How much supply chain friction is in your business?
Have you ever wondered how many hours your team spends on paper-based processes or manually investigating finance errors? Supply chain friction is a real cause for concern for all businesses. It’s responsible for the loss of thousands of pounds for the average business each year and affects the productivity and well-being of payment professionals, as well as the business’ bottom line.
According to research we conducted last year among financial decision makers and process owners in large, small and medium sized businesses, the average business spends around 6,500 man hours a year chasing purchase order numbers, processing paper invoices and responding to supplier enquiries. We found that businesses were spending around 55 hours per week doing manual, paper-based processes and checks, 39 hours chasing invoice exceptions and errors, and 23 hours responding to supplier enquiries.
When we asked what people perceived to be the key friction factors within their business, they identified the top five as:
- The high proportion of paper invoices received
- Too many non-PO based invoices
- High volume of supplier enquiries regarding invoice or payment status
- Lack of automated exceptions
- Lack of automated approval.
Many of these processes result in time-consuming administration and cause friction that impacts the bottom line.
Can friction be overcome?
The question is can anything be done about it? Are friction and inefficiencies a permanent feature and something that will always haunt procure-to-pay processes?
The answer is a resounding “NO.” In this day and age with all the progress that digitalisation has brought, there is no need for the payment process to be held back by lack of automation, leading to errors and inefficiencies.
Friction removes energy from a process and slows down forward momentum – this is the last thing you want to experience with your cash flow.
The wonderful thing is that if businesses aren’t tied up processing invoices or receiving phone calls from suppliers, they have more time to explore opportunities for growth with existing customers and go after new ones. Technology exists which will do away with these tiresome and menial tasks that clog business work streams.
Quantifying the friction problem
At Tungsten Network, we believe in eliminating this friction. In order to do this we must first shine a light on the sources of friction and quantify them. We need to discern what causes friction within procure-to-pay and identify whether it is more or less prevalent in large, medium or small companies. We need to observe the knock-on effect of friction – how it affects staff wellbeing and morale, and whether it impacts payment times and relationships with suppliers. Also, how it contributes to the overall productivity of the company and what it costs in terms of man hours and money.
Last year, we considered many of these issues in our inaugural Friction Index. We were staggered by the scale of the problem and the knock-on effect to suppliers. We discovered that friction is a global epidemic that many companies want to address.
Looking to the future
Businesses can be taking simple steps to remedy this. Digital transformation is the key to overcoming inefficiencies within a business and automating processes will free up valuable time for employees, while eradicating errors and creating a more efficient way of working.
We know that many organisations are tackling friction head on. Many are looking for ways to streamline procure-to-pay processes and others have already turned to digitisation, but manual processes remain prevalent, particularly in smaller businesses where the benefits may seem less obvious. For this reason, we are conducting our research once again: to measure the forces that are hindering payment processes and make a year-on-year comparison.
Our intention is to create a second Friction Index, building on last year’s insight, which explores the current state of payments processes and further highlights the pressures that finance professionals are under. To do this, we need your input.
If you would like to take part in the research to find the friction in your business and stand a chance of winning an Amazon Echo Dot, please visit: https://www.research.net/r/9675TRW.
Automation is the first step towards eliminating paper, duplications and errors. It can transform the payment and billing process. and save time, money and countless headaches, meaning that finance professionals won’t waste important hours on administrative tasks and can channel their energy into the role they were trained for. Eliminating friction in this way will give businesses the control they need over their working capital position to innovate, succeed and grow.