Performing a technology change, such as an ERP upgrade or replacement project, is an ideal time to repair the financial leakage within your Source to Pay process.
Ponder this question – if you were preparing to renovate your house, and you knew the pipes were leaking, would you plan to fix them at the same time? The answer is most likely yes. So we challenge you to consider this: if you’re renewing your core technology systems, wouldn’t it make sense to plug your financial leakage at the same time?
Many organisations will be facing large-scale technology changes within the next few years, especially those running on old ERP systems from vendors like SAP and Oracle. Although this is often a forced transition, savvy companies are taking this opportunity to transform the organisation, incorporating process reengineering along with the technology change, to achieve increased operational efficiencies, and reduced risk, as well as enabling improved agility and innovation. One of the important aspects of preparing for any technology program is to have a clear plan, which includes understanding the current state of your business and where the existing technology and processes are not effectively enabling your operations. Many organisations often don’t realise the amount of manual processing, shadow IT, and business risks that evolve as your technology ages, all of which can significantly erode your bottom line. But with knowledge comes opportunity. Our experience shows that virtually all businesses have revenue losses within their source-to-pay process, and there is a significant opportunity to improve accuracy and reduce risk by increasing controls in this area.
Finding The Root Cause
Pipes may start leaking for many reasons – from tree roots growing around them to the deterioration of the materials themselves. Whatever the reason, getting visibility into the risk areas and performing routine checks can prevent price creep, and ultimately avoid a flood.
Similarly, financial leakage within your source-to-pay processes can occur for many reasons, so it is wise to perform routine checks to understand the root causes, then prevent invoice and payment errors, and stop revenue streaming out the door. Many organisations fail to recognise that ERP and Source to Contract solutions (like Coupa and Ariba) do not provide the level of checking required to stop all of the leaks. When organisations are processing significant volumes of transactions, especially with highly complex contractual agreements behind them, companies are forced to place bets on where the leaks may be happening. For example, organisations may choose to only review a select number of transactions, perform a high-level review, or allow for higher tolerance limits, all of which can spiral into large revenue losses over time. Does this sound familiar? With these core systems providing limited automation for the analysis of line-item data, and the associated resolution of the errors, this means that trade-offs have to be made and many issues are simply overlooked, allowing the financial leakage to continue and grow.
How to Repair the Leaks
Profectus is about ensuring you find the leaks, understand the cause, and fix them quickly. Our solutions endeavour to ensure that every dollar you spend with your suppliers is correct, preventing the hidden errors and overcharges that are affecting your bottom line. When it comes to identifying overpayments and recovering lost revenue, we know it only takes the smallest error (like an additional service charge or a 5-cent error on a promotional scan claim), multiplied across hundreds of thousands of invoices and charges, and this can flood into millions of dollars in lost revenue. Current source-to-pay systems are not designed to cater to the level of scrutiny that is required in today’s world of highly complex supplier operations. Our statistics below, clearly demonstrate this fact, and the need to have an additional layer of protection in place to eliminate errors, minimise risks and stop the leakage.
Our cutting-edge audit recovery services and source-to-pay automation technologies are used to complement your existing ERP and source-to-pay systems and processes and provide the crucial line-item interrogation required to identify overpayments. Our advanced compliance solutions accurately detect overcharges and contract discrepancies in real time, allowing you to proactively address the leaks even before your pay run.
The timing of performing this audit is an important consideration. When you’re planning to upgrade your ERP and/or source-to-pay systems, this is the right time to break down the walls and see what’s really happening. Understanding your current situation not only gives you perspective on the extent of the leaks but highlights where you should focus your renewal to get the best results. This baseline exercise also enables you to estimate the benefits and hence support the business for the change. Once these controls are in place, you will have comfort that the leaks are unlikely to cause significant damage moving forward, including as part of the technology revamp – a time when new problems can be inadvertently introduced.
Below is a high-level view of our approach to identifying and minimise the risk of leakage:
Recoup - Our expert profit protection team meticulously examines your line-item data to identify revenue opportunities and mitigate risks in your source-to-pay processes.
Automate - Our cutting-edge solutions accurately detect errors in real time, allowing you to proactively prevent financial leakages.
Optimise - Gain valuable insights into how you can reduce spend and re-negotiate better rates and terms with your suppliers.
What’s the Cost?
When it comes to renovations, it is understood that a budget needs to be set, based on the expected return on investment. With each key aspect of any renewal program, it’s natural to ask how much this will cost and to assess whether there is value in making those changes right now. Let’s put our proposition into context with some of the numbers from one of our client engagements.
In 2016, Profectus engaged with a well-known Australian bank, to confirm what they suspected – they had some leaks. What they didn’t realise at the time was the extent to which the floodgates were open. Our client started by testing the waters and allowing Profectus to undertake an Audit involving a select number of suppliers.
In analysing the first five suppliers that the bank targeted, Profectus helped to identify and recover over $500K. When the remit was expanded to 74 suppliers, the bank recovered a whopping $5M. Within a year of working with Profectus, the bank achieved more than 100% return on investment. And it’s a relatively simple process to put these checks and balances in place. Here is a quote from our client: “It’s a very quick and easy service to implement, and the return on investment is massive.”
The Bank now relies on Profectus to oversee the transactions and deals of 200 suppliers across their value chain, with an ROI of about 300% being achieved every year.
The numbers speak for themselves, with the added advantage of reducing risk across your source-to-pay process. Our solution can also help quickly identify errors that may happen when companies transition to new systems. Our analysis will highlight issues early and often and show you where more testing may need to be done, or what transition errors may have occurred.
Start Digging
The numbers clearly highlight the value in assessing and starting to fix your financial leakage, and what better time to do it than when you’re revamping your systems and processes? There is the added advantage of reducing the risks to your systems implementation and ongoing operations. Reach out for some no-obligations insight into your source-to-pay process, we can help you build the business case for stronger controls. If you do this as part of your systems transformation, we can assist with capturing the value and ROI that you could achieve, and help fund your technology project.