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Understanding Cash Conversion Cycle (CCC)

Understanding Cash Conversion Cycle (CCC)

The Cash Conversion Cycle (CCC) is a crucial business metric, especially when managing cash application processes. At its core, the CCC measures how long it takes to convert its invested company’s other resources into cash from sales. Essentially, it’s the time taken to turn your cash outflows into cash inflows.

Understanding the CCC can provide valuable insights into a company’s operational efficiency. The shorter the cycle, the quicker a company can generate cash, which is critical for maintaining liquidity and ensuring the business has the funds needed to meet its obligations.

Components of the Cash Conversion Cycle

The CCC consists of three main components: Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payable Outstanding (DPO). Each component offers a different perspective on a company’s cash flow.

Days Inventory Outstanding (DIO) refers to the average number of days it takes for a company to sell its inventory. The quicker the inventory is sold, the better it is for cash flow. On the other hand, Days Sales Outstanding (DSO) represents the average number of days it takes to collect payment after a sale. A shorter DSO means the company is collecting its receivables faster. Lastly, Days Payable Outstanding (DPO) measures how long a company takes to pay its suppliers. A longer DPO can improve cash flow but might strain supplier relationships.

Calculating the Cash Conversion Cycle

Calculating the CCC involves using the three components: DIO, DSO, and DPO. The formula is simple: CCC = DIO + DSO—DPO. This formula shows the time lag between outlaying cash and receiving it back.

A negative CCC indicates that a company receives cash from sales before paying its suppliers. This is an ideal situation as it means the company effectively uses its suppliers’ credit to finance its operations. Conversely, a positive CCC implies that the company has more cash tied up in its operations for longer, which could impact liquidity.

Why CCC Matters in Cash Application

The CCC is particularly significant in cash application because it directly impacts a company’s liquidity. A shorter CCC means that a company quickly converts its resources into cash, which can then be reinvested into the business or used to pay off liabilities.

Companies with a short CCC can better manage their cash flow, reducing the need for external financing. This efficiency is significant for small and medium-sized businesses that may not have the luxury of large cash reserves and need to monitor and optimize their CCC more; companies can ensure they maintain sufficient liquidity to operate smoothly.

Improving the Cash Conversion Cycle

Improving the CCC often involves addressing the three components individually. For example, reducing DIO might involve improving inventory management practices, such as adopting just-in-time inventory systems or better forecasting demand. By selling inventory faster, companies can shorten their DIO and, in turn, the CCC.

To reduce DSO, companies can focus on improving their accounts receivable processes. This might include offering early payment discounts, tightening credit policies, or investing in automated invoicing systems that reduce the time it takes to issue and track invoices. Faster collections mean a shorter DSO and a more favorable CCC.

Increasing DPO is another strategy to improve the CCC. Companies can hold onto their cash longer by negotiating better payment terms with suppliers. However, this strategy must balance maintaining strong supplier relationships, as overly extended payment terms might harm those relationships.

Challenges in Managing the CCC

While improving the CCC is beneficial, it’s not without its challenges. One of the main difficulties is balancing the three components. For instance, while extending DPO might improve the CCC, it could strain relationships with suppliers, leading to disruptions in the supply chain.

Additionally, reducing DIO might require significant changes in investment practices, which could involve upfront costs and learning. Companies need to weigh these challenges against the potential benefits of a shorter CCC to determine the best course of action.

Moreover, external factors such as market conditions, economic downturns, or changes in customer payment behavior can impact the CCC. These factors are often beyond a company’s control, making maintaining a consistently short CCC challenging.

Technology’s Role in Optimizing CCC

Technology plays a significant role in optimizing the CCC. With advancements in software and data analytics, companies can gain better visibility into their cash flow processes and identify areas for improvement. For example, enterprise resource planning (ERP) systems can integrate inventory management, accounts receivable, and accounts payable into a single platform, making monitoring and managing the CCC easier.

Monitoring and managing the CCC more easily reduces DSO by speeding up the invoicing and payment process. These solutions can match payments to invoices quickly and accurately, reducing the time it takes to process receivables and improving cash flow.

