Procure-to-Pay process: The major impact of indirect purchases

10% savings on indirect purchases can produce up to 50% increase in sales benefits

Faced with this observation, indirect purchases which until now having been considered to be the “poor child” of purchasing, are undergoing a real transformation: 76% of the companies questioned have an Indirect Purchasing Department and 57% manage them differently when compared to direct purchases. A process in full transformation and whose benefits on the financial chain are directly impacted by its rate of digitisation.

The challenges of indirect purchases

There are two main categories of purchases:

  • “Strategic” or “production” purchases which include raw materials and components entering into the composition of finished products. They are incorporated into the direct costs of sold manufactured products.
  • “Indirect” or “non-production” purchases which include supplies used in the day-to-day running of organisations, but which do not enter into the production process: services, intellectual services, consumables of all kinds (administrative supplies, office automation…), and non-production investments (real estate, IT, etc.)

The weight of these indirect purchases can represent up to 81% of expenses depending on the business sector. While strategic purchases are largely equipped in companies because they represent 75% of company expenses, this is far from the case with indirect purchases, which represent only 25%. However, indirect purchases alone represent 92% of the order volume, 96% of the number of referenced suppliers and 97% of the volume of items ordered. A poorly controlled process has many hidden costs: delivery management, non-process purchasing issues, reconciliation and validation of invoices, loss and theft, errors and returns, non-existent receipts and dispute management, etc.

The result: a significant burden linked to the management of indirect purchases that 57% of companies consider too high. We must therefore digitalise this process and maximise its automation.

White Paper – 5 reasons to digitalise your Procure-to-Pay Process

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The impact of the digitalisation of indirect purchases on Procure-to-Pay

The purchase order process is the first step of the supplier invoice processing chain and its digitalisation reduces budgetary consumption, optimising cash management and making it possible to correctly prepare analytical tasks. The immediate benefits which have repercussions on the entire supplier invoices process:

  • Accounting: sharp reduction in processing times thanks to automatic order / invoice reconciliation, optimisation of dispute management thanks to better traceability throughout the cycle, and reduced time in processing entries for year-end closings because provisions are facilitated by this same traceability
  • Validation: the number of validations required is greatly reduced because the invoices respect the established purchase order process upstream, immediate identification of main check points through the purchase order and generation of a reliable audit trail much more in line with regulatory requirements
  • Payments: acceleration thanks to the entire upstream automation chain which allows, on the one hand, a passage of invoices awaiting payment in record time and on the other hand a reduction of risks on account of better secured supplier purchase orders.

The performance of supplier invoice processing is therefore “purchase-driven”: the more the order process is mastered and traced at the beginning of the chain, the faster the accounting performance will be.

The benefits of a purchasing module within an AP automation solution

A purchasing module therefore offers intrinsic benefits for all the actors involved:

  • Finance departments (optimisation of expense management, visibility on commitments, etc.)
  • Purchasing departments (optimisation and tracing of the purchasing circuit, visibility on needs in real time, price negotiation …)
  • Applicants (optimisation of budgetary consumption and of the decision-making circuit, rapid validation of needs, etc.)

An essential step in moving towards 100% automation, the purchasing module takes on its full meaning within a Procure-to-Pay solution. This automation performance is at the heart of ITESOFT’s priorities: this is why we created Streamline for Invoices, the P2P solution the most efficient on the market.

Our unique Capture as a Service technology combines a pooled supplier base as well as unique AIs, OCRs (Optical Character Recognition) and expert algorithm technologies for a guaranteed 85% automation performance, seen at 92% in production. To go further in automation, ITESOFT also offers a supplier portal enriched with Supplier Relationship Management (SRM) functions for a better quality of referencing, an acceleration of the control circuit and a reduction unnecessary exchanges.

ITESOFT Streamline for Invoices is the guarantee of clear benefits for your Procure-to-Pay process: the best automation performance, the greatest adaptability,  and the most advanced detection of risk.

Recommended Reading:

White Paper – 5 reasons to digitalise your Procure-to-Pay Process

Download

Post by Remy Domrane,
Marketing Project Manager

Holder of a Master in Marketing & Communication, Rémy joined the ITESOFT teams in 2018. His knowledge of the B2B sector and his natural appetite for new technologies make him the ideal candidate for the position of Project Marketing Manager, and he has continued to expand its knowledge in the field of the dematerialization of financial processes.

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