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ING Guide to Financial Supply Chain Optimisation
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Section Three:
Purchase-to-Pay Processes
Gregory Cronie, Head Sales, Payments and Cash Management, ING
M
aking payments efficiently,
cost-effectively and securely is
pivotal to every well-managed
finance function. Many of the discus-
sions on payments in banks’ brochures
and media articles surround payments
processing, particularly straight-
through-processing, security and bank
connectivity. These issues are, of course,
very important in achieving a best-in-
class payments operation. However, in
addition to processing, managing
payments is also a strategic element of
working capital to ensure that the
company is able to take advantage of
early payment discounts offered by
suppliers where these are beneficial,
manage FX risk created by foreign
currency payment obligations and time
payments with cash inflows to avoid
liquidity issues. Furthermore, the cash
management organisation needs to be
structured to minimize the number of
cross-border payments to manage
payment costs.
As fig 6 illustrates, this time with
Company A on the left and the supplier
on the right, the purchase-to-pay
process mirrors the order-to-cash
process, typically including the
following steps (and challenges):
A. Company A receives the invoice from
the supplier and needs to reconcile
these against the order details before
authorisation and payment. This is
time-consuming if the original
purchase order number is not shown
on the invoice.
B. The company may wish to query the
invoice and again, the better aligned
the information between itself and the
supplier, the quicker this is to resolve.
C. Once approved, which may need to be
done by one or more business
managers, the payment can be
processed. This can be an involved
process internally, particularly in the
case of multiple payment origination
systems, large numbers of “one off”
supplier payments when supplier bank
account instructions need to be set up
and approved, if there are frequent
changes to payments or if a variety of
Managing
payments is a strategic
element of working
capital to take
advantage of early
payment discounts,
manage FX risk created
by foreign currency
payment obligations
and time payments
with cash inflows to
avoid liquidity issues.
Fig 6: Purchase-to-pay processes
Source: Asymmetric Solutions Ltd
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