Furthermore, predictive analytics can help companies forecast demand more accurately, allowing them to manage inventory levels more effectively effectively manage inventory. levels companies can take a proactive approach to managing their CCC rather than reacting to issues as they arise.

Case Studies: CCC in Action

Examining case studies of companies that have successfully managed their CCC can provide valuable insights. For instance, companies in the retail sector often have shorter CCCs due to fast inventory turnover and efficient payment processes. By analyzing the practices of these companies, others can learn how to optimize their own CCC.

On the other hand, companies with long CCCs might struggle with cash flow issues, which can lead to challenges in meeting financial obligations or investing in growth. Studying these cases can help businesses identify the pitfalls to avoid and the strategies to adopt.

Ultimately, learning from real-world examples can provide practical guidance for companies looking to improve their CCC and, by extension, their overall financial health.

Conclusion: The Future of CCC Management

As businesses continue to navigate an increasingly complex economic landscape, the importance of managing the Cash Conversion Cycle cannot be overstated. In 2024, companies will need to focus on leveraging technology, optimizing processes, and balancing the components of the CCC to maintain healthy cash flow.

While challenges will undoubtedly arise, businesses that prioritize the management of their CCC will be better positioned to weather economic uncertainties and capitalize on opportunities. As the saying goes, “Cash is king,” and managing the Cash Conversion Cycle effectively is key to ensuring that businesses have the cash they need to thrive in the years ahead.

Tips for Automating Cash Apps

Tips for Automating Cash Apps

Automating cash apps can be a game-changer in how you handle your finances, offering many benefits such as convenience, efficiency, and accuracy. In this comprehensive guide, we’ll delve into seven effective strategies to help you harness the full potential of automating cash apps, whether managing personal finances or overseeing business transactions. By implementing these strategies, you can streamline your financial management processes, save valuable time, and gain better control over your financial well-being.

1. Set up Recurring Payments and Transfers

Automating recurring payments and transfers is a cornerstone of efficient cash app usage. This feature allows you to schedule regular transactions for expenses like rent, mortgage payments, utility bills, and savings contributions. By establishing automated schedules, you can eliminate the hassle of manual payments, reduce the risk of missed deadlines, and avoid late fees or penalties. Moreover, recurring payments ensure consistency in meeting your financial obligations, providing peace of mind and freeing up mental bandwidth for other priorities.

Regularly reviewing and adjusting your automated transactions is essential to ensure they align with your financial goals and priorities. Whether you need to modify payment amounts, change frequencies, or add new recipients, staying proactive in managing your automated transactions ensures they continue to serve your evolving needs effectively. Additionally, leveraging advanced features such as payment scheduling and bill reminders can further enhance the efficiency and effectiveness of your automated payment setup, allowing you to stay on top of your finances effortlessly.

2. Utilize Expense Categorization and Tagging

Expenses can quickly pile up, making tracking where your money is going challenging. Leveraging your cash app’s expense categorization and tagging features can provide invaluable insights into your spending habits. You can easily visualize where your money is allocated by setting up custom categories for expenses like groceries, dining out, transportation, and entertainment. Additionally, automated tagging based on predefined rules or keywords can further streamline the categorization process, ensuring accuracy and consistency in expense tracking.

Furthermore, utilizing expense categorization and tagging allows you to monitor specific spending patterns and identify areas where you may need to adjust your budget. For instance, if you notice that you’re consistently overspending on dining out, you can take proactive steps to reduce expenses in that category. Similarly, tagging expenses for tax-deductible items or business-related purchases can simplify tax preparation and ensure you’re maximizing potential deductions. Overall, expense categorization and tagging empower you to make informed financial decisions, optimize your budget, and achieve your financial goals more effectively.

3. Enable Notifications and Alerts

Staying informed about your financial activities is crucial for controlling your finances and avoiding potential issues. Enabling notifications and alerts on your cash app allows you to receive real-time updates about account balances, transaction activities, and upcoming payments. These notifications are timely reminders and warnings, helping you stay on top of your financial commitments and avoid unnecessary fees or penalties.

