Accurate measurement of days sales outstanding (DSO) and days payable outstanding (DPO) are critical for assessing overall corporate financial health, since total working capital performance can only be determined when DSO and DPO are used in conjunction with days inventory outstanding (DIO), days working capital (DWO) and cash conversion cycle (CCC) metrics.
The impact of an effective punchout process on the financial health of an organization can be significant since DPO can now be more actively and intentionally managed as a factor in optimizing working capital performance.
- Seamless – The buyer accesses the supplier’s ecommerce store directly from their internal procurement system with a simple link.
- Authentication – The punchout session automatically logs the buyer into the store.
- Browsing – Since the catalog is configured to reflect approved items and pricing, the buyer can proceed just as they would for any online shopping experience.
- Checkout – At checkout, all relevant purchase information is automatically brought back into the buyer’s procurement system.
- Approvals – The procurement process may now proceed through the appropriate workflow, such as requisition approvals, etc.
Maverick spend is eliminated since employees purchase directly from approved suppliers via a direct connection from the corporate ERP or procurement system.
What is Maverick Spend?
Any spend done by corporate personnel outside the managed structure and guidelines set by procurement. Also known as rogue spending. Source: TCGi
Approved suppliers within the punchout ecosystem maintain their respective catalogs unique to the buyer, reflecting approved items, negotiated pricing, discounts, and other details. The shift to supplier maintained catalogs also eliminates much of the parallel catalog maintenance effort previously managed by the buyer. This is especially important for buyers that access large catalogs, catalog products that are subject to frequent changes, such as pricing, product configurations, and other factors, as well as high volume transactions.
“Clear enables our workforce to quickly create purchase orders and automates peripheral tasks such as email approvals and punchout integration with our vendors, all without the software development associated with a traditional IT initiative.” John Gellhausen, VP Business Process, Rush Enterprises from the Clear Software Use Case on Punchout Integration
Compliance is also improved significantly, as employees can now experience the same shopping experience they are familiar with as individual consumers. And as previously mentioned, since punchout uses a direct connection to a suppliers e-commerce website, all relevant details of the transaction are captured, including line item details, which are automatically loaded back into the buyer’s procurement system.
Invoice reconciliation issues due to line item discrepancies, pricing, and other details are eliminated. As a result, the Accounts Payable team can now leverage potential early payment discounts, better manage cash flow, and more intentionally manage DPO as part of an effective working capital performance strategy.
An overall reduction in procurement costs, as well as the option of early payment discounts, can have a profound impact on your business. It also allows your suppliers to maintain better control over their inventory, and improve the buying experience for your employees.