An Electronic Invoicing Maturity Model: P2P, Data and Systems Linkages (Part 1)
An Electronic Invoicing Maturity Model: P2P, Data and Systems Linkages (Part 2)
An Electronic Invoicing Maturity Model: Discounting and Payment (Part 1)
Organizations at the intermediate stage (Level 2) of e-invoicing maturity begin to take a much more consistent approach to measuring KPIs such as on-time payment. In the area of discounting and payment, these companies typically have on-time payment rates of approximately 90%, owning in large part to the visibility their systems afford. For budgeting and forecasting, this visibility can lead to better working capital planning, another hallmark (and benefit) of e-invoicing maturity and sophistication.
As companies move into the Advanced (Level 3) stage of e-invoicing maturity for discounting and payment, the overall percentage of suppliers possessing a realistic opportunity to participate in non-card based early payment programs climbs dramatically, hitting 70% or more. Organizations typically foster higher adoption of discounting programs at Level 3 maturity not just by closing the invoicing and payment loop, but also by actively marketing the benefits of the program to suppliers. These efforts often include focused on-boarding processes specifically for discounting programs, which can occur either as one-off selected options (e.g., a supplier opts to take a discount one month but not the next on a given invoice) or as binary (e.g., opt-in or opt-out) programs where a supplier always takes a discount -- or not.
Anecdotally, Spend Matters has observed that binary opt-in/opt-out programs often have lower APRs. In terms of on-time payment, organizations at Level 3 maturity are likely to hit metrics and KPIs at least 90% of the time. But perhaps more important, organizations at this phase of maturity should consider an additional set of KPIS to consider related to discounting and payment. Our Compass research suggests that these KPIs may include such areas as considering the percentage of suppliers that take available discounts, percentage of suppliers in the trailing 12 months that have participated in dynamic or fixed working capital programs (and frequency of participation) and elapsed time requirements to effectively implement new payment term rationalization programs or changes (including supplier notification).
For more on P2P, check out our latest free Compass research in the area: