Can You Reduce Your Business Process Outsourcing Costs with Procure to Pay?

In this next blog from the doing more with less series, we look at how automating admin-intensive processes such as purchase order matching and invoice approvals can reduce expenditure on administration costs, and avoid the need to turn to Business Process Outsourcing.

Organisations are operating in challenging and changing business environments. Teams have pressured KPI’s to meet but have less resources at hand. Time and sparse resources are being pulled away from value-added activities because they are needed to perform low-value – but necessary – manual activities such as invoicing, purchase order matching, approvals and other laborious tasks. This is one of the reasons why some organisations turn to outsourcing, but do the risks outweigh the advantages? And is there an alternative?

Business Process Outsourcing (BPO) is the external contracting of business functions, such as Human Resources, Finance or other “back office” operations. BPO, as a business segment has seen great growth over the past decade and continues to flourish and benefit many organisations but…. are times changing?

For those organisations that have chosen to implement a Business Process Outsourcing strategy, it brings the promise of eradicating low-value administration activities from core team members. But, it can also bring many new challenges such as; service levels with offshoring, unclear or complicated contractual issues, changing requirements and unforeseen, unclear charges. BPO also throws up new security risks – some of which are usually out of the organisation’s control, especially with shared services. Add to this, the security risks and difficulties in managing offshore centres, and we’re now seeing a strong desire amongst many organisations to “in source” these functions back into the business again so they can regain full control across many of their key financial processes.

Outsourcing procurement and finance functions is still an emerging practice, but given the challenges we’ve listed above, many organisations are rightly reluctant to cede control of such vital areas of their business. This is understandable as these functions control the profit and loss of the company and impact the important and critical day to day and long term strategic plans. This means that finance functions, reluctant to hand over control of these operations, must retain burdensome manual processes that steal time away from the more strategic, critical areas.

However, there is an alternative solution for finance teams, in the use of an integrated procure to pay system. These systems provide the facility to tightly integrate with key financial processes and they enable easy, company-wide collaboration across the entire procurement process. The real benefit however, is in the way that they can offer an easy way to automate many admin-intensive tasks such as supplier management, invoicing and purchase order processing.

Within finance, many people will only think of the benefits to the bottom line from using a p2p system but actually, with this type of technology, it can improve much more. From more effective collaboration and visibility of suppliers to time efficiencies, cleaner and more reliable data and stronger governance. In a recent example, a research survey commissioned by SAP reported that organisations where master data is synchronised between various systems (accounting, purchasing, and so on) experience on average a 31% lower PO error rate. In this one small example we can immediately see an opportunity to spend far less time fixing errors that need not have occurred in the first place!