Monthly Archives: December 2019

Invoices are still costing you money!

Six Years Ago we pointed out that:

  • You’re probably overpaying your suppliers by 1%
  • There’s a 2 in 3 chance you’re being defrauded of 2% of your revenue
  • Up to 75% of your AP overhead is completely wasted
  • At least 1 in 10 invoices are erroneous
  • One Million Invoices requires at least 100 standard 4-drawer filing cabinets

But things aren’t much better.

  • PRGX and other leading recovery firms still recover 0.3% of total spend on average which means the over-payment average is still the same using the rule of thirds (1/3 not recoverable because contracts expired, 1/3 goes to the audit firm in fee based recover, 1/3 goes to you)
  • PwCs recent Public Procurement:: Costs We Pay for Corruption, average loss to fraud is 3.5%, with a UK average of 4.76% … and while private companies might think they are better off, the cyber crime economy keeps reaching record highs (and is 1.5 Trillion in the US alone) and private fraud losses in the UK almost equal public fraud losses according to a CIPS study
  • Based upon recent data from the 2019 Payables Friction Index, a good portion of your AP overhead is completely wasted
  • The number of erroneous invoices hasn’t decreased

Furthermore, according to the 2019 Payables Friction Index, in collaboration with Corcentric, PYMNTS surveyed 2,570 firms on AP processes and found the following:

  • Paper Still Dominates
    • 81% of firms still use paper checks to pay invoices
    • 45% of firms still use cash
  • e-Cash is still in the minority
    With the exception of ACH, that has finally penetrated more than half at 62%, all other methods (including credit cards / p-cards) are still less than 50%!
  • e-Invoices are increasing
    but up to 34% of invoices are still paper (in organizations under 100M in particular)
  • OCR, on average, is still under 50%
    (as low as 37% in organizations under 10M) and, more importantly,
  • utilization of basic automation, ML, and/or AI is even less
    when modern RPA + ML systems exist that can automate e-Invoice processing through simple rules, m-way checks, bounce backs for correction, completion, and verification, to 98% … and
  • approval times of one or more weeks averaged between 16% and 45% across respondents, depending on the number of approvers needed and organization size … when the majority of invoices should be auto-processed and auto-approved …

In other words,

  • You’re losing money on overhead,
  • You’re losing money on early payment opportunities,
  • You’re losing money on over billings and duplicate billings, and
  • You’re losing money on fraud …
  • … when the majority of this loss is easily preventable!

So why not get a modern e-Invoicing solution, standalone or part of a S2P platform, and stem the bleeding and use that money to hire more A-class talent to identify long-term strategic savings build on a supply resilience strategy?

How Do You Know If That SaaS is Priced Right?

As per our recent post on What is that Platform Worth?, SaaS is good, but only if you get an RoI from the subscription license fee. So how do you know if that SaaS platform is priced right for you?

Six years ago we ran a post on Good SaaS vs. Bad SaaS where we focused on some of the key non-functional characteristics that should be examined in your SaaS purchase process. Six years have past, and they still haven’t really changed. In summary,

Good SaaS is Bad SaaS is
focussed on value sold on cost
has RoI models and plans to achieve them talks about process improvements and associated cost reductions
is designed to support business cases is focused on manpower reduction
has offerings and prices applicable to different customer sizes has a one-size-fits-all offering and pricing scheme
competitively priced for what you need priced out of the ballpark

Breaking it down, a good SaaS vendor comes in with a proposal that

  • competitively prices the solution based upon a value model that
  • demonstrates a realistic realizable ROI based upon an
  • appropriate implementation plan that not only addresses
  • process and workflow improvements that will result not only in manpower reduction and cost reductions but
  • increased throughput and improvements that will increase the overall value Procurement contributes to the organization.
  • And the vendor will be able to help you summarize all of this in a business case customized for your organization.

    It’s about your needs, not their optimal sales process / price-point.

Talent is Scarce, but Remember EQ and TQ are not Interchangeable!

the doctor realizes just how limited the supply of top Procurement talent is, and how tempted you might be to hire any apparent “talent” that you come across, especially if you get the okay among constant (brain-dead) hiring and training budget cuts (when Procurement is one of the few organizations that can consistently deliver a return many times it’s operational cost), but when you are filling your Procurement roles, chances are that at least one of them is going to be an TQ-heavy role. And whereas you can replace Procurement knowledge with IQ, you can’t replace Technical Knowledge with IQ, at least not quickly.

This is important because, given how important it is for a new hire to fit in, a company is often ready to hire the minute a candidate comes along that:

  • has the personality that fits the corporate culture,
  • has influential charisma, and
  • has intellectual potential.

or, in other words, has the right EQ.

This is important, and should be the deciding factor among multiple candidates that can do the job, but you should first make sure the candidate can do the job she is being hired for. If it is highly technical in nature (i.e. leading the implementation and customization of a new S2P system to support organizational processes and transform them along the way), then she needs to be rather technical in her background and have a good knowledge of what the systems can do, how they do it, and what the organization will need from them.

These are not basic Procurement skills or category expertise that can be taught to any candidate with a high IQ, some common sense, and a background in the industry. These are skills that typically take years of training and experience to develop.

In other words, before hiring, first

  • clearly identify the role that needs to be filled
  • the key technical / experiential skill sets that are needed
  • what, if anything, can be made up with in-house / third party training if the candidate has the right IQ and work ethic

and limit consideration to those candidates. At this point, you can let EQ prevail (even if one candidate would take 6 weeks of training and another 6 hours, because even if a candidate required no training, the wrong attitude would prevent that candidate from ever fitting in). But not before. Remember that before you get overzealous. At the end of the day, the job needs to get done, and the perfect candidate is not the perfect candidate if he can’t do the job.

A New Year of Procurement Events Is Almost Upon Us. Time to Get Ready for the Next Round of …

Bullshit. (Cafe Press wants to sell you a cap. We have no affiliation, but we like this cap in particular.)

SI has already logged over 50 Sourcing and Procurement events for 2020, and it hasn’t even tried to list them all! There is not that much new stuff to talk about every year (and, to be honest, it would be difficult in some years to fill just one 3-4 day event with all new material), so you know what that means. Either:

  1. Replay the skipping record. (The Bird is the Word, after all!)
  2. Resuscitate some long dead hype (which is probably a reality after a decade or two, but old news just the same).
  3. Talk about some “future” development that is so far off in the future that it’s totally useless to anyone who is attending the event.

In particular, get ready for a year of:

  • Community Themes: we know community intelligence is incredibly useful across S2P (market price intelligence, supplier performance, best practices, group buying, etc. etc. etc.), but we need more practical implementations today
  • Automation: after all, two decades old technology will likely get confused with AI if there are enough embedded rules, right?
  • Procurement 4.0: we only started the 3.0 journey about 3 years ago with the appearance of the first S2P suites … it will likely be at least 5 more years before we see the full realization of Procurement 3.0, and before anything appears with the first hints of 4.0 functionality (and there’s no way your C-Suite is waiting 5 years for a return on investment)

And now you know why the doctor doesn’t go to many events. As for you, the best events are, to be honest, typically vendor events that have multiple streams with educational material (from peers) appropriate to where you are in your Sourcing and Procurement Journey. There will be one or two decent events each year where a lot of the content will be relevant, new content, based on where we are now, but a lot will be the same old same old. So choose your events with care, unless you like the broken record (and still think The Bird is the Word!)