Moreover, customizable alert settings allow you to tailor notifications to your preferences and priorities. For example, you can set up alerts for low balances, significant transactions, or unusual account activities to quickly identify and address potential security concerns. Additionally, setting reminders for upcoming bill payments ensures you never miss a deadline, helping you maintain good financial standing and avoid late fees. By leveraging notifications and alerts effectively, you can stay proactive in managing your finances and make informed decisions that align with your financial goals.

4. Integrate with Accounting Software

Efficient financial management often requires syncing transactions and data across multiple platforms. Integrating your cash app with accounting software streamlines this process, allowing seamless data transfer and synchronization. Connecting your cash app to accounting software, such as QuickBooks or Xero, will enable you to automate the recording and categorization of transactions, eliminating the need for manual data entry and reconciliation.

Furthermore, integrating your cash app with accounting software provides valuable insights into your financial health and performance. Comprehensive reporting and analytics tools offer detailed insights into income, expenses, cash flow, and budgeting trends, allowing you to make informed decisions and strategic financial planning. Additionally, streamlined tax preparation processes simplify compliance and ensure accurate reporting, reducing the risk of errors and audits. Integrating your cash app with accounting software enhances efficiency, accuracy, and transparency in financial management, empowering you to achieve your financial goals more effectively.

5. Leverage Budgeting and Goal-setting Features

Effective budgeting and goal-setting are essential for achieving financial success and stability. Many cash apps offer robust budgeting and goal-setting features that allow you to establish spending limits, track expenses, and work towards financial objectives. Setting specific savings goals, such as building an emergency fund or saving for a vacation, can create a roadmap for achieving your financial aspirations.

Additionally, budgeting features within cash apps enable you to set spending limits for various expense categories, such as groceries, dining out, entertainment, and transportation. Real-time tracking of expenses helps you stay accountable to your budget and identify areas where you may need to adjust spending habits. Moreover, automated savings contributions towards your financial goals ensure consistency and progress, even during fluctuating income or expenses. By effectively leveraging budgeting and goal-setting features, you can take control of your finances, reduce financial stress, and achieve long-term economic success.

6. Automate Investment Contributions

Investing is a critical component of long-term wealth-building and financial planning. Automating investment contributions through your cash app allows you to consistently allocate funds towards your investment portfolio, regardless of market fluctuations or economic conditions. By setting up recurring transfers to your investment account, you can take advantage of dollar-cost averaging and mitigate the impact of market volatility on your investment returns.

Moreover, automated investment contributions help cultivate disciplined investing habits and ensure consistency in wealth-building efforts. By automating contributions towards retirement accounts, such as IRAs or 401(k)s, you can accelerate progress towards your retirement goals and secure your financial future. Additionally, leveraging automated investment features within cash apps, such as robo-advisors or automatic portfolio rebalancing, can optimize investment strategies and minimize risks. Automating investment contributions streamlines the investment process, enhances portfolio management, and fosters long-term wealth accumulation.

7. Secure Your Account with Biometric Authentication

Protecting your cash app account and financial information is paramount in today’s digital landscape. Biometric authentication adds an extra layer of security by requiring unique physical identifiers, such as fingerprints or facial recognition, to access your account. By enabling biometric authentication features on your cash app, you can enhance account security and safeguard against unauthorized access or fraudulent activities.

Biometric authentication offers several advantages over traditional password-based authentication methods. Firstly, biometric identifiers are unique to each individual and difficult to replicate, reducing the risk of unauthorized access by malicious actors. Secondly, biometric authentication offers greater convenience and ease of use than password-based methods, eliminating the need to remember complex passwords and reducing the likelihood of security breaches due to weak or compromised credentials.

