It goes without saying … every company today is looking for ways to cut costs quickly.

Companies that still handle and process paper invoices are ripe for cost reduction.

Some companies believe that somehow scanning invoices will reduce manpower requirements in AP. Many have been disappointed with this approach.

That leaves automating the AP process with the right combination of eInvoicing, Invoice Portals, Workflows, and imaging … depending on Suppliers’ preferences.

These preferences can be heavily influenced by how fast Suppliers get paid and how much effort is required by you to process their invoices. Invoices sent and received electronically can, of course, be paid quickly and efficiently. Paper invoices, not so much.

The alternative is outsourcing.

There really are only two viable alternatives: outsource or automate. It’s up to you.

By Tim McEneny, President & CEO, PurchasingNet, Inc.

In this economic climate, employees and managers must be able to demonstrate that they are increasing their company’s top line (revenue) or decreasing costs. Most procurement professionals cannot increase revenues, so that leaves decreasing or controlling costs.

Here are 10 actions that can be taken in a relatively short time horizon to survive a down economy:

1. Prepare a “Descending Dollar” listing of your suppliers based on their latest 12-month spend. If you don’t have a good eProcurement system to give you this data, talk to your buddies in AP.
2. Classify each of your suppliers as an A, B, or C supplier. A’s are the high-dollar suppliers and C’s are low-dollar suppliers. This will help you attack the high-dollar opportunities first. Naturally, you’ll want to start with the A’s.
3. Consolidate as much spend as possible with one supplier. Reduce your supplier base where appropriate. For example, if your company is buying office products from a dozen different companies, you have a tremendous cost reduction opportunity staring you in the face.
4. For each “spend category,” use the uncertain times as a way to renegotiate pricing, terms, etc. If you can aggregate your spend in a given category, you will be surprised how willing suppliers will be to offer more favorable pricing in return for increased business.
5. Use “Demand Management Techniques” for indirect spend to reduce the number of items that employees can requisition or request. There really is no need to offer your end-users thousands of choices when there’s money to be saved by offering comparable lower cost items.
6. Determine which Key Performance Indicators (KPI’s) are important to your company’s success. Our Best Practices KPI Library has over 50 KPI’s which are in use today.
7. Begin measuring actual performance vs. Best Practice KPI Benchmarks. These results can be published on a monthly basis. Remember the old saying…“you cannot control what you do not measure.”
8. Start matching invoices programmatically (automatically) to Purchase Orders so you don’t need an army of people in AP to perform manual matching. This will dramatically reduce overhead and reduce errors.
9. Start tracking and reporting the number of “After-the-Fact PO’s” to ensure your current process is being followed. Issuing a PO after an invoice is received indicates poor process compliance.
10. Avoid maverick buying by monitoring all purchases and invoices to ensure they are going through a central Procurement system or Purchasing Department. This can be implemented with the right system and a little top management support.

One of our clients, a Regional Bank with 2,500 employees, recently accomplished each of these steps in an 8-month period.

The result?

They experienced a 49% cost reduction in their largest spend category.

You can do it too! Now is the perfect time to take action and survive the poor economy. Even if you can’t accomplish each of these 10 steps, you will show your managers that you have “a plan” and are on your way to executing it.

Visit www.PurchasingNet.com for more survival tips.

-Tim