Investing in back-office business process improvements is now at the “top of mind” for many executives, especially CFOs. Calculating the Return on investment (ROI) for software is different for every company, due to the uniqueness and specific business rules to each property. After 13 years of serving the hospitality industry with over 7,000 contracted customers, BirchStreet definitively knows that its software helps its customers on many different levels, but how do we measure this? Reporting and analysis drive companies to make strategic decisions, but what if it is unknown?
The BirchStreet Way:
Determining the ROI for procure to pay automation can be data driven, based on the gap between the current business process and the desired business process. It should include a complete overview of time and costs involved from procurement through payment. While it may take one company 10 minutes to enter an invoice into their system, it may take another 15 minutes. Approval routing can often take days or weeks, or it may take a mere two minutes of walking by their office for a quick signature.
BirchStreet has broken down the categories of what types of gaps are typically found and closed by P2P automation:
- Supplier Compliance Gaps: such as supplier compliance with the contract, brand product compliance and pricing.
- Intelligence Gaps: such as supplier and product transactional information, reporting, accounting intelligence, checkbook transparency and substitutions.
- Inter-connectivity Gaps: such as the gaps between procurement and inventory management, the gaps between purchasing, receiving and invoice reconciliation, the gaps between PO approvals and your budget/forecast, and more.
- Process Compliance Gaps: such as the accuracy of GL coding, recipe preparation, PO approval process, budget compliance and perpetual inventory or high cost control.
- Integration Gaps: such as AP/POS/ERP/Inventory to P2P.
- Technology Gaps: such as common architecture and reduction and alignment of third party providers.
To find out what the top gaps are in the hospitality industry, click here to download your free copy of our Gap Guidance Worksheet. We have listed the top 25 gaps that our customers typically face, which often leads them to investigate P2P options.
Although it’s often a difficult task, businesses that measure their “before (current)” and “after (desired future)” scenarios use the Gap Guidance Sheet to develop KPIs (key performance indicators) to measure ROI. For example, one BirchStreet customer used the KPI to have a “more efficient month-end close.” Their expectation of using the software was to “reduce closing by 2 days. The system automatically populates/lists all outstanding items that have not been received and generates a report of open POs.” After several months of tracking, they found that the actual result was “AP/Procurement for the entire property has reduced closing by 2 days.” The hard cost could be determined by calculating 2 days of the AP Manager’s salary. In addition, other savings could be factored in such as what that employee is doing with 2 days of extra time (more efficiency), the cost reduction of operations due to fewer errors and possibly faster payment time to suppliers, which may result in lower prices or discounts.
Can BirchStreet help you with figuring out what your P2P ROI will be?