Conclusion

Automating cash apps offers numerous benefits for streamlining financial management, from simplifying transactions to enhancing security and providing valuable insights into your financial health. By implementing these strategies and leveraging the features of your cash app, you can achieve greater efficiency, accuracy, and control over your finances, ultimately leading to improved financial well-being and success. Whether managing personal finances, overseeing business transactions, or planning for the future, automating cash apps can help you save time, reduce stress, and achieve your financial goals more effectively. By taking advantage of these tips and maximizing the capabilities of your cash app, you can take control of your financial future and enjoy greater peace of mind in managing your money. Check out oAppsNET’s Cash App Solutions.

oAppsNET Cash Apps: Unlocking Versatile Use Cases

oAppsNET Cash Apps: Unlocking Versatile Use Cases

In today’s fast-paced digital landscape, cash apps have revolutionized how we manage our finances. Among these innovative platforms, oAppsNET Cash Apps stand out for their versatility and comprehensive features. From personal budgeting to business expense management, oAppsNET Cash Apps offer various use cases to streamline financial transactions and optimize cash flow. In this comprehensive guide, we’ll explore the diverse use cases of oAppsNET Cash Apps, showcasing their flexibility and effectiveness in various scenarios.

1. Personal Budgeting and Expense Tracking

oAppsNET Cash Apps are ideal for individuals looking to take control of their finances and manage their budgets effectively. These apps provide intuitive interfaces and powerful tools for tracking expenses, categorizing transactions, and setting budget goals. Users can monitor their spending patterns, identify areas for saving, and stay on track with their financial goals. Whether managing monthly expenses, saving for a vacation, or planning for retirement, oAppsNET Cash Apps empower users to make informed financial decisions and achieve excellent financial stability.

However, achieving effective cash management requires careful planning and execution. It entails creating a budget, tracking expenses, and setting financial goals to align spending with income. Additionally, it involves maintaining an emergency fund to handle unexpected costs and having a strategy for managing debt responsibly. By prioritizing cash management, individuals can achieve greater financial resilience and flexibility, enabling them to weather economic uncertainties and confidently pursue their long-term financial objectives.

2. Splitting Bills and Group Expenses

One of the standout features of oAppsNET Cash Apps is their ability to facilitate group payments and split bills effortlessly. Whether splitting dinner with friends, sharing rent with roommates, or organizing a group gift, these apps make dividing expenses among multiple users easy. Users can create group accounts, track shared expenses in real-time, and settle balances seamlessly. With oAppsNET Cash Apps, coordinating group finances has always been challenging, saving time and reducing the hassle of managing shared expenses manually.

Moreover, these apps provide transparency and accountability, ensuring all group members know their financial contributions and obligations. Users can easily track who has paid their share of the expenses and send reminders to those who have not. This simplifies splitting bills and fosters better communication and collaboration among group members. Whether splitting household expenses with roommates or organizing a group outing with friends, oAppsNET Cash Apps streamline the process and ensure fair and equitable cost-sharing.

3. Managing Freelance Income and Invoices

For freelancers and independent contractors, managing income and invoices can be daunting. oAppsNET Cash Apps offer specialized features tailored to the needs of freelancers, allowing them to track earnings, send invoices, and manage payments efficiently. Users can generate professional invoices, set payment reminders, and track client payments in real-time. With integrated invoicing features and customizable payment options, oAppsNET Cash Apps simplify managing freelance income, enabling freelancers to focus on their work while ensuring timely payments and cash flow.

Furthermore, these apps provide insights into project profitability and client payment trends, allowing freelancers to identify high-value clients and optimize their pricing strategies accordingly. By analyzing their income streams and expenses, freelancers can make informed decisions about their business operations and identify opportunities for growth and expansion. Whether tracking billable hours, managing project expenses, or sending invoices to clients, oAppsNET Cash Apps provide freelancers with the tools they need to succeed in the gig economy.

4. Small Business Expense Management

Small businesses can benefit significantly from oAppsNET Cash Apps for managing expenses, tracking cash flow, and optimizing financial operations. These apps offer robust features for tracking business expenses, categorizing transactions, and generating financial reports. Users can monitor business spending, reconcile accounts, and identify cost-saving opportunities. With real-time insights into cash flow and expenses, small businesses can make informed decisions to improve profitability and financial health.

