by Helen Sanders, Editor
‘Purchase to pay’ is a phrase that has littered the trade press for a number of years now, referring to the series of processes that take place between the issue of a purchase order, through to receiving, approving and reconciling an invoice, and approving and making payment to the supplier. In many cases, companies have made significant progress in enhancing one or more of these elements by optimising and centralising processes, streamlining connectivity and rationalising bank relationships and accounts.
Increasingly too, companies are recognising that optimising these processes is not enough to achieve complete operational and financial efficiency, and are now seeking to integrate the purchase-to-pay cycle with order-to-cash, connecting payables and receivables in order to optimise liquidity and working capital as part of an integrated financial supply chain. At least, that’s the theory. This article looks at how far we’ve really gone in achieving an efficient purchase-to-pay cycle and where we are going from here.
The business case for payments optimisation
In some respects, there would appear to be few business drivers for investing in payments processing. After all, the longer cash resides in a company’s bank accounts the better. In addition, a company’s survival is rarely going to depend on whether a supplier payment is made on time, whereas the same cannot be said for a collection. The reality, however, is that an efficient payment process can cut costs significantly, reduce the risk of costly errors or fraud, and protect the company’s reputation. When part of an efficient cash management structure, bank relationships and accounts can be rationalised and the liquidity and working capital management strategy enhanced. The more extensively that processes are integrated, from the point of a purchase order being raised, through to the reconciliation of the payment by the supplier, the more significant the advantages; however, there are a variety of challenges to contend with.
Sign up for free to read the full articleRegister Login with LinkedIn
Already have an account?Login
Download our Free Treasury App for mobile and tablet to read articles – no log in required.Download Version Download Version