According to a survey from The Hackett Group, 38% of CPOs are already piloting artificial intelligence programs and 20% are piloting solutions that use the internet of things. And data is at the core of these digital megatrends.
Question: What are the three global megatrends facing the finance and procurement industry?
Analytics is all the buzz. It’s becoming increasingly prevalent for procurement and finance professionals but if we look at it at a higher level, it’s really being driven by three major megatrends:
1. Globalisation. Businesses once improved their processes and performance by engaging with organizations close them. Fast forward to today where businesses can use online e-procurement marketplaces to quickly ramp up transformation with like-minded partners.
2. Demographics. Digital-natives are quickly forming the majority of the workforce. Many of them thrive on creating innovative solutions with data and analytics and expect to use these tools day-to-day. They want to uncover and leverage insights to drive service profitability and efficiency. The last thing they want after 3+ years at university is to become a cogwheel in the financial production line.
3. Technological evolution. It will soon be the norm for all areas of a business to be empowered by AI and machine learning - processing and analyzing huge volumes of data from business processes to better predict the future.
These megatrends are driving businesses to harness the untapped troves of information they already have to reap efficiencies.
Question: Why do suppliers need to be treated as stakeholders and how can businesses ensure this happens?
It’s not always been easy for suppliers to source new customers. Traditionally, it’s been expensive to find prospects, engage with them, understand what they need, and deliver goods and services to them.
Today, customers can be found easily in e-procurement networks. They can engage online, agree on prices, establish contracts, and start trading in small quantities. Because suppliers now have more choices regarding their customer base, they expect to be more successful with their customers.
Customers need to offer their suppliers enjoyable ways to conduct business. Practically, this means electronic contracting, collaboration, and trading. Give options for your suppliers to manage their own data, and offer them their preferred way to get paid, on time or early.
Question: You talk about the rise of the “source-to-pay predictor.” What is this?
In today’s era of automation and analytics, there’s no time for manually managing transactions. Newly qualified graduates also expect that automation and robotics will give them more time for the social and analytical aspects of work.
Being a predictor means using automated systems to analyze the possible outcomes of digitized information and collaborating with business partners and colleagues to prioritize actions. It requires you to shift your focus from running a business (or the manual processes behind it), to applying data science and automation to optimize the source-to-pay process and drive efficiencies. Being a predictor is about embracing this true mind-machine partnership.
Question: What steps should finance and procurement take to become source-to-pay predictors?
Firstly, data must become structured. If it’s not in a digital format, it can’t be processed by a computer. This includes electronic invoices, but also RFIs, tenders, contracts, catalogues, orders, and conversations between suppliers and buyers. To deliver the most robust results, it also needs to include everything that you know about your partners and your counterparts.
Next, these intelligent systems and abundance of data must be married with smart people. Professionals must skill up and embrace new technologies to transform financial processes and their role in it. Encourage your team to build their skillset – including collaboration and social decision-making around data, ethical thinking around supply chain questions, and critical thinking around the insights provided by machine learning.
Question: What is the role of AI, machine learning, and blockchain in finance and procurement?
Data is an absolute prerequisite to machine learning, artificial intelligence, predictive and prescriptive analytics. By consolidating of lots of procurement and finance data, organizations can leverage advanced technologies to find the most important actions to work on. Artificial intelligence and machine learning are great at finding trends, anomalies and insights for people to validate. The technology should be put to work to serve people.
What does this mean to procurement? Well, when you have the data and analytics in place, you can use AI and machine learning to discover insights that were not visible to the human eye. Your cross-functional team can then ask questions that were not possible to answer before. Like:
Which suppliers are most exposed to our cash and liquidity planning regimes, and how do we keep them satisfied?
Which suppliers would be most likely to give us a discount for early payment?
In which spend categories can we discover alternative suppliers?
How are we performing against other businesses based on our spend and process performance?
Question: Turning locally, Australia’s and New Zealand’s governments are heavily focused on e-invoicing. What benefits can be achieved through e-invoicing?
Public and private sector organizations across the globe are actively seeking to improve performance, reduce operating costs and promote economic growth through digitization. Invoicing is currently a significant cost to Australian and New Zealand economies. It involves a variety of paper based and electronic forms dealing with the production, distribution, data capture, matching, reconciliation, dispute management and subsequent archiving of documents, errors, manual intervention and processing delays.
Over the last few years, both Australia and New Zealand have made significant inroads to catalyze change and introduce digital building blocks to help reduce business burden and increase productivity and efficiency. The Prime Ministers of Australia and New Zealand announced a common approach to e-invoicing, formalized by an international arrangement signed in late 2018.
Once implemented, e-invoicing can deliver a number of key benefits for businesses, including:
Potential efficiency gains of 60-80% (Billentis, 2015)
Significant performance improvements by driving efficiencies in the accounts payable function, including confirmation of receipt of invoice to the correct party
The ability to exchange and process data with less manual efforts and less errors, often requiring the buyer only to signify approval for payment
Improved quality of invoice data, early error detection, and reduction of overall processing times resulting in greater efficiencies
The ability to conduct business everywhere
A capacity to measure key performance indicators, such as operational, financial and supplier metrics.
Question: How can e-invoicing help businesses and governments deliver greater value from payments?
Over 1.2 billion invoices are sent and received annually in Australia. Making this electronic could help taxpayers save a potential $2.4-3 billion and has a total saving potential of $7-10 billion for our economy. The PEPPOL agreement that both governments have signed onto is one single B2B and B2C eProcurement technology and will allow the government to transition to e-trading more effectively.
We’ve seen the success of e-invoicing elsewhere, particularly in the Nordics where Basware HQ is. In Norway, for example, as soon as business lists their e-invoicing address in the national directory they can immediately receive e-invoices. It’s a painless process. Furthermore, the UK Department of Work and Pension has saved £2.5 million every year since moving to e-procurement. While the UK Police Force has saved £69 million over 6 years. That’s a lot of financial efficiency for taxpayers’ money.
When first implementing e-invoicing, the government can help small businesses adopt the scheme by offering early payment thanks to faster processing. This really helps the liquidity of cash strapped small-to-medium sized businesses and will improve uptake of the system.
Question: Any final comments?
In this journey, choosing the right change partner is everything. As e-Procurement becomes the new norm we would encourage businesses to join an electronic invoicing network that is compatible with the Trans-Tasman e-invoicing initiative. Look for a solution that connects users and suppliers in one cloud solution to enable genuinely digital, global trade interactions.
Within your businesses, double down on automation and form a consolidated view on spend and processes. Define target competencies and systematically build your team against those. Champion a new style of teamwork, working with computers, and set goals for the mind-machine partnership - this will include delegating tasks to AI. Above all, do not lose sight of human experience. People determine how machines learn, identify the right data, guide training process, and refine outputs. It is the predictors’ time to shine, in this new era.
Ready to learn more?
Learn more about how data affects every facet of the S2P process in our whitepaper. Questions? Contact us!