Moreover, these apps provide scalability and flexibility, allowing small businesses to adapt to changing financial needs and scale their operations as they grow. Whether managing day-to-day expenses, tracking project costs, or monitoring employee reimbursements, oAppsNET Cash Apps provide small businesses with the tools they need to streamline their financial processes and achieve greater efficiency and success.

5. Cashless Payments and Digital Wallets

In an increasingly cashless society, oAppsNET Cash Apps serve as digital wallets, enabling users to make secure payments, transfers, and purchases easily. These apps support various payment methods, including credit cards, debit cards, bank transfers, and digital wallets, providing users with flexibility and convenience. Whether paying bills, transferring money to friends and family, or making online purchases, oAppsNET Cash Apps offer a secure and convenient way to manage financial transactions anytime, anywhere.

Additionally, these apps provide enhanced security features such as encryption, biometric authentication, and fraud detection, ensuring that users can conduct transactions safely and securely. With built-in safeguards and authentication protocols, oAppsNET Cash Apps protect users’ financial information and mitigate the risk of unauthorized access and fraudulent activities. Whether shopping online, paying for groceries, or sending money to loved ones, users can trust oAppsNET Cash Apps to safeguard their transactions and financial interests.

6. Investment Tracking and Portfolio Management

For investors and traders, oAppsNET Cash Apps offer powerful tools for tracking investments, monitoring portfolios, and analyzing market trends. These apps provide real-time updates on stock prices, investment performance, and portfolio allocations, allowing users to make informed investment decisions. Users can track their portfolios, set investment goals, and monitor market news and trends. With oAppsNET Cash Apps, investors can stay informed and in control of their investments, maximizing returns and minimizing risks.

Furthermore, these apps provide personalized insights and recommendations based on users’ investment preferences and risk tolerance, helping them make strategic investment decisions. Whether diversifying their portfolio, rebalancing their investments, or identifying growth opportunities, users can rely on oAppsNET Cash Apps to provide the information and tools they need to succeed in the financial markets. With their intuitive interfaces and powerful analytics capabilities, oAppsNET Cash Apps empower users to take control of their investments and achieve their financial goals.

Conclusion

In conclusion, oAppsNET Cash Apps offer a comprehensive solution to modern cash management needs, catering to individuals and businesses with a wide range of versatile use cases. From personal budgeting and expense tracking to small business management and international money transfers, these apps provide intuitive interfaces and robust functionalities to streamline financial transactions and optimize cash flow. With scalability, flexibility, and security, users can adapt to changing economic needs and conduct transactions safely and securely. Moreover, advanced features for expense reimbursement, tax planning, and compliance simplify complex financial processes, empowering users to navigate personal and business finance with confidence. Check out oAppsNET’s Cash App Solutions.

P2P: What It Is and How To Use It – Part 3

P2P: What It Is and How To Use It – Part 3

By Matthew Albert

Okay, you have to admit, some of these cooking shows are starting to get just a little over-the-top in trying to convince us how easy every recipe is. Back in the day, if you wanted to make an omelet, you cracked eggs, melted butter in a pan, did your best Julia Child impression, and BANG–omelet. That’s what easy is supposed to be. I see the chef do something, I process the idea, I replicate it. Breakfast is served.

Nowadays, though? Forget it. I see a loaf of bread on TV. The end product looks so unassuming and so unpretentious that I figure I can do this easily. I go back and find the show’s YouTube clip for their allegedly “5-star easiest ever” bread. But if I want to make this so-called “easy” bread, these shows essentially want me to:

  • Find the finest bread flour that’s been milled by a New Hampshire granite stone at the end of a Douglas Fir tree crank
  • Heat up a pair of typical Peruvian bread stones to 400.15 degrees and water them using spring water that has a pH of 7.2
  • Bloom a packet of yeast that’s been personally approved overseas by the Dalai Lama (he IS a long-hitter after all)
  • Cover the dough using tempurpedic tarry cloths
  • Read a Dickens novel while the bread rises to give the room a cultural milieu and improve the bread’s provenance

Obviously, easy. Duh. And yet, there are still plenty of people out there who feel this kind of effort and pretentiousness is worth their time. Why do we do this to ourselves and each other? When we want to improve on something or learn a new skill, all we want to do is watch a master and then have them tell us how to replicate the process. We know some practice will be required, but we appreciate that what we’re being told to do is an act that many are capable of doing eventually.

