Corporations are under constant pressure to improve the operational efficiency of their Accounts Payable (AP) function and optimise cost. Establishing a Shared Services Operations (SSO) centre that caters to multiple business entities helps them to alleviate some of this pressure. The AP function in a SSO centre can often accomplish more tasks with fewer resources in a faster time frame by centralizing and streamlining the payments process from the point of origin to payment execution.
While centralizing payment operations through a SSO centre is designed to help corporations achieve higher payment efficiencies, two critical points within a typical procure-to-pay process that are often overlooked are the vendor / supplier master file creation and the invoicing and payment processing processes.
To learn more, download the brochure here
The vendor / supplier master file contains the critical payment details that are used to process each vendor payment, and today this very process is still very manual and error prone. This is a process that is often governed by the Master Data Management (MDM) team within the SSO.
According to an iPolling survey conducted by Peeriosity1, 77% of the companies surveyed take two or more days to setup a new vendor within the company’s vendor database. As such, it is not difficult to imagine how much time it could cost a SSO if they were to retain a manual vendor / supplier master creation process, not to mention the possible errors and duplication of efforts involved.
The accounts payable department, who are responsible for the invoicing and payment processing are faced with the challenge of ever increasing volume of invoices received year after year, leading to a bottleneck to the procure-to-pay process since the payment details within invoices need to be cross referenced with the vendor and bank master files to prevent against fraudulent or erroneous payments.
According to the AP Automation Study done by ACOM in 20142, as many as 63% of respondents have experienced an increase in the invoice volume as compared to the previous year. Even with the adoption of technology, it still took the corporate respondents up to 5 days to process an invoice. The inefficiency in invoicing and payment processing will eventually discount the benefits that a SSO centralized infrastructure provides.
Let’s breakdown some of the repercussion of having a manual master data management process instead of automating that process.
Manual MDM vs automated
Manual loading of vendor/supplier bank data in the absence of quality bank reference data can cause the following problems:
- Poor validation of vendor/supplier bank data delays payments: Without access to accurate and regularly updated bank reference data, MDM team members are challenged when attempting to validate the bank details provided by the vendor/supplier. Any resulting payment delays usually leads to dissatisfied vendors/suppliers and represent a reputational risk to the corporate
- Incomplete vendor/supplier bank data leads to duplication: In the absence of quality bank reference data and the fact that vendors/suppliers seldom provide a complete set of bank information, it becomes a challenge for MDM team members to differentiate one bank record with another and hence this often leads to vendor/supplier bank data having multiple records for the same bank
- Manual corrections of vendor/supplier bank data are time consuming: Non-automated processes to follow up with the vendor/supplier must be in place when a payment gets rejected due to incorrect/missing routing information. This not only consumes time but often results in banks charging repair or rejection fees
Accuity has helped several MDM and AP teams across many SSO centres to overcome these challenges. The key for many of these organizations is utilising accurate and regularly updated bank reference data that provides the routing information necessary to correctly process payments. This is used to:
- Validate the information provided by vendors/suppliers before it is loaded in the ERP system
- Create a complete and consistent set of vendor/supplier bank data which includes bank name and address, SWIFT code and also local clearing code. This also helps in avoiding duplicate entries for the same bank
- Automatically update payments and bank data whenever there is an update in the bank reference data. This enables corporates to feel greater confidence that they have the most accurate information, even if their vendors/suppliers are not as quick in sharing when their bank’s data changes
Corporations can take this even further by providing their vendors/suppliers with a self-service portal. This useful tool improves vendor/supplier onboarding and also may allow online invoice submissions. According to the AP Automation survey, approximately 36% of the respondents cite the ease of onboarding and submitting invoice the most compelling reason to invest in a self-service portal. Even one step further, corporates can enhance the self-service portal by embedding quality bank reference data within the tool. Now the bank information keyed in by vendors/suppliers is validated at point of capture.
Achieving SSO goals needs technology and robust MDM process
Technology has been the key driver in the centralisation of payments function and the implementation of SSO centres for corporates. However to achieve the goals envisioned from the creation of SSO centres, organizations need to have robust master data management processes as well. Such processes, built on a foundation of trusted bank reference data, establish a single source of truth and resolve the challenges that arise from manual errors. In turn, accounts payable can better tackle the growing invoice volumes and focus on the other tasks that are crucial for the success of a SSO centre.
Learn more about how Accuity helps corporates with their payments processes and bank master data.
For more information, download the brochure ‘Payment Solutions for Shared Service Organisations’