Expert Guide: eTrading for the Construction Industry
Over the next few weeks COINS P2P expert David Bullock will explore e-trading for the Building & Construction industry in a new series of blogs. The first will explore who wins when it comes to transitioning to electronic trading? The second will provide advice on how to manage the business transformation process of electronic trading and explore some of the “gotcha’s” and things to avoid. Finally, he will discuss the wider Procure 2 Pay challenges for the sector and your business. Improve your e-trading by attending the COINS Conference where David Bullock will be delivering a variety of sessions on topics such as eProcurement
Expert Guide 1 - Why choose to trade electronically?
Why, in the 21st century, are we still processing so much paper? With contactless payments commonplace on the high street and smartphones becoming the new wallets, you can buy a coffee using a smartwatch with a flick of the wrist. Yet in the construction sector we still like to hold onto paper receipts, deal with paper invoices and goods received notes as if, without them, everything will come tumbling down. Mountains of paper find their way into our administration process, errors and issues are rife and the problem is only getting worse.
Why do we cling to this approach? Is it because 'we always do it like this'? Is the construction sector so resistant to change? Do businesses feel that the issue is insurmountable? Whose problem is it anyway?
In the construction sector, Electronic Trading (eTrading) refers to integration of your business’s Procure-to-Pay (P2P) with those of your supply chain, so that all documentation passes electronically between the business systems of the various trading partners, without the need for your order processing data to be printed or handled manually. Documentation typically includes invoices, purchase orders, tender enquiries and responses, requisitions, proof of delivery documents, remittance advices and statements.
When trading electronically we must consider the value proposition to your business as well as to your supply chain partners. By embarking upon electronic trading, you are transforming the way you do business; you will need to take all of your supply chain with you on the journey and identify and communicate 'what's in it for them' too.
Most people believe that buyers will generally achieve more benefits from electronic invoicing (eInvoicing) than suppliers. This is because the buyer is provided with economies of scale in processing large volumes of invoices electronically. Key benefits for buyers include:
By eliminating the sorting, registering and manual data entry of paper invoices organisations can look to save anywhere in the region of 60-80% of their costs by moving to an electronic invoicing process.
Capturing invoice data electronically enables straight through processing (STP) of critical data right into the accounts payable process by removing the manual, error-prone, processes.
Increased productivity. Being more accurate naturally leads to a reduction in re-work due to the fall in invoice errors. Consequently, there is a reduced number of supply chain queries and phone calls to the AP centre.
Faster processing and payment processes
eInvoicing fully automates the invoice capture, routing and approval process within the business. As a result, invoices are processed quicker, leading to on-time payments. This avoids any late payment fees and increases the opportunities that may lie in contracted negotiated discounts with the supply chain.
Attention on higher value activities
By removing the mundane, low-value, data entry tasks, staff are freed up to work on more strategic business objectives such as audits, invoice validation, supplier relationships and negotiated agreements and discounts.
More negotiated opportunities
Electronic Invoicing by its very nature ensures faster processing and approval of invoices, as a result your business can often take advantage of various timely payment opportunities that exist. Your supply chain will certainly want to work with you to create a win-win opportunity for all concerned.
Improved dispute handling
Disputed invoices can cost your business a significant amount to resolve, often resulting in further inefficiencies further down the supply chain. Electronic Invoicing allows for faster and more accurate payments which in turn reduces the number of calls from suppliers relating to payment status or disputing the payment amounts.
Enhanced relationships with suppliers
Electronic Invoicing is an efficient, effective, payment process which will, in line with the points above, create a very strong supplier relationship. This trusted, collaborative relationship will result in better customer service, stability within the supply chain and increased confidence for your ultimate end clients.
While eInvoicing provides significant benefits to your business as a buyer, the benefits to your supply chain should not be underestimated. Improved customer satisfaction, reduced credit collection administration costs, better capital management and cash-flow control are all benefits that apply to suppliers. Some of the key supplier benefits include:
EInvoicing software removes a myriad of manual processes from mailing, routing, sorting and re-keying. Your supply chain can have their invoices processed and approved quicker as electronic data is immediately available within the heart of the AP process. Consequently, invoices get paid on time and cash flow is improved.
Delivery costs can be significantly reduced due to savings in postage, materials, processing and storage. Further savings result from a reduction in re-issue requests, customer service calls and the ability to implement electronic payments. Also, having an electronic invoice archive saves the costs associated with the storage and retrieval of paper copies.
Fewer rejected invoices
E-Invoicing construction software enables straight-through processing (STP) directly from your supply chain to your ERP. It eliminates your need to manually re-key their data, reducing the potential for data entry errors. As a result, your supply chains invoices are less likely to be rejected and you can start processing them without delay.
With electronic delivery of invoices, your supply chain knows precisely when you have received their invoices, reducing the need for status calls. Improved accuracy resulting from eInvoicing reduces the amount of rework required and lower volume of dispute phone calls.
Enhanced account reconciliation
With eInvoicing construction software solutions you can send an electronic remittance advice with the payment, providing detailed accounting of invoices paid as well as debits, credits and adjustments taken. Additionally, this helps in situations where you claim deductions against an invoice due to shipment problems such as damaged or missing items.
In addition to buyers and suppliers, other business managers – including line-of-business managers, CEOs, finance and purchasing – also experience significant benefits from eInvoicing. Increased process efficiency means that managers have greater control of planning and forecasting as well as the ability to deliver higher levels of customer service. Some of the key benefits for managers include:
Invoicing on paper means that there is a delay in the invoice becoming visible within the accounting systems. This has implications for the accuracy of forecasting and forward planning. Within COINS OA the ability to see the invoice as soon as it is issued provides a much greater level of certainty and control.
For many companies the ability to optimise their working capital is essential. It improves business agility and can minimise the need for external financing. By shrinking the order-to-pay and order-to-cash cycles, eInvoicing allows businesses to receive payments in a timely manner and take advantage of any discount schemes or negotiated terms that may be available.
Ensuring that your business is transacting with the right suppliers at the right time is key to mitigating risks associated with your delivery. Providing a collaborative software solution with your supply chain and having a joined-up process will drive a greater level of compliance right across the business.
Improved supplier/customer relationships
Making the invoicing process as effective as possible reduces the number of disputes that arise and ensures that the organisation can deliver a high level of service. Moreover, by integrating with the systems of your customer or supplier both parties are making a significant investment in long-term relationship.
Enhanced IT system optimization
In most cases, eInvoicing does not demand a large technology overhead. Most IT departments can implement the secure connectivity and data transmission necessary through optimising their existing IT infrastructure or using a third-party provider. IT managers are able to minimise the resources required to support eInvoicing functionality.
Meeting sustainability and environmental objectives
eInvoicing eliminates the paper and transportation of paper from supplier to buyer. While removing one paper invoice will not save the planet, digitising a proportion of the 30 billion invoices sent in Europe each year will have a significant impact. As well as helping to meet the sustainability objectives that most companies are now setting themselves, the ability to reduce printing and mailing simply represents good business practice.
Everyone’s a winner
The rewards for your business, and those within your supply chain, by adopting electronic trading are profound. Yes, there are huge savings in time and money cutting out the paper transactions but it’s the closer relationships you forge with your key suppliers that provide the greatest paybacks. Providing tools and processes for your supply chain to transact with you more easily will create a long-standing trust right across your supply chain partners. However, you must bring them on the business transformation journey with you. 'Communication and collaboration' are key to a successful electronic trading project.
The COINS 2019 User Conference, 'Building Value Through Collaboration' is on 12th and 13th June 2019 at The Lowry, Salford - book tickets at constructioninnovation.com
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