time spent trying to locate the missing items.
There are lots of small ways to improve these problems but there is one knight in gleaming armour which has the ability to lance them all. As we discussed in one of our previous articlesnew technology is available which can alter the way you can manage your operation. B2B card payments, or “16 digit accounts” as they are increasingly known, are growing in popularity and there is good reason for this increase in awareness and usage. Deloitte has done an in-depth study into these forms and payments (the full report can be found here) and I wanted to highlight some of the key findings.
Cards are simply a better way to pay
Deloitte conducted a survey of Procurement Managers which were using 16 digit accounts as part of their payment process. The key findings are fascinating:
- 75% of those surveyed believed 16 digit accounts reduced the processing time of payments.
- 74% thought 16 digit accounts reduced the required number of approvals for payments.
- 68% thought administration costs were reduced when using 16 digit accounts.
- 47% said cashflow improved due to enhanced cash management and extended credit.
So, it’s easy to see why people are using this functionality for B2B payments. Buying managers found that the average improvement was approximately 1.4 times (or 44%) in the speed of settlement when paying on 16 digit accounts. If you add up all these productivity gains over the course of a team, over a year, it means that your department will increase efficiency. But how is this achieved?
16 digit account payments typically reduce the number of approval steps required in a PO process through the application of automated controls. All the data is housed in one location and can be shared electronically with other systems in your organisation. Plus, you get access to an additional credit line so you can increase the efficiency of your working capital.
Faster, more control but by how much?
The study found that invoice processing costs were cheaper when using 16 digit accounts. The findings show that processing costs are more than three times cheaper when using a 16 digit based process. Compare this…
- Invoice processing costs for 16 digit accounts – $20
- Invoice processing costs with traditional purchase order – $73
This is as a result of reduced paper based processing, administration effort and banking costs. Only you will know how many invoices you process each year but with a potential saving of $53 per invoice the benefits very quickly stack up.
The opportunity is often lost by deliberating
You will probably have a range of targets in front of you. You will have an immense amount of information available about how to improve your operation over the rest of the year and the year ahead. The implementation of a 16 digit account programme can be quick and simple and benefits are immediate.
Sid Vasili is CEO of Invapay. Sid’s working life has been spent breaking and rebuilding things. Frustrated at the usual approach to doing business, he has developed organisations which specialise in innovation. The consistent theme in each company has been ‘there’s a better way to do this.’ He is the Founder of Invapay – a technology company which simplifies payments and procurement for buyers and sellers.