Automated payment solutions: A natural progression for efficient Supply Chain Finance - Part II

November 5, 2013 Ankita Tyagi

In part I of this five-part series, we discussed some of the key market drivers which shape the supply chain finance (SCF) landscape today and how dynamic discounting can help buyers realize incremental savings while ensuring cash flow to suppliers. In this blog, we will explore the role of automated payment solutions, commonly known as ePayables, in ensuring financial visibility and invoice management across the supply chain.

Both suppliers and buyers want visibility into their cash flow position. However, without a robust invoice management and tracking system, this objective can be hard to accomplish. Manual invoice processing not only slows the cycle but is also error-prone. Tools such as eInvoicing and ePayables help with document management and ensure that all purchase orders, contracts, and invoices are regularly tracked. According to the October 2013 From the Shadows to the Forefront: AP Automation and the Strategic Vision report, 22% and 19% of the respondents cite an inability to capture early payment discounts and the need to shorten supplier payment cycle as two of the top five market drivers compelling them to undertake payment automation.

Once buyers realize that they can effectively manage their invoices through automated solutions and that they now have financial visibility into their cash flow position, they can plan payments to suppliers ahead of time, which in turn offers them the opportunity to capture early payment discounts. According to the report, Best-in-Class companies not only invest in automation of their invoice, receipt, and workflow (IR&W) processes (50%) but are also 28% more likely than their peers to devote resources to supplier enablement for electronic invoice submission. The benefits of this are reflected in their ability to process invoices faster — Laggards take 3.86 times as long to process an invoice as Best-in-Class companies, who are also 7.4 times as likely as Laggards to capture early payment discounts. Hence, it’s easy to see the natural link-up between eInvoicing, ePayables, and SCF.

In part III of this series, I will discuss alternate or third party sources of funding for suppliers, which go beyond the traditional bank and financial institution route and offer more flexibility to small businesses.

Until next time,

Ankita Tyagi

Research Analyst

Financial Management & GRC

Aberdeen Replay

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