The following is a guest blog post from ServiceMax partner, Amalto. For more information, visit Amalto’s listing in our online marketplace here.
In the 2017 Perceptions Study recently published by Receivable Savvy, nearly 500 supplier organizations representing different sizes and industries were asked how they handled various aspects of their order-to-cash operation. More than 75 percent of respondents indicated that they submit invoices using paper, while 87 percent indicated they receive payment by paper check.
While there may appear to be a disconnect — especially in today’s environment where technology is pervasive and suppliers want to be paid as quickly as possible — paper processes are not as uncommon as one might think. In fact, organizations still rely on paper for a variety of reasons including the need for familiarity with a solution they’ve used for years, resistance to innovation because of the perceived costs and the desire to use something they can feel and hold in their hand.
What many of these companies don’t realize are the hidden problems associated with managing portions or all of their operation using paper. They need automation solutions designed to streamline a variety of order-to-cash processes and ensure customer payments are made and realized quickly.
Paper Invoicing Creates Unnecessary Complexity
Paper-based invoicing adds unneeded complexity to a process already full of multiple moving parts. When submitting invoices via paper, not only are costs significantly higher APQC indicates top performing organizations spend only $1.17 per invoice submitted while bottom performing organizations spend $39.61), the chance for errors and exceptions increases dramatically. Once an error makes its way into the invoicing process it increases DSO and negatively impacts cash flow for the supplier organization.
What can be done?
Invoice automation and e-invoicing can greatly streamline the submission process and shortens the entire Accounts Receivable cycle by a matter of days. By leveraging electronic invoicing, organizations can remove multiple instances of manual handling, which is where most errors occur. If there is a mistake because of manual handling, you’ll likely tack on a few more days to the process. Handling invoices electronically allows businesses to reduce payment cycle time anywhere between two to seven days, and many electronic invoicing solutions allow suppliers to submit invoices to customers at no cost.
Paper-Based Field Ticketing Invites Errors and Inaccuracies
Paper-based transactions in the field put a huge burden on field service organizations by hindering existing workflows and creating a variety of inefficiencies. These include guessing on pricing, re-entering data, improper hours being billed, inaccurate reporting and higher overall error rates. These inefficiencies require error correction on the back end, which increases man-hours and overall cost.
What can be done?
By working with a solution provider that is well versed in managing field ticket issues, organizations can streamline the operation to the point where paper is eliminated altogether. Once this happens, organizations can improve clarity and accuracy of field data, pricing and contract management, eliminate the need to re-enter data, streamline the approval process and enable proactive operations management.
Paper-Based Payments Negatively Impact Cash Flow
We illustrated how paper-based invoicing can slow payments on the front end, now let’s look at how paper-based payments slows the process on the back end. Supplier organizations receiving paper checks must first receive those physical payments through the mail or courier, then deposit checks into a bank account and finally reconcile those payments with the appropriate customer accounts. This manual process can easily increase DSO by a matter of days. Each day a payment remains outstanding or is not realized in the recipient’s bank account, the more it costs the supplier to carry that unpaid receivable. This negatively impacts cash flow for the supplier, which can hinder company expansion, slow the implementation of new initiatives and even impact payroll.
What can be done?
In the same way invoice submission and field ticketing can be streamlined with automation and technology, faster payments can be realized by applying the same philosophy. Encouraging customers to pay via ACH and other electronic methods can reduce DSO by as many as five to seven days. Furthermore, by integrating a payment solution with an ERP solution, suppliers can leverage that integration as well as any resulting reports from such a streamlined system to better manage the payment receipt and reconciliation process.
Many organizations are mired in paper-based operations and struggle to find a way out of their dilemma. By addressing these three areas, organizations can significantly improve their cash flow and positively contribute to their financial bottom line.