If you look at the P2P articles all over the web, the same problem exists there, too. There are TONS of P2P articles telling you how to achieve the highest levels of success. But when you start reading them, they’re full of jargon-y finance terms and meaningless cliches meant to discourage you from trying to replicate what someone else has done. Let’s do our part to fix that right now. Here are some tips on P2P that we feel can be replicated by any dedicated AP leader.

Outline and Accommodate

Start off by taking a look at your current P2P setup. Make a list of how many steps your process has. Keep the steps in their sequential order, too.

Assess Current Performance

For each step in your process, determine which steps currently seem to run efficiently and which ones do not. Focus primarily on the steps that take too long to finish and reflect on what may be causing those problems.

Research and Select

Armed with your knowledge of how your system currently operates, research and select P2P software that speeds up your inefficiencies within your system.

Train and Promote

With your software selected, train your staff on how it works. Show them how their jobs get easier with the new software in place.

Measure and Evaluate

As your new P2P setup takes flight, determine how you will know if the setup is being successful. Select three or four key performance indicators (KPIs) that can provide concrete data about the specific phases of your P2P process. Decide beforehand what will qualify as “successful” numbers and “unsuccessful” numbers. Consider using a color-coding system so that successes and failures can be identified visually within a moment’s notice. That will make it easier for your colleagues to understand the implications of the data, too.

Reflect

It is critical with any new initiative that you reflect on a consistent basis. Be honest with yourself about where the P2P setup is meeting its goals and where it isn’t. Reach out to your staff and get their input as well. Their firsthand accounts will give you the best information about P2P successes and failures. Based on the data, adjust your practices and reflect on the new data as it arrives.

Remember, no matter how complicated P2P may get, the above tips will keep you [insert cliche here].

P2P: What It Is and How To Use It – Part 3

P2P: What It Is and How To Use It – Part 2

By Matthew Albert

When we were kids, every problem of ours fit into one of two camps: easily fixable or apocalyptically impossible. If the problem could be fixed in less than 5 minutes, the day could continue. If it couldn’t, then cue the Celene Dion penny whistle music and check back with us next year. (And while we’re at it, I’LL never let go of thinking Rose is a horrible person who couldn’t just slide over three flippin’ feet.)

Most of the time, the fixes were actually pretty easy. You’d just go ask the nearest relative, they’d push two buttons, and to us it seemed like they were on the level with every MIT engineering grad. If we didn’t have an adult around, we did the obvious–we just hit the thing until it worked. We didn’t know why that helped, we just knew it helped.

Or maybe you suffered from the incessant blinking pink screen on your CRT TV? Again, no adult around? Do the obvious. Blow in the cartridge. Was that supposed to work? No. Did it? Pretty much every time.

(We know, we know. Blowing on the cartridge didn’t actually fix it. We know. Thanks. You must be fun at parties.)

So what does all of this have to do with P2P technological integration? More than you think. Let’s say you’ve made the wise choice in migrating your P2P operations to newer software. As the leader of that initiative, you have to know the software inside and out before you roll it out to your team. When something doesn’t work right, YOU are the relative that’s going to fix everything. You need to be able to explain why something works the way it does. It’s no longer enough to say, “Well, it worked. That’s fine.”

Picking the Right Program and Conducting the Training

Prior to purchasing software, meet with your team members and ask them what type of information they often need to have when doing P2P work. Use their responses and search for software that can get your team what they need in the most efficient manner. Don’t forget to include this feedback when deciding the P2P software that is the most cost-effective for the business.

Before you can see any measurable impact on performance, though, you absolutely must create an onboarding experience for your team. Find a way to make this onboarding occur in such a way that it doesn’t create more work for employees. This training ideally should happen on the clock. If it’s hard to schedule that, consider doing the training in multiple groups of team members and having the groups rotate through phases so that you’re not completely short-staffed. Be supportive as they learn from their mistakes early on in the process.

