The New Procure-to-Pay Process - Driving Cost Savings & Efficiency

By Nexus • October 8, 2019

Many real estate companies are still using manual, inefficient processes to manage their procurement, process their invoices, and pay their suppliers.

Part of the reason is habit. Often, there are longtime accounts payable staffers who can rattle off every invoice and payment since the beginning of time. The other reason: comfort that “it just works”. Even if it’s an error-prone, time-consuming process, it’s a known-quantity.

But there are plenty of reasons to switch to a complete automated accounts payable system to manage the procure-to-pay process.

 Just consider:

  • Greater control – More people can view monthly spend, budgets, and payments – and it’s easy to set up role-based permissions.
  • More efficiency – Invoices are processed up to 65% faster.
  • Fewer errors – Everything is electronic, from purchasing to making payments. This reduces manual mistakes and duplicates.
  • Better relationships with vendors – There’s no more “I’ll get back to you after I research this.” Answers about invoices, POs, and payments are available at the click of a button.
  • Greater budget compliance – Most AP and Payments systems integrate directly with your accounting system, automatically pulling in all the appropriate budget data.

To realize the benefits, just compare how the old and new procure-to-pay processes work:

Traditional AP & Payments Process for Real Estate

Many companies have a traditional payments process.

Buyer Process

Supplier Process
Illustration_1-02 Illustration_1-04
  • Products/services are sourced from a wide range of stores/vendors
  • Purchase order is created, approved, and then mailed
  • Product/service is delivered
  • An invoice is received via snail mail
  • Payment is approved
  • A clerk cuts the check and mails it
  • Data is manually entered into the accounting system
  • Purchase order is received
  • Buyer is provided with product/service
  • Invoice is issued – net 30, 60, 90 days
  • Invoice is followed up on – at least once or twice
  • If it isn’t paid, invoice is followed up on again
  • Check is delayed in the mail
  • Check is deposited in bank account and clears up to 48 hours later

 

The New Procure-to-Pay Process

The new procure-to-pay process incorporates all the safeguards of yesterday, and even adds several more, while automating the manual processes outlined above. Just compare how the process is streamlined, when a paperless AP and Payments automation software is used:

Buyer Process

Supplier Process
Illustration_1-01

 

Automated AP and Payments

 

  • Buyers purchase directly from pre-approved catalogs (ideally embedded in the AP automation software)
  • Purchase order is sent electronically to approved suppliers
  • PO is converted to an invoice, after goods/services are delivered
  • Invoice is routed to the right approver(s)
  • Approved invoice is automatically recorded in accounting system
  • Payment is approved and sent to automated payments vendor, instead of a check printer, directly from the accounting system
  • Funds are disbursed by the payment automation vendor
  • Buyer receives electronic confirmation that payments have been sent
  • Buyer views payment status and all reconciliation information in an online portal or their accounting system
  • All headaches are avoided – any payment issues are resolved by the payment software company
  • Approve POs electronically using supplier self-service tools
  • Send invoices through portal, e-invoice, or email
  • Receive payment electronically - via ACH or AP Virtual Card
  • Process payment in POS (for Virtual Cards); funds are secured and available immediately
  • Reconcile payment with all the details available on screen

 

Greater Efficiencies with the New Procure-to-Pay Process

With an Automated AP and Payments software platform, companies realize efficiencies at every step of the procure-to-pay process. They also have far more visibility into how they are performing against budget, while saving time and cutting costs:

E-Catalogs

With best-in-class AP automation platforms, buyers can purchase directly from supplier e-catalogs embedded directly into their AP automation platform. The buyers select the items needed – from approved vendors – and then submit the purchase order electronically. This helps keep costs down because purchases comply with corporate rules and adhere to pre-negotiated pricing.

Electronic PO Processing

By shifting manual purchase order processing to electronic PO processing, purchasing becomes faster and more compliant. The electronic PO has all the same information as its paper counterpart – price, delivery dates, quantity, terms and conditions, and all the line items. But it can also align with budget restrictions, using budget information passed from the accounting system.

At the same time, automated approval routing helps speed up the whole PO process. Instead of having to walk from desk-to-desk, electronic POs can be sent directly to the approver. Then, audit trails can record and display all the actions taken.

E-invoices

Digital and e-invoice management helps increase speed and efficiencies too. For example, with an e-invoice, the invoice information is placed in a structured format that the buyer’s automated AP system, like NexusPayables, can recognize, without any manual intervention. Digital invoices, sent by email, often require little to no manual input, either.

Reduced Check Costs

Some of the greatest efficiencies come from reducing or minimizing checks. Not only can you eliminate material costs like paper stock, ink, envelopes, and postage, you can also eliminate the time required to manually cut and send these checks. These expenses can really add up - the Wall Street Journal reports it can cost anywhere from $4 to $20 to issue a single paper check.* So, the fewer checks you cut, the better.

Customers using NexusPayments cut an average of 30% fewer checks in just 10 weeks after switching to Virtual Card

Greater Visibility and Control

Using role-based permissions, everyone from the AP clerk to the CFO can view all invoices and POs received, processed, approved, rejected, and in-flight.  

Plus, most accounts payable software allows customized approval workflows to make sure invoices are sent electronically to the right people for approval – based on the invoices’ value, region, GL code, over-budget amount, job code, contract, and/or other factors.

Similar workflows can be created for payments approvers. For example, you can designate that AP managers be able to approve payments up to $9,999, while the CFO must approve any payments over $10,000.

How Can Payments Automation Help?

While the AP automation component will handle the buyer’s POs and invoicing, the automated payments software will pay all suppliers electronically. Ideally, both the AP automation and the payments software work together seamlessly – and digitally track every step from PO to payment.

 

To trigger a payment, the buyer approves a payment file – from the property management software or GL – and sends it to the payments software. The software manages the process of moving funds from the buyer’s bank(s) to paying suppliers using electronic payment methods. It also notifies both parties that the payment is sent through a supplier portal. 

Ideally, the payments software already has a community of suppliers – in real estate – who have said “yes” to receiving their payments electronically, usually by ACH or Virtual Card.  This community is critical: the more suppliers in your vertical that accept payment electronically, the fewer checks you’ll have to write.

Tracking and Visibility

For tracking and visibility, the payments software should provide a portal where suppliers can view the status of their payments and all the remittance information, so they’re not in the dark about when the money is coming, and what invoice it’s being paid against.

Rebates

Nexus-Virtual-Card-PaymentsTo make the deal sweeter, the automated payments software may also offer you rebates for payments made via Virtual Card. (The supplier shoulders the cost of this rebate, often as part of its interchange fee with the credit card companies). Keep in mind, not every expense qualifies for a rebate. So, you’ll want to have a thorough understanding of the spend the payment automation company is calculating for your likely cash back totals.

Process – Not a Technology

The new procure-to pay process offers real estate companies more visibility, greater efficiencies, and cost savings. It transforms manual processes into automated ones, while providing buyers and suppliers with an avenue for better communication. After all, answers are on screens, not buried in stacks of paper or filed away in off-site storage areas.

AP automation should be viewed as a process, not a singular event. For example, components like e-catalog or automated payments can be added on after initial implementation of the core AP automation platform. It doesn’t have to be all at once.

Just keep in mind, the more that’s automated, the greater the benefit to your financials and your AP team.

*U.S. Companies Cling to Writing Paper Checks

About Nexus

Nexus lets real estate companies like yours manage every aspect of the accounts payable process with clicks and keystrokes, not paper. Our cloud-based AP automation software helps you work faster, simplify your day-to-day, and gain the visibility you need into suppliers, budget, and spend.

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