REPORT: Eight Building Blocks of Invoice Automation, Supply Chain Finance & Discount Management

AP Automation – including Invoice Automation and Discount Management (IADM) initiatives need a framework to ensure that programs are approached on a strategic basis which bridges both the Supply Chain and Finance organizations. PayStream’s analysts have introduced such a framework to help enterprises implement “integrated” IADM and maximize benefits.
 
To achieve the long-term value of Invoice Automation & Discount Management (IADM), organizations need to adopt a strategy involving both Procurement and Finance and therefore initiatives should be approached at an enterprise level. So far, only a limited number of enterprises have stepped up to this challenge and are implementing what PayStream Advisors calls “integrated” IADM optimization. This number is steadily rising, as corporate enterprises begin to achieve benefits in their first attempts at IADM and realize what really needs to be done. Our most recent research survey that many enterprises are still implementing electronic invoicing or stand alone Discount Management or Supply Chain Finance programs, not truly integrated projects.

When company’s focus on planning, as opposed to implementation, PayStream estimates that:

·         Nearly 30 percent of surveyed enterprises have plans that would fit the integrated IADM description.
·         Approximately 50 percent of those are planning a Level I approach (not integrated)
·         Less than 20 percent are planning an integrated approach which brings together buyer/supplier collaboration with electronic invoicing.
·         More than 15 percent are considering global initiatives to inject third party financing into their supply chains

Integrating Invoice Automation and Advanced Finance Tools such as Dynamic Discount Management or Supply Chain Finance is not easy. It requires a multi-disciplinary vision and leadership to drive a “focus on unleashing working capital from the trade Invoice and receivables,” otherwise it will remain fragmented. It involves difficult changes to processes, and external organization that can make implementation difficult. Organizational and cultural barriers exist between Supply Chain/Procurement and Finance managers making clear thinking on IADM difficult.The technology support seems easy — but it isn’t. Technology staff must grapple with the challenges of getting invoices approved faster, multichannel alignment, and systems integration. Even if the CFO accepts the need for enterprise-level IADM, the quarterly demands of procurement and working captital targets, especially in delicate economic conditions, make IADM one of the the most important challenge facing the finance organization, but not the most urgent for the CFO. This typically results in a focus on tactical “quick wins” until conditions are better.The main reason enterprises are not implementing integrated IADM is an inability to see the big picture and understand what is involved. Just as a map helps you understand the context of your journey (the roads you need to navigate and alternative routes), so the PayStream IADM framework helps enterprises make decisions about the best route and objectives for their situation.Following an analysis of several larger corporate enterprises, PayStream Advisors has created a IADM framework, or map, called “The Eight Building Blocks of Invoice Automation and Discount Management” (see Figure 1) to help enterprises see the big picture, make their business cases and plan their implementation. The framework can be used for internal education and debate in developing the IADM vision and IADM strategies. It can then be the basis of an assessment of the enterprise’s current and required IADM capabilities, to help understand its current position and future strategy. Using this framework, PayStream Advisors is currently profiling several enterprises that are great examples of IADM at work.

Core Topic
Supply Chain Financing: Optimizing Working Capital through the strategic use of financing and discounting in the supply chain

Key Issues
During the next five years, how will cash management strategies, processes and technologies evolve to enable enterprises to improve the use of working capital tied up in trade Invoice and receivables?
What is IADM, how will it evolve, and what drivers are emerging to force its adoption?
What is the senior finance executives in successful IADM initiatives?

Strategic Planning Assumptions
Through 2008, 90 percent of successful IADM initiatives will balance the needs of improved supplier relationships with working capital improvements Enterprises that have a wide differential between their and their suppliers cost of capital are twice as likely to achieve adopt IADM and Discount Management goals.PayStream’s Building Blocks research and report will be released at the September 10-12th PayStream Summit, in Orlando, FL. Those finance and supply chain managers whom desire the latest information, tools and techniques in Invoice Automation and Discount Management should reserve their delegate representation at the conference

Last 5 posts by Henry Ijams

• Invoice Automation & Discount Management -- the New Look of Accounts Payable - June 23rd, 2008
• The Eight Building Blocks of Supply Chain Finance & Discount Management - December 28th, 2007
• eProcurement - Moving from Technology to Execution - December 6th, 2007
• Building a Bulletproof Business Case for Paperless Technology - August 25th, 2007
• What is Dynamic Payables Discounting? - August 7th, 2007

Share This

Leave a Comment Trackback