Mid-market enterprises (MME) drive an approximate 42 per cent of India’s GDP. As crucial economic actors, MMEs deeply impact the country’s supply chains as buyers and sellers. Yet despite the volume of transactions flowing through these businesses, the payables automation opportunity in the middle market segment remains underdeveloped.
Payables automation streamlines the invoice-to-pay cycle beginning with the requisition of the purchase order, information extraction from an invoice, verification against purchase orders, business systems, invoice approvals and payments. Currently, most payments administered by MMEs accounts payable (“AP”) departments struggle under the weight of analogue processes or disparate and complex point systems that partially automate processes. For fast-growing MMEs, inefficiencies associated with traditional invoice management impact processing cycles and costs, optimal cash flow management and supplier negotiations.
Many MMEs are at varying stages of the digital adoption curve due to the cost and the process changes it entails. MMEs are typically caught between small business-designed financial solutions and expensive requirements of systems that are predominantly designed for larger enterprises with a higher invoice throughput, complex accounts payable workflows, and general ledger coding that is too sophisticated for solutions typically needed by the MME segment. For MMEs, these solutions are cost prohibitive, as they involve implementation complexity and high operational overheads.
MME business payable requirements
MMEs are dynamic and need solutions that can efficiently address current business requirements and expand (technology requirements) as the organization matures to build a sophisticated digital-first enterprise-quality AP organization of the future. Although specific needs may differ these organizations are looking at AP technology that supports:
- Automation of basic AP processes such as invoice capture, matching and approvals with ability to scale as invoice volume outgrows AP staffing
- Easy-to-use employee tools for accelerated approvals
- Supplier self-service portals and simplified processes for improved supplier collaboration and invoice enquiry support
- Rich dashboards to analyse cash outflows at a macro and micro level
- Access instant credit to address a working capital shortfall
- Support new payment modes and multiple currencies in line with expanding geographic footprint requires legal compliance support
- Integrates with multiple back-end systems is typical, especially for companies growing through acquisition
- Agile, scalable and future-ready architecture to enable hybrid ways of working, which will be the norm going forward.
Raising the game with SaaS models
MMEs targeting operations maturity require flexible, cost-efficient digital-first technology models to automate their payables workflows and free up the workforce for value-added activities such as advanced cash flow modelling. With continued pervasive digitalization and growing familiarity with cloud-based IT applications, many MMEs are gravitating to As-a-Service- offerings delivered via the cloud rather than traditional, on-premises, license models to reduce capital expenditures and lower infrastructure costs. SaaS models enable MMEs to start with basic automation and when a business grows, enterprises can opt for advanced functionality to support emergent requirements without breaking the bank.
SaaS-centric business payable solutions unite software, infrastructure, and business processes, providing MMEs with an on-demand scalable, consumption-led growth model along with predictable pricing. According to a recent IDC forecast, 70% of midsize companies in India are assessing SaaS models supported by analytics, cloud, and machine learning to support transformation at scale and speed and gain benefits beyond lowering costs. This includes:
Take digitization to the next level: Beyond basic invoice automation, SaaS-based service providers are embedding AI and ML across multiple stages of the invoice processing cycle including data capture from invoices, invoice matching and fraud detection and mitigation. Machine learning models learn by experience via spotting patterns, correlations, and trends in data. Using the computing power of the cloud and community intelligence models SaaS service providers can harness large volumes of data to train algorithms for greater process accuracy.
Creating connected finance experiences: Data capabilities are critical for chief financial officers to gain visibility and optimise enterprise-wide spend. Standard dashboards such as invoice failure analysis, payment term compliance, early payment discount impact and other process-related reports help finance practitioners to improve cash flow by increasing Days Payable Outstanding (DPO) and by identifying cost reduction opportunities. In addition, SAAS based offering can help enterprises progressively shist to predictive payables modelling and arrive at optimal payment timing and mix to lower transactional costs. SaaS providers can leverage aggregate anonymised data to help enterprises benchmark metrics and identify risk.
Ability to leverage a range of added value capabilities: SaaS platforms enable rapid scaling and less expensive development of ecosystems and ancillary services. Many SaaS-based service providers including Zaggle Zoyer expose APIs and curate a wide range of third-party added value services to complement core invoice-to-pay (I2P) offerings spanning Regtech, Supply Chain Financing, Invoice Discounting, Buy Now Pay Later, and more – all integrating seamlessly to deliver incremental value to enterprises Integration is easier with modular architectures and communication via APIs.
Shared supplier repository: SaaS AP providers can analyse aggregate spend trends and third-party information to create a set of shared resources that can benefit enterprises, create a supplier capabilities database that includes supplier classifications and risk profiles enabling enterprises to make better spend decisions
Refreshed pricing models: Mid-market enterprises benefit from innovative pricing models aligned to their growth. Most AP providers deploy per active user pricing which enables mid-market enterprises to delegate spend decisions to employees without losing oversight or invoice-based pricing for organizations with modest invoice throughputs.
Address skill gaps: MMEs face critical challenges to keep pace with the evolving technology continuum due to a lack of in-house technical skill gaps and an inability to attract high-quality technology talent. SaaS-based models can address the gap and allow service providers to make use of advanced technology capabilities in areas such as automation, analytics, AI, and cloud where in-house skills are scarce.
Cloud-based AP automation can transform AP management. The earlier a business adopts it, the better it can reap the benefits, including better cash management, reporting, and visibility. Cloud-based technology will help keep pace with the rapidly changing business environment and realise long-term advantages.