Mercator Blog

Digital Technologies Providing Tighter, More Seamless Connections in the Corporate Cash Cycle.
Date: September 6, 2018
Steve Murphy
Director, Commercial and Enterprise Payments Advisory Service
In order to produce goods and services and then sell, ship, receive (and make) payment for their goods and services, companies follow a series of business processes with supporting information systems. The time required from start to finish for that ongoing business cycle varies widely depending on industry, company strategy, and effectiveness in execution. For example, General Motors no doubt has a longer cash cycle than McDonalds. However, to understand its relative performance in financial operations, GM has to pay attention to how it stacks up against Ford and other automotive competitors. One core measure of this effectiveness is the cash conversion cycle. This means that once a company has a product ready for shipment (available inventory), it should know its average required time to sell and then to collect and post payment to a bank account.

On the cusp of a new age with rapidly advancing technology (Industry 4.0, or the fourth industrial revolution), it is sobering to realize that the modern digital capabilities for supporting these business cycle processes began appearing only about 20 years ago. This report is designed to help readers understand (and to some extent, evaluate) the systems and selected vendors that provide solutions in the procure-to-pay sequence, which Mercator Advisory Group describes as the processes and systems supporting procurement, invoicing, payment, and open account financing. The various solutions have been delivered over time in a generally fragmented way, with each key solution set having different specialty vendors.

The subject of the report, Procure-to-Pay Convergence: Market Review and Vendor Comparison, is the current and future state of the procure-to-pay technology landscape and some of the companies that are providing solutions in each of the key delivery areas. We see a growing convergence of these systems as vendors adapt to modern capabilities and increasingly seek to deliver a better end-user experience. There are of course other back-office systems (sourcing, accounting, reconciliation), which in effect become part of the broader “source-to settle” timeframe, and front-office technology (most notably customer relationship management, or CRM) that supports business success. Accounts receivable still is separated from accounts payable in the typical large enterprise, and the two are unlikely to converge in the short term, while sourcing is an ongoing evaluation of potential suppliers. As such, we review solutions that most directly affect the cash cycle. In this report, Mercator provides an overview of the procure-to-pay landscape and a detailed comparison of six vendors that are pursuing more comprehensive solutions in this space.