Are manual tasks, decentralized data, and poorly documented policies bogging down your financial operations? If so, it’s time to stop relying on short-term fixes such as increasing headcount, and start implementing automation in your Finance function.
80% of CFOs report accelerating their investment in digital finance functionality for 2022. These numbers exceed the investment in other areas like talent, fixed assets (real estate and equipment), and supply chain. While migrating to a platform is a significant project and investment, it’s the most efficient and scalable long-term solution. Human teams, no matter how large or well-trained, can’t beat technology for optimizing processes.
In this article, you’ll learn how to improve your operational efficiency and save money by:
- Streamlining your supplier list for better leverage
- Establishing a formal purchasing process to improve productivity
- Building a cross-functional purchasing policy
- Automating AP to save time and money
- Integrating your systems into a single solution
Where to start optimizing financial operations
If your accounting and finance processes aren’t yet running on automated platforms, there are still ways to build in efficiency and prepare for automation. Implementing a few small process improvements will have immediate upside in terms of efficiency, and pave the way for easier integration of platforms and automated workflows.
Let’s review the top five methods of increasing efficiency in your current Finance and Procurement functions:
1. Use strategic sourcing to improve savings
Streamlining your vendor list and strengthening supplier relationships is one of the first and easiest ways to improve financial efficiency. While strategic sourcing requires some work to collect your supplier data and benchmark pricing, you can start the process with only a spreadsheet and some help from the purchasers in each department or location.
Embracing strategic sourcing has many benefits, including:
- Cost savings: By relying on one supplier for a specific category or service, you can take advantage of volume discounts across locations, helping realize significant cost savings.
- Improves spend management: Streamlining your vendor list significantly reduces the number of invoices you process by consolidating your purchases across locations. Fewer invoices mean faster processing and opportunities to improve spend management.
- Consistency: Consolidation makes it easier to evaluate contracts for high-volume goods and services. By using one supplier to service all your locations, there’s no need to go back to the drawing board. No matter how many locations you service or how quickly you expand, the purchasing process will remain the same.
2. Standardize your procurement workflows
Start your stakeholders on the right foot by creating a well-documented, repeatable purchasing and approval process. There are a few benefits to codifying your purchasing process that include:
- Faster process: A standardized workflow for purchasing makes the requisition process faster and cleaner for your stakeholders.
- Easier financial reporting: Standardizing your purchasing creates a paper trail for audits and financial reporting and captures important data for future spend analysis.
- Improves internal processes: Approval workflows help stakeholders route approvals to the correct decision-maker. For instance, clear rules let them know when to include the Financial Operations Manager or Chief Financial Officer in high-value contract approvals.
- Creates transparency: It reduces the back-and-forth of manual or email-based approvals and builds transparency into the process. Stakeholders will know exactly what steps they must perform to get their needs met and have reasonable expectations of the timeline.
3. Establish purchasing prerequisites
Identifying departmental prerequisites lets stakeholders know the conditions they must meet for capital expenditures. For example, if your Finance department has certain requirements for contracts, such as avoiding single-year discounts or bundled services. Outlining your prerequisites avoids friction and wasted time during the approval process. This is especially true when negotiating a contract with a non-preferred or new supplier.
By setting expectations in advance, you won’t be caught heading back to the drawing board halfway through a negotiation, potentially saving hours of time for you, your sales rep, and your approvals team. Establishing these internal policies in advance also reduces risks and liabilities for your organization. It creates guardrails for finance and legal reviews and ensures everyone adheres to the practices that successfully reduce risk.
4. Automate your AP process
On average, companies spend about 1% of revenue on their Finance function, with top performers (as defined by APQC’s Open Standards Benchmarking database) coming in at just over .5%. For bottom performers, that number climbs as high as 1.6%. The difference between top and bottom is automation.
When it comes to reducing waste spending, realizing cost savings, and improving productivity, there’s no better place to start automating than your accounts payable and accounts receivable functions. Moving to a touchless process has some excellent short-term impacts on your business, such as:
- Speeds up invoice processing – Automated systems capture, code, and pay thousands of invoices per day, where full-time AP clerks typically average five processed invoices per hour.
- Reduces errors and fees – The reported average exception rate for manual invoicing is 13%. Even high-performing departments average 4%. Automating eliminates these exceptions and saves thousands in late fees annually.
- Increases early payment discounts – On the other side of the coin, moving to integrated payments and financial transactions speeds up the process. It helps companies realize more cost savings from suppliers.
5. Integrate your accounting and financial operations systems
Data silos between accounting and the larger finance organization create problems and reduce visibility. When the accounting and larger ERP platforms don’t integrate, you’re creating redundant work and opening the door to discrepancies.
Integrating your accounting and finance platforms creates:
- Cleaner data: Creates parity between the data in all your financial systems.
- More visibility: Gives the finance operations team a full view of the numbers, in turn improving financial planning and forecasting.
- Granular control: Helps finance get a handle on expenditures by location, team, department, and supplier to identify areas for improvement.
- Better record-keeping: Improves the integrity of your financial records, quarterly/annual statements.
- Accurate accounting: Supports GAAP accounting principles and audit preparation.
Moving to an end-to-end procurement solution
While any one of the above tips can improve your financial operations and efficiency, implementing them all as part of a fully-featured procurement platform like Order helps the finance and procurement teams work together and revolutionize their practices.
A procure-to-pay solution works by integrating your requisitions, invoicing, reconciliation, and payment processes into a single, automated system. These systems leverage AI and machine learning so your teams can get away from manual tasks. Automation removes many of the logjams and inefficiencies of manual operations and scales in step with business growth.
A procurement platform offers the finance team:
- Consolidated invoicing and payments that avoid fees and promote savings.
- Lower costs for every aspect of the procure-to-pay lifecycle
- Better visibility into the financial activities that improve the bottom line.
- Robust analytics and data visualization for data-driven decisions.
- Easier preparation of quarterly and annual financial statements.
Operations teams will benefit from:
- A single view of your purchasing lifecycle, from requisition to remittance.
- A unified purchasing experience for stakeholders across all locations.
- Curated, strategic sourcing that leverages the best prices and terms.
- An approvals process that leaves behind guesswork, rejected requests, and risk.
With an integrated end-to-end solution, your finance, operations, and procurement teams can take advantage of advanced features to make better decisions and improve bottom-line strategy.
If you’re ready to future-proof your financial operations with end-to-end automation, get to know Order by scheduling a demo of the platform.