Few sectors have been hit as hard by the COVID-19 outbreak as retail. Consumer confidence at its lowest level since the 2008 financial crisis, social distancing is set to become the new normal, and post-pandemic footfall likely to be significantly affected. The outbreak is accelerating several pre-existing trends in the sector, and the situation is now urgent.
Prior to the pandemic, the industry had already identified AI, data analytics and other emerging technologies as central to meeting rapidly evolving consumer behaviours and expectations. Today, the uncertainty around the long-term consequences of the outbreak makes the need even more pressing.
While retailers are already investing heavily in technologies that transform the customer experience, digitalization of many back-office functions has so far been overlooked. Yet, many of these functions are vital to ensure operations and cash flow are optimized.
Accounts payable is one of these areas.
A recent survey by IDG Connect, “True digital transformation in retail isn’t just about changing old processes”, took a close look at what large and mid-size retail companies across Europe are doing in the accounts payable area, and what their plans for the future are.
Going electronic doesn’t equate to digital transformation
The survey clearly highlights the challenge that retailers face in dealing with paper and emailed pdf invoices. Over 50% still receive paper invoices, and a large majority, 71%, found that invoice approvals are taking too long.
As a result, many companies have invested in point solutions to help alleviate this problem. A response from one Italian retailer illustrates this, “There is a lot of frustration waiting for long approvals and payment processes. A lot has and will be rectified with digital technology.”
Nearly half of the accounts payable teams surveyed have streamlined their invoice recording process using tools like OCR and scanning. This, in theory at least, reduces some of the pain associated with receiving large volumes of paper invoices.
However, this brings us to a much bigger issue. According to the survey, there’s a perception that introducing tools such as OCR equates to digital transformation.
While these technologies can help bridge the gap between paper and digital, they are unlikely to have a major impact when it comes to digitally empowering users and transforming the role of AP within the business. They will also not provide any support for retailers trying to establish closer relationships and better collaboration with suppliers and customers.
Reinventing the role of accounts payable in retail
A fully digitalised accounts payable function is the perfect springboard to reinvent the procure-to-pay (P2P) process and beyond. With the ability to collaborate and transact in real time across a network of retailers, wholesalers, producers, banks and other financing partners, companies can take maximum advantage of early payment opportunities and optimize their working capital.
These benefits also extend to suppliers. This is important – a lack of supplier engagement often limits the success of accounts payable transformation projects. But with faster invoice approvals and direct access to multiple financing possibilities, suppliers stand to gain just as much. All of this helps to build trust and strengthens the overall retailer-wholesaler-producer relationship, paving the way for better collaboration and more innovation.
Better decision making
Just imagine if all the data and information that passes through the accounts payable department could be harnessed and made available for analysis. Up-to-date information about every supplier, every contract, every invoice, discounts, legal terms and delivery performance—all in one place.
Now imagine the knowledge you could extract if you could effectively analyse this information. Not to mention the value these insights could bring if shared within the company. What if you could query every supplier in your network in real time, and find the best option for your specific need? What if you had a complete picture of your spending patterns? The potential is huge. However the survey showed that only a minority of companies considered access to data to support better business decision-making to be one of their main digital transformation objectives.
One interviewee summed it up well, “Making AP digital will transform the way our departments interact, and how information flows between them. Department heads along with senior management can take the right steps, eliminate risk earlier and make more informed decisions.”
So what’s holding accounts payable digitalization back?
The business benefits are clearly there, and not just from a cost-saving perspective, but also from a more strategic and growth point of view as well. The technology needed to make it happen is already here too, including all the services needed, such as supplier on-boarding.
So why is the digital transformation of accounts payable not progressing at a faster pace? Why are companies still focussing resources on isolated, department-specific projects, instead of on delivering an end-to-end supply chain payment solution?
According to the survey, the vast majority of retail executives agree that digital transformation will significantly change the role of AP in their company in the next five years. Add to this the unprecedented level of global uncertainty and massive disruption the COVID-19 crisis has caused in the industry, and there’s now a clear need for this timeline to be accelerated.
However, it is equally clear that the urgent need to transform accounts payable is not yet backed up by investment in truly transformative initiatives. Until senior management is fully on board and understands the strategic value of an integrated AP function, this will remain the case.
Download your copy of the IDG survey to find out exactly what your retail industry peers are doing with regards to AP and P2P transformation, their goals and priorities, and where they struggle to make a difference.
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