It’s time to automate payments!
[BY SUSAN AVERY]
WITH SO MUCH BUSINESS AUTOMATION these
days, it’s hard to believe that some companies
still use checks to pay for goods and services. Yet
a recent Association for Financial Professionals
survey found that businesses still pay about half
their bills by check. Respondents said they like
the familiarity of the process, and they know the
Those statistics are surprising given that using
checks is costly and inefficient. Processing checks
manually takes time, and errors can occur.
Automating the purchase-to-pay process can streamline
operations and save money by
reducing those errors.
With automated purchase-to-pay systems, employees use
online catalogs to buy goods
and services from suppliers
with whom procurement has
negotiated price and other
contract terms. The systems,
which also pay the suppliers,
have been around in various forms since the 1990s
and continue to gain in popularity. According to
the research firm Gartner, 50 percent of North
American and 35 percent of Western European
companies with more than US $2 billion in
annual revenue have invested in at least one of
the following purchase-to-pay system modules:
e-requisitions, catalog management, and accounts
payable invoice automation.
Now providers of these systems are adding more
functionality to their products. For example, some
are offering networks or marketplaces where buyers and suppliers can transact business with one
These companies and some others in the finan-
cial services industries (those that offer purchasing
credit cards are one example) are called financial
technology, or “fintech,” companies. According
to a Harvard Business Review article, “The Rise of
Fintech in Supply Chains,” financial technology
companies act as intermediaries in facilitating
transactions between a company and its suppliers.
Services offered by some fintech companies
enable both the buyer and supplier to improve
their working capital by making it possible for the
buyer to extend its payables and at the same time
accelerate payment to the supplier, notes the HBR
article. This provides both sides with benefits,
including greater liquidity and less variability in
the timing of payments.
These services can also
improve the accuracy and
security of payment activities.
For example, the transactions
that run through the marketplaces generate data. Fintech
tools can then use artificial
intelligence (AI) and machine
learning to examine that data,
helping to identify recurring
errors on invoices and detect
fraud by identifying subtle differences in a remit-to address, for example. Both of these data-heavy
tasks are difficult for humans to carry out.
To take advantage of the benefits these new
services offer, businesses need to let go of paper
checks. Procurement leaders and their colleagues
in finance should work together to research the
market and evaluate suppliers, assessing the opportunities and the risks. They need to automate the
purchase-to-pay process. Then they will have
fewer administrative tasks, like correcting invoice
errors, to manage and more tools they can use to
contribute real value to their company’s financial
BUSINESS JOURNALIST SUSAN AVERY IS EDITOR OF THE WEBSITE
MY PURCHASING CENTER.
Services offered by
enable both the buyer
and supplier to improve
their working capital.