Measuring Success – Key Performance Indicators

With the program in place, it’s time to think about how to assess the success. Businesses often use certain benchmarks, aka key performance indicators (KPIs), to determine the success of a particular program. Data can be your best friend here if you pick good friends. Using the wrong data to measure your success can result in you making decisions that are not good for the company and your employees.

Here are some reliable KPIs that can help give you accurate measurements of how your P2P software initiative is going:

  • Invoice to purchase order ratio
  • Percentage of purchase orders that require no human intervention (in other words, the percentage of automatically-generated POs)
  • Percentage of on-time payments
  • Average cost per purchase order
  • Average cost per invoice
  • Average time to process an invoice (as in the specific type of the invoice)
  • Average time to approve an invoice
  • Rate of invoice exceptions (the invoices that require special attention because they don’t perfectly fit into the algorithms of your software)

Depending on which KPIs you use, you’ll want to see high numbers for some and low numbers for others. Also, don’t feel obliged to use all of the above KPIs. Limit your list to anywhere from 2-5, and you’ll still get a good sample size. As usual, some KPIs will be more appropriate than others for your business. The ones we’ve listed above, though, tend to be pretty useful across the board.

So, to recap: Consult with your team, figure out where you want to go, determine the software that gets you there, and then decide on how you’ll know that you’re reaching the goal.

For the final part in our series on P2P, we’ll take a look at more issues to consider from the AP perspective.

P2P: What It Is and How To Use It – Part 3

P2P: What It Is and How To Use It – Part 1

By Matthew Albert

There’s a scene in Office Space where the Bobs are doing interviews before the dreaded firings. They bring in Tom “I HAVE PEOPLE SKILLS!” Smykowski and ask him the legendary question, “What would ya say…ya do here?” We could post the response here, but you know it already. (And if you haven’t seen the film, fix that problem immediately. Don’t bring further shame to our blog.)

In short, Tom tells the Bobs that he (actually, his secretary or the fax machine) takes software specs from customers and brings them down to the engineers. The Bobs, of course, ask why the customers can’t just deal directly with the engineers to which Tom goes ballistic because software engineers “are not good at dealing with customers.” The point the Bobs raise in this scene is one of efficiency. Tom’s probably right that the engineers don’t want to deal with the customers. However, the larger issue is that there’s a spot to optimize communication here.

When we think about the idea of Procure to Pay (or Purchase to Pay depending on how rich your alma mater’s donors are), we’re talking about a complex chain of events that ultimately accomplishes a simple exchange–goods for money. That’s it. How customers get those goods and how you get their money is far more complicated. Let’s break that process down. In most P2P arrangements:

  • The buyer inquires about purchasing goods usually through a catalog or product list
  • The supplier confirms they have the requested goods
  • The supplier quotes the price
  • The buyer confirms the original request
  • The supplier confirms the confirmation and ships the goods (stay with us, folks)
  • A purchase order gets issued to the supplier
  • The supplier receives the purchase order and processes the goods for shipping
  • The goods get delivered
  • The buyer confirms they have received the goods
  • The supplier sends an invoice to the buyer, matched with the number of the purchase order
  • The buyer confirms they have received the proper goods and related invoice, based on the purchase order
  • The buyer pays the supplier

Now that’s a 12-step program with a completely different set of issues. Involved? You bet! Imagine how problematic this system could be if you had 1-2 humans handling each step (or even a couple of steps along the way). You’d be a prime target for miscommunication, errors, and unhappy customers.

Wouldn’t it be nicer if you had software that did the vast majority of these steps for you? What if you had some software that basically took care of the cataloging, updating the inventory, confirming orders, issuing POs, issuing invoices, and processing payment? Think about how much easier your life would be if all you had to do was fill orders and ship them because the computer took care of the rest.

In a nutshell, that’s why you want to consider transitioning your P2P setup to better technology. There are several options and features to consider in these types of programs, and we’ll spend a big part of this series focusing on what these features are and how they can help you streamline P2P.