A recent study by The Hackett Group identifies cost reduction as the top procurement priority for 2025. It has been voted as one of the top three priorities each year since 2021, most likely due to an uncertain economy.
With that, one of the biggest barriers to financial efficiency is reducing late payments to suppliers. Procurement teams that fail to reduce late payments risk the following:
- Missed discounts that could drive cost savings
- Late fees and penalties that increase operational expenses
- Strained supplier relationships leading to higher pricing and reduced negotiating power
- Business disruptions from delayed shipments or unfulfilled orders
To optimize financial efficiency, improve cash flow, and reduce costs, procurement leaders need to move beyond reactive payment management and focus on pinpointing and solving the root causes of late payments.
Five approaches for procurement leaders to improve financial efficiency by reducing late payments
Here are five approaches to breaking the cycle of late payments and creating a more efficient procure-to-pay process:
1. Ensure invoice accuracy from the start to improve financial efficiency
Errors in purchase orders and invoices create unnecessary delays, requiring back-and-forth communication and manual corrections. Automate three-way matching (between purchase orders, invoices, and goods receipts) to prevent errors that lead to late payments and financial inefficiencies.
2. Streamline invoice processing with automation
Manual invoice handling creates slow approvals and lost invoices, leading to preventable late payments. Implementing automated payment scheduling can improve financial efficiency and reduce late payments by detecting invoice discrepancies, routing approvals instantly, and prioritizing urgent payments.
3. Strengthen collaboration between finance and procurement for greater financial efficiency
Procurement leaders often struggle with reducing late payments due to poor coordination between finance and procurement. Procurement and finance must work together to manage cash flow and optimize payment schedules.
Using dashboards to create a single source of truth allows procurement leaders to track invoice status, approvals, and payment timelines, ensuring greater transparency and efficiency across financial processes.
4. Benefit from reducing missed cash discounts
Companies often miss out on cost savings due to inefficient payment cycles. By aligning payment timing with supplier discount opportunities, procurement teams can drive significant financial efficiency gains.
Strategic payment scheduling helps procurement leaders capitalize on early payment discounts while maintaining healthy cash flow, ultimately reducing late payments and optimizing working capital.
5. Gain cross-system visibility
Without clear visibility, procurement leaders lack the data to prevent issues before they escalate. Implementing process mining and analytics tools provides procurement teams with actionable insights to reduce late payments and drive financial efficiency.
Transparency across procurement processes enables leaders to proactively identify payment bottlenecks and take corrective action before late payments disrupt supplier relationships.
How SAP Signavio solutions can help procurement teams improve financial efficiency
SAP Signavio solutions can help procurement leaders eliminate inefficiencies and improve financial efficiency by providing visibility, insights, and recommendations to improve procurement processes.
With SAP Signavio solutions, procurement teams can:
- Detect blocked and parked payments and uncover root causes
- Optimize working capital by improving payment cycles and reducing late payments
- Identify and eliminate duplicate invoices to enhance financial efficiency
- Improve supplier master data to streamline approvals and reduce inefficiencies
How to better achieve procurement excellence with SAP Signavio solutions
We invite you to download The Procurement Leader’s Guide to Process Excellence, which takes a deeper look at how procurement leaders can improve financial efficiency by reducing late payments.
Plus, gain insights into two other key areas for achieving procurement excellence: boosting procurement efficiency and productivity, and improving procurement compliance.