Changing Top Priorities for Companies in Today's Economic Climate

The ambitious business plans that many companies hoped to be executing in 2009 have in most cases been set aside and a new list of priorities advanced. This article called Top Priorities for Companies Today and the Growing Need for EDI and B2B E-Commerce discusses an emerging set of priorities that are being seen in Q1 2009. Note priorities 7, 8 and 9 all have to do with e-Invoicing and accounts payable optimization.

Companies today are looking for ways to accomplish more with less. They are seeking ways to automate people intensive processes with business automation, and replace paper with electronic data exchanges. They are seeking to consolidate systems and processes into Shared Services Centers and to simplify labor intensive IT environments with more third party managed services providers.

Supply Chain Financing and EDI / B2B

This week I have been involved in a lot of discussions around Supply Chain Financing. This is a world I barely knew existed a few months back. Corporate Treasures are of course focusing on Working Capital and its components. One component DPO (days payables outstanding) is an indicator of how long a company is taking to pay its suppliers. Manufacturers and other companies are looking to find ways of extracting more cash from their supply chain, as the credit markets are clearly constrained. Companies may be looking to take longer to pay suppliers, helping suppliers remain financially stable, and at the same time negotiate early payment discounts. Some times, there may be a bank willing to provide a short term loan to the paying company so they can pay suppliers early and get an early payment discount, or to loan money to the supplier so the manufacturer can take longer to pay their bill. All great stuff, but how is EDI and B2B E-Commerce involved?

Let's discuss the processes involved in the financial supply chain. First let's look at it from the perspective of the manufacturer:

1. Send Purchase Order
2. Receive products
3. Receive an invoice
4. Perhaps dispute an invoice
5. Issue payment (and thus impact working capital)
   
6. Archive Invoice and Payment information

Let's now look at the supplier side:

1. Receive order
2. Deliver product
3. Submit invoice
4. Resolve invoice dispute
5. Receive payment (and after posting, impact working capital)
   
6. Clear receivables
   

Every time you see the words; receive, submit, send or issue there is a place for EDI and B2B e-commerce (for more on EDI and B2B issues) - the electronic exchange of business documents and data. If fact, there is a whole industry dedicated to helping large companies optimize their accounts payable processes.

In the world of Financial Supply Chain there is a lot of business information that is being exchanged in a short amount of time. The ability of a manufacturer to receive an invoice, process it and negotiate an early payment discount and make the payment all needs to take place in a few short days. The whole discussion around early and dynamic payment discounting is mute if processing the invoice takes longer than the early payment discount term allows.

To take advantage of the various Supply Chain Financing opportunities available from banks and other parties, manufacturers must have the capability to support a high level of business process automation and have advanced EDI and B2B capabilities. The manufacturer can either support the EDI/B2B requirements internally, or find a managed services provider that can support these processes and provide a tight integration with the manufacturer's ERP and accounting system.

Crossgate and BancTec are 2 of many companies that are active in this solution area. For a more comprehensive list see this directory.