Digital transformation is not only important for the production activities in your company, but also for accounts payable (AP) processes, which can impact your supplier payments. However, most companies still face issues or lags in this area.
In fact, according to data from Strategic Treasurer, 60% of financial leaders claim that accounts payable is the most inefficient component of their manufacturing operations.
In this article, we will explore 7 lessons that can be applied by any manufacturing company to optimize their supplier payment process.
While digitization has improved efficiency, productivity, and operational control in your production, accounts payable processes are still manual, costly, and error-prone.
To achieve true digital transformation, we must take a holistic perspective that spans the entire invoice-to-payment process. This involves integrating automated solutions that allow for the elimination of manual processes, cost reduction, and implementation of security measures to prevent fraud.
Automation has enabled a revolution in efficiency, scalability, visibility, and quality in production. The same can be applied to the accounts payable process. By automating the workflow, the payment process is accelerated, the risk of human errors is eliminated, scalability is increased without the need to hire more staff, and visibility is improved at each step of the process.
According to the 2022 survey by Strategic Treasurer, 60% of manufacturers say saving time and improving productivity are the top drivers for automating accounts payable processes in their companies.
To achieve cost savings in the vendor payment process, it is necessary to focus on several areas. In the production process, like reducing material costs, preventing maintenance issues, and modifying energy consumption. For AP processes, cost savings can be achieved by replacing physical checks with electronic payments, reducing processing costs, and maximizing early payment discounts.
According to a report from the Institute of Financial Operations and Leadership (IFOL), 45% of accounts payable departments take between 6 and 25 days to process a single invoice (from receipt to payment approval).
With manual processes and fragmented systems, the accounts payable area becomes a "black box" where data can't be seen, analyzed, and reported in real-time. Full automation of accounts payable provides complete and real-time visibility of that box, putting comprehensive and up-to-date AP data at your fingertips.
With better data, you can make more informed decisions. For example, solid data and analysis will provide you with the necessary insights to:
Making better decisions benefits all teams of the company, from AP to the plant floor to senior management.
Digitalization of the plant has introduced significant safeguards in manufacturing. For example, with automated monitoring that incorporates machine learning, alerts are issued the moment problems arise, mitigating the negative impact. Digital transformation in the accounts payable area also has a great capacity to reduce fraud risks.
First, simply by replacing checks - which are highly vulnerable to theft and fraud - with online payments substantially strengthens the security posture. Virtual cards, for instance, utilize a unique randomly generated 16-digit number, expiration date, and CVV that can only be used once.
Automation in AP does not replace the need for skilled workers but allows them to focus on higher-value tasks. By freeing up your AP team from tedious and low-level tasks, they can dedicate themselves to strategic initiatives that truly drive business value. Additionally, digital transformation allows them to collaborate with other departments and utilize data from previous and current payments to improve supplier management and negotiate better terms and rates. AP transformation not only helps retain current talent but also attracts new skilled workers as your business grows.
Suppliers are essential to the success of any manufacturing company, so it's important to treat them as valuable partners. Digital transformation of AP not only improves internal efficiency but also provides significant benefits to suppliers. By providing secure and timely payment options, business relationships are improved and strengthened. Reducing exposure to fraud and eliminating late payments also enhances trust and loyalty from suppliers. AP digital transformation benefits both your company and suppliers, resulting in a stronger and mutually beneficial business relationship.
As mentioned earlier, real-time control and visualization of your company's expenses are essential for maintaining efficient financial management and making informed decisions. Fortunately, Tribal offers a comprehensive solution to digitize and optimize your accounts payable (AP) process.
Tribal's expense control platform allows you to monitor your team's operations and analyze your business expenses from anywhere, at any time. Imagine having a complete overview of your financial transactions instantly. With Tribal, that's what you get.
One standout feature of the platform is its real-time expense viewer. With this tool, all your administrators can access and monitor transactions instantly. You no longer have to wait for monthly or weekly reports to get an overview of expenses.
Dynamic expense categorization is another key functionality of the platform. You can analyze the distribution of your expenses and validate the performance of each category. This capability allows you to identify areas of high spending and make strategic decisions to optimize your resources.
Additionally, Tribal offers the ability to generate instant reports. You can export a detailed summary of your expenses and use it as a reference for making informed financial decisions. These reports will help you identify spending patterns, control your cash flow, and optimize your internal processes.
Flexibility is also a strong point of the Tribal platform. You can manage your business from any device, whether it's through the web or the iOS and Android app. This gives you the convenience of accessing the platform from your preferred device, no matter where you are.
Last but not least, Tribal is committed to the security of your financial operations. You can make all necessary payments with peace of mind, knowing that the platform has robust security measures to protect your data and prevent any suspicious activity. Additionally, you will receive instant notifications of any account movement, allowing you to maintain full control over your finances.
So there you have it! Artificial intelligence can be a powerful tool to help businesses improve their processes and make informed decisions. Whether it's analyzing large amounts of data, improving operational efficiency, or predicting customer behavior, AI can be a valuable addition to any organization. Although it may seem overwhelming at first, there are many solutions available that make AI accessible to businesses of all sizes and budgets. So if you're thinking about implementing AI in your company, go ahead and give it a try! The benefits can be tremendous.