The costs of processing purchase orders and payments are presenting a challenge to all organisations. Certainly, given the current economic climate, all companies will be seeking new ways to eliminate unnecessary and wasteful costs.

1. SmartProcurement November 2008
ACCOUNTS PAYABLE TECHNOLOGY - DRAMATICALLY REDUCE PURCHASE TO PAY CYCLE
COSTS.
The Aberdeen 2006 Corporate Payment Cards Benchmark Report cites
63% of the companies polled placed “Reduced Cost of Processing
Purchase Orders and Cheque Payments” as the their primary goal for
implementing a Purchase Card program.
Figure 1: Top Pressures Driving Purchasing Card Initiatives
Reduced PO/Cheque 63%
Payment Costs
Spend Visibility 47%
Streamlined Procurement 46%
Employee Convenience 42%
Source: Corporate Payment Cards Benchmark Report, Aberdeen 2006
Further, 56% of the companies researched in the Aberdeen 2007
eProcurement: Trials and Triumphs Report cited the same primary goal for
implementing eProcurement systems.
Figure 2: Top Pressures Driving eProcurement Initiatives
Lack of Requisition to Pay
56%
Process Efficiency
Improve Compliance 41%
Improve Visibility of Spend 30%
Lower Transaction Costs
27%
Increase Spend under
Management 23%
Source: EProcurement: Trials and Triumphs, Aberdeen 2007
This is evidence that the costs of processing purchase orders and
payments are presenting a challenge to all organisations. Certainly, given
the current economic climate, all companies will be seeking new ways to
eliminate unnecessary and wasteful costs.
© 2008 TRANSACTION TECHNOLOGY SOLUTIONS -1- 26 January 2009

2. SmartProcurement November 2008
Whilst most investigations within these organisations tends to focus on the
overall “Purchase to Pay” cycle cost, very little time is spent understanding
where, within this process, the actual costs lie. Research conducted by
Transaction Technology Solutions over the last eight years over a cross
section of large South African companies reveals that 23% of the overall
costs lie in the “Purchase…” section of the process and 67% lies in the
“…to Pay” section.
Figure 3: %’age cost of each element of Purchase to Pay process
Invoice Management 42%
Payment 25%
Authorisation 11%
Receiving 10%
Requisition 6%
Order 6%
Source: Transaction Technology Solutions research conducted over a cross section of South African listed companies
Many businesses have implemented eProcurement and Purchasing Card
solutions with the intention of achieving cost savings and efficiencies in
the purchase to pay cycle. The business cases associated with these
implementations have generally focused on delivering process cost
efficiencies and reducing the input costs of indirect commodities through
consolidating volume and driving compliance to supply agreements and
policies. However, as a result of the relative impact of the different
technologies on the process, the overall results have varied.
Figure 4: Average cost savings resulting from purchasing technologies
Invoice Management 7%
63%
Payment 9%
55%
Authorisation 33%
30%
Receiving 2%
4%
Requisition 28%
35%
Order 35%
9%
Traditional eProcurement
Traditional Purchasing Card
Source: Transaction Technology Solutions research conducted over a cross section of South African listed companies
© 2008 TRANSACTION TECHNOLOGY SOLUTIONS -2- 26 January 2009

3. SmartProcurement November 2008
Purchasing Card has traditionally outperformed eProcurement in the
Invoice and Payment elements of the process whilst eProcurement has
outperformed Purchasing Card in the Ordering elements of the process.
There are obvious reasons behind this:-
1. eProcurement is more effective at ensuring that the correct line
item is purchased from the correct supplier at the correct price.
Traditional Purchasing Card did not address this as its pre-purchase
controls were limited to ensuring only the correct supplier category
and spend limits. This is managed with Purchasing Card post-
purchase controls however risk averse purchasing and financial
managers have always preferred to manage these elements in the
pre-purchase phase, especially listed and public service entities
concerned about Sarbanes Oxley and the PFMA & PPPFA.
2. Purchasing Card is unparalleled in its impact on the Invoice and
Payment element of the purchase to pay process. As illustrated in
Figure 4, it delivers 63% savings to the invoice management process,
largely as a result of the effective removal of low value invoices.
Further, it delivers 55% cost savings to the payment process as a
result of eliminating the higher volume of low value payments by
consolidating the payment off all these invoices down to one
payment to the Bank. When considering that 67% of the overall
process costs lie in invoice management and payment, the
Purchasing Card dramatically over-achieves eProcurement when it
comes to delivering cost savings.
Every purchasing and financial manager seeking to drive out unnecessary
and wasteful costs has to consider implementing this solution.
About the Author
Julian Curtiss is Managing Director of Transaction
Technology Solutions, a specialist systems technologies implementer. He
has consulted to some of South Africa’s largest corporations on the
benefits of process enabling technologies. Julian has been involved in the
business end of IT projects for over 12 years, incorporating work in the UAE,
United Kingdom, Zimbabwe, Kenya, Uganda and South Africa. This has
included the implementation of Business Management Systems such as
Sage Software, ERP systems such as JDEdwards (Softline), E-Procurement
systems such as SAP Enterprise Buyer, and card management systems
© 2008 TRANSACTION TECHNOLOGY SOLUTIONS -3- 26 January 2009

4. SmartProcurement November 2008
such as VISA’s Information Source ™ and MasterCard’s SmartData Online
™.
© 2008 TRANSACTION TECHNOLOGY SOLUTIONS -4- 26 January 2009