The rapid development of COVID vaccines, some of which were based on messenger RNA (mRNA) technology, shows the value of biotech’s continuous investment in R&D to meet market needs today and tomorrow, and support business growth. Because of this major, ongoing financial commitment, back-office functions like Accounts Payable need to run as lean as possible and find ways to do more with less.
Many finance teams are turning to finance automation to gain the efficiencies they need to sustain their growth while delivering much-needed cost savings and increasing visibility into, and control over, AP spend. As biotech firms embark on this digital transformation journey, the path they take will depend on the needs of their organization as well as their size and stage of growth. Often, smaller firms that are using a procurement platform and services to manage purchasing will opt for a payment-only solution to automate their supplier payments. Larger firms with in-house purchasing teams, who are challenged by order volumes that strain existing invoice processing workflows, are more likely to turn to a holistic solution to automate the end-to-end AP process, from invoice capture through invoice payment.
The pain of manual supplier payments
If you work at a smaller biotech, you might be using a procurement solution that facilitates purchase approvals and generates POs, but you may still be handling the payment process manually. The major problem with manual processing is that it wastes two things that are in short supply in your lean finance team: time and money.
When you issue checks, which is a very popular method of payment, it takes staff time to prepare them, chase down signatures, and send them out. The cost of all of this unnecessary staff time, along with the hard costs of ink, toner, and paper, ends up costing your company roughly $6 to issue each check. And with the time it takes to prepare and send out a check through the mail, it might be late, causing you to incur late payment penalties, and potentially reach your credit limit with suppliers.
Automation reduces costs, while virtual cards bring in revenue
Savvy biotech firms are leaving checks and other manual payment methods behind and turning to payment automation. By automating the process of preparing, authorizing, and executing payment runs, companies are able to save significant time and cost. In addition, because you’re able to leverage a single workflow for multiple payment methods, you’re able to incorporate additional electronic payments types without additional time or effort. Finally, the flexibility and control you gain over payment timing empowers you to choose whether to take advantage of early payment discounts or simply pay on time to hold onto your cash as long as possible while avoiding late fees.
You realize further financial benefits when you use virtual cards because you make money for your company every single time you make a payment. These rebates can offset the cost of the payment automation solution, delivering fast ROI, and in some cases, even transform AP from a cost center into a profit center. You can use these rebates to offset your ERP license cost or to help fund R&D initiatives to support business growth.
In addition to cost and time savings, payment automation enables greater visibility and control; faster, more efficient workflow; and on-time payment, which strengthens supplier relationships, and gives them the cash flow they need to keep supplies flowing. Automated payment methods provide added protection against fraud, especially when using virtual cards. Since virtual cards have unique numbers for one-time use, companies using them reported just 3% of actual or attempted fraud in comparison to 74% of organizations using checks, according to the 2020 AFP Payments Fraud and Control Survey.
End-to-end AP automation multiplies the savings and efficiencies for biotech firms
Larger biotech firms feeling the pain of a growing volume of invoices to process would be best served with an end-to-end AP automation solution, which extends the value of payment automation across the invoice-to-payment process, and provides a holistic view of finance.
The pain large companies feel on the payment side is often compounded by manual invoice processing challenges. It’s not unusual for biotech firms to receive invoices in different locations, where they can easily get misplaced or lost. Once AP receives the invoices, which can contain lines and lines of supplies, they have to be manually input by AP staff, wasting time and money, and opening the door for human error. On top of that, AP staff has to chase down invoice approvals from scientists and other employees working in distributed locations across the company. All of this contributes to a lack of visibility, control, and may lead to late payments.
Following are key benefits biotech firms can gain by automating their end-to-end AP process:
- Efficiencies drive savings. By reducing the time and effort to process invoices, you not only save AP staff time, but also the time of scientists and other approvers. All of that delivers key cost savings. With a streamlined, fast AP workflow, you’ll not only be able to avoid late fees, but also take advantage of early payment discounts.
- Automated workflow gets rid of delays. The days when you have to manually enter invoices into your accounting system and track down scientists for approvals will be history. All of these tasks are automated, ensuring that the invoices move along the workflow in a timely fashion, and alerts you to any delays so they can be addressed before they result in late payments.
- Visibility enables smooth operations. The AP department will know where every invoice is in the process – who has worked on it, what they have done and when. This enables you to make sure that no invoices fall through the cracks, and become lost, missing, or late. The system also provides visibility into the process, so you can see if there are any invoice processing roadblocks and fix them before operations become backed up. An end-to-end solution will also give you an easily accessible audit trail that simplifies auditing and compliance
- Insights lead to improved procurement. The visibility you gain also allows you to know who is purchasing what, and from which suppliers. This data will help you identify ways to improve processes and uncover opportunities for volume discounts and other savings.
- Control to prevent fraud. You can automate and enforce rules to safeguard your organization from fraud. For example, you can require that invoices over a specified dollar amount need two approvals.
Two paths on the same automation journey
Digitizing your AP process will deliver dividends — whether you work at a smaller biotech firm that has a procurement system in place and is ready to automate payments, or at a larger biotech looking to automate end-to-end AP process. Either way, your lean finance team will be able to gain efficiencies and significantly cut costs that can be used for the greater good of your biotech firm – to propel R&D, new innovations, and business growth.
Check out this E-book to learn more about how lean finance teams can leverage AP automation to gain efficiencies, reduce costs, and generate revenue streams!