MAKING A CASE FOR AUTOMATION
Calculating Current Procurement Costs & Potential Savings to Make a Case for Automation
by Salim Khalife, Founder & CEO
Making a case for automation can seem like a daunting task. Procure-to-Pay (P2P) professionals must find clear, compelling ways to communicate the potential savings and benefits of P2P automation to their organization’s decision-makers. They must calculate their current procurement costs and relate them to potential savings to make a case for automation. In a conversation with PayStream Advisors, I explained that the first step organizations should take when considering automation is “to make sure that their house is in order” by ensuring internal adoption and management buy-in—but how can this be done?
One persuasive argument for automation lies in the potential savings organizations can achieve using a robust procurement solution. Any system that takes the burden away from all the touch points should be able to give you at least 50 to 60 to maybe 70 percent savings on the cost to process a requisition or a purchase order (PO). Procurement professionals should first assess their organization’s current procurement state and costs, then demonstrate the savings that can be delivered by P2P automation. To this end, Paramount WorkPlace and PayStream Advisors have collaborated to develop the Procure-to-Pay Calculator.
The Procure-to-Pay Calculator is a simple tool to help organizations measure the total cost of processing POs and invoices. This calculator factors in all the variables contributing to a company’s estimated cost per purchase order (CPPO) and cost per invoice (CPI), such as the time procurement and AP professionals spend on all activities across the PO and invoice lifecycles. After entering some basic information, companies can quickly estimate their current costs—and also see how those costs could change by automating processes.
For example, a mid-market organization processing 1,500 requisitions and 3,000 invoices per month may have three purchasing agents, two AP clerks, and a manager in each department. Using the Procure-to-Pay calculator, organization leaders can clearly see their current estimated CPPO and CPI; they can also view the potential savings they can achieve with automation—up to 52 percent per year.
Demonstrating the staggering amount of savings that can be achieved with P2P automation is an excellent way to catch the attention of decision-makers, especially when presented alongside the other benefits of a procurement tool. Other significant advantages of these solutions include the ability to manage all procurement and order management tasks under one platform, reduce paper and manual processing, enhance communication among departments, and cut back on staff time spent on low value-added tasks. Some key functionalities of Paramount WorkPlace’s solution, including multi-company purchasing, project-based requisition down to the activity level, and the elimination of maverick spend.
I recommend involving a variety of stakeholders when building a business case, including purchasing managers, users from different departments, and controllers or a chief financial officer. These stakeholders will be able to clearly see the potential benefits and help guide an organization as it identifies automation goals and researches potential solutions. Identifying how a company can benefit in many ways—financially, operationally, and strategically—strengthens the case for automation, and helps decision-makers truly understand the impact that a procurement tool could have across the entire organization.
Professionals considering an automation initiative should consult The Ultimate Guide to Building a Procure-to-Pay Business Case for more ways to drive change and implement new processes. The benefits of a holistic procurement platform are also described in further detail in PayStream’s Integrating Purchasing and Payables report.
ABOUT SALIM KHALIFE
Founder, President & CEO, Paramount WorkPlace
Salim leads vision and strategic company and product direction. With over 25 years of hands-on strategic management experience in the technology and software development industry, he is known for translating vision into reality in a variety of economic environments. Prior to founding Paramount WorkPlace, Salim held key roles at Platinum Software and Unisys Corporation. At Platinum, he directed quality assurance for their Michigan office and was credited for establishing, building, and managing a 100-person quality assurance department in addition to his hands-on involvement in developing the detail design specifications and marketing requirements of the software applications. At Unisys, he managed 25 quality assurance engineers with hands-on development of imaging products. Salim holds a Bachelor of Science in Electrical Engineering from Lawrence Technological University and Master of Science in Computer Science from the University of Detroit.
ABOUT PAYSTREAM ADVISORS
PayStream Advisors is a research and consulting firm focused on business process automation in sourcing, supply chain management, procurement, accounts payable, payments, and expense management. PayStream’s team of experts provide targeted research and consulting services to address the changing needs of finance and procurement professionals. In short, they are dedicated to maximizing the returns and lowering the risks associated with technology investment. PayStream’s research reports, white papers, webinars, and tools are available free of charge at www.levvel.io/. PayStream Advisors is a division of Levvel, an technology services firm specializing in strategy, design, architecture, and infrastructure services.