Purchasing, finance administration and financing require Cross-border cooperation
Point-of-view, Procurement, Source-to-Pay
Many companies are taking a closer look at their purchase-to-pay processes. Supply chains are extending further and further, while demands for greater transparency, better delivery reliability and optimal production costs are increasing.
Yaron Nadbornik, Head of Procurement at SATO, Anders Nordström, ABB’s CFO and Kimmo Helle, Metsä Group’s Vice President Treasury Development & Trade Finance, all agree that developing purchasing, payment and cash management functions requires cross-border collaboration and systems, interfaces and automation. The three were on a panel discussing the topic at OpusCapita’s Finance Forum.
“Digitalization and increasing automation in support functions, especially in finance administration, will fail to make much progress if the focus is on a single function. Instead, the entire process must be developed and business operations must be involved, too. Otherwise it will be difficult to increase the share of electronic purchase invoices, for instance,” Anders Nordström says.
ABB is currently centralizing the Group’s finance functions from the present 36 country-specific finance administration centers to two global and four regional centers. Purchasing operations and purchasing transactions will be centralized at the same time. According to Nordström, the change is part of a world-wide program to increase the efficiency of the work done by office staff.
“In the next stage automation will remove the steps that are now slowing processes down. We want paying to be as automatic as possible: if a purchase order has been appropriately approved, the delivery matches the order and the invoice matches the delivery, why not pay automatically, too?”
Easy buying for companies
According to Kimmo Helle, buying and paying is much easier for consumers than businesses. He believes that as a result, the biggest changes that will take place in the near future will involve corporate payment traffic as blockchain technology develops.
“As consumers, we can order running shoes on-line from China, pay with a credit card and have the shoes delivered to our door. But a company cannot sell a container of sawn timber to China as easily because the tools for this do not exist,” he says.
“In companies progress has become stuck in improving existing procedures, such as the efficiency of the purchase invoice acceptance process. What we need instead are ways to rethink the entire process. For example, in many SEPA markets we already use direct debit, which removes the need for review at the invoicing stage.”
Increasing payment automation and growing risk of fraud also emphasize the importance of managing master data.
“In our Group we have a common finance administration ERP for all business operations. We have to consider all processes used to process master data and supplier’s bank information very closely,” says Helle.
Place for change management
SATO renewed its purchase-to-pay process a few years ago and implemented a new procurement system. Yaron Nadbornik says that systems, common data warehouses and comprehensive reporting are needed to allow procurement to really be able to see what the organization is buying and how much it is spending.
“And people need to use the systems. At first, our development project looked like a mere system reform. But a lot of change management is also needed to make people commit and understand why new procedures are necessary and how they make the entire organization more efficient."
“This also generates transparency that makes it possible to develop procurement and more open supplier collaboration,” says Nadbornik.