Can your ERP support your procure to pay process?
- Posted by: David Watters
- Category: Best Practices
A businesses Enterprise Resource Planning (ERP) system has become a vital necessity for organisations of all sizes to help manage their operations and house data critical to everyday operations and financial reporting and analysis. The market for ERP systems has grown exponentially and is now worth over $25bn and grows between 10%-20% per year. Not a surprise considering 50% of companies are “soon acquiring, upgrading, or planning to update ERP systems soon.”.
At Valtatech, we have worked with a huge range of ERP systems, typically integrating cloud-based procure to pay solutions with customers ERP systems to ensure that business critical data like supplier master data, OK to Pay invoice data, payment confirmation and budgetary data. A question we routinely get is whether cloud-based procure to pay platforms are necessary given that most ERP systems can handle procure to pay workflows. It’s not a straightforward question, so we take a deep dive into some of the considerations that businesses should be looking at when deciding on whether your ERP is the right place to house your procure to pay process.
Reporting from an ERP system is typically quite restricted, whilst you can export all the data and run your own analysis, automated reporting out of the box in your ERP system is limited. The pandemic has taught us that businesses who were able to not just survive, but thrive, were the ones who were able to make quick, data-driven decisions. Businesses utilising a cloud-based procure to pay platform can typically configure the following reports on demand within the platform:
- Payment time reporting – The Australian Government has introduced the Payment Times Report Scheme, under the scheme, large businesses and large government enterprises need to report their small business payment terms and times. ERP systems out of the box typically don’t capture the required data to run the report such as invoice receipt date, exact payment date and which of your supplier base needs to be included in the report.
- Detailed spend reporting – commodities and spend categories are not captured in your ERP which creates problems trying to run detailed procurement category analysis to understand where cost saving and supplier consolidation opportunities are. This severely inhibits your procurement team or procurement specialist’s ability from driving real business value past helping to negotiate contracts.
- Supplier Quality Management – typically ERP systems do not capture data that can be used to report on and drive supplier quality. Areas such as expected vs actual deliver dates, supply chain visibility and sustainability reporting are not captured out of the box which leads to more manual data manipulation work or costly customisations to your ERP system.
Total Cost of Ownership
ERP systems by design are heavy and complicated systems, with a lot of interdependencies which can make configurations or customisations down the track very expensive. You are typically reliant on the software providers or implementation partners to make these changes which makes it difficult to drive a fair and open procurement process to undertake the changes.
The pandemic has taught us that change is constant, business processes and business models need to be more agile and Government taxation and regulations also being subject to fairly frequent change. Your processes, data captured or data analysis within your ERP system will need to be updated which comes at a high change cost. ERP systems can limit your ability to be as flexible and agile as you would like not just because of the high change cost but also due to the limitations of the system and the depth of changes that can be made.
Cloud-based Procure to Pay platforms are far more flexible, designed to integrate more easily, be configured by the customer, and have more customisable workflows and custom fields. Businesses should consider the total cost of ownership when assessing whether to run their procure to pay processes within their ERP or implement a cloud-based procure to pay solution.
According to Spend Matters, “Roughly 67% of ERP implementations fail. These failures are usually categorized as such because systems end up costing much more than originally intended, they take longer to implement than expected, they do not deliver the anticipated results — or a combination of all three.”. One of the key drivers for implementation projects not achieving their intended outcomes is poor or slow user adoption. User adoption can be influenced by several factors but one of the main drivers is user experience. Your users and suppliers expect straightforward and simple experiences to conduct their business, they will tolerate changes in systems and processes if the systems drive a good experience.
Typically, ERP systems are not designed with broad users in mind, given the sheer number of processes that ERP systems support it’s hard to create a simple and easy user experience. Clunky user experience and systems that are not purpose-built for a process leads to poor adoption. Cloud-based Procure to Pay platforms are designed specifically to facilitate the procure to pay process, leading to an intuitive and easy experience for internal users and suppliers alike.
Integrations with Suppliers
One of the key areas of value that can be achieved through procure to pay automation is integrating more closely with suppliers to drive the digital exchange of business documents like orders and invoices in the most efficient way possible. On the buying side, the ability to integrate supplier content, like supplier product catalogue information can help drive an easy user experience. Most ERP systems out of the box cannot accommodate this level of information without customisation, either limiting your supplier or integration or adding more cost to your ERP project and increasing the total cost of ownership.
On the invoicing side, many ERP systems don’t natively support the Australia and New Zealand government e-invoicing framework, Peppol, which means that businesses will not be able to take advantage of a growing e-invoicing network being adopted across those countries. Other invoice data integrations like EDI or cXML are typically not supported out of the box within ERP systems so onboarding suppliers through these channels can be very expensive.
Cloud-based procure to pay solutions can support supplier integrations and through our e-invoicing services, Peppol, out of the box. In some cases be configured by the customers directly. These types of integrations can drive real value through removing the need for manual data entry.
ERP systems are broadly designed to hold data making automation within the procure to pay process clunky and expensive. Cloud-based procure to pay platforms are purpose-built to move data through the procure to pay process in the most efficient way as possible. From automated approval workflows, automated coding, automated data integrations from other core business platforms to reporting automation – Procure to Pay platforms drive a huge amount of automation allowing your staff to focus on higher value activities rather than transactional data entry and duplication.
As you can see there are a lot of different areas you should be considering when deciding on whether to run your procure to pay process within your ERP or procure a cloud-based procure to pay platform. Whichever pathway you choose make sure that your processes are simple and driving measurable value.
Need some assistance? Speak to us today about automating and optimising your procure to pay processes.