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Reclaim Control of Your Non-Merch Spend - Top 3 Strategies

To compete at the pace of fashion we need agility. We are adding 50 vendors a week!
- LVMH subsidiary executive

If you’re in the retail industry I’m sure you’ll recognize the frustration in the quote above. A frustration based on internal business processes that can’t keep up with fast-moving customer demands, competition and seasonal peaks.

For your business to be agile, you need to give budget-holders the freedom to make business partnerships (and that means purchasing decisions) without too much red tape. The flip side of that is uncontrolled spend and poor management of vendors, leading to high costs, unpaid invoices, inaccurate accounting, and a bad reputation. If you manage non-merch accounting with traditional manual workflows, chances are you suffer from familiar challenges in the accounts payable process, such as lack of control, financial blind spots, and inefficiencies.

I’ve worked with leading retailers like Cineplex, Marc Jacobs and Polaris and below are my key learnings of how they’ve managed to reclaim control of their non-merch spend and ensure their business stays competitive.  

AP invoice automation for retailers

Step 1: Digitize non-merch invoices (OCR, e-Invoicing and vendor portal)

Digitizing your non-merch invoices is key to get real-time accurate accruals and control of invoices. Lost and duplicated invoices is still a problem that afflicts underperforming retailers from an accounting perspective. This is a fast fix; Check out how Marc Jacobs automated accounts payable in 3 weeks.

Note of caution: A data analysis of your vendor base with a competent partner will show the best options for invoice digitization. Do you outsource data capture to a BPO/Digital Mailroom? Should you push vendors to EDI standards? Will on-boarding vendors to a supplier portal work? Is OCR a pragmatic solution or a headache to avoid?

Avoid vendors and consultants who give you easy answers such as "Guaranteed 97% automatic capture" or oversells the challenges of on-boarding vendors to a portal. The realities are subtle and depend very much on your unique vendor community and your leverage with them.

In my experience, some clients have utilized a vendor portal with tremendously positive results. Others struggled to show real ROI. Others, such as a major airport retailer, are able to negotiate EDI with all major suppliers and implement an extremely efficient operation as a result. Most of our clients in the mid-market have good results with a specialized OCR solution for invoices.  

Step 2. Automate the invoice workflow (e-Procurement and AP automation in the cloud)

Once you have e-Invoicing/automatic capture in place you are ready to automate the workflow itself within your organization. Modern accounts payable workflow systems reside in the cloud and can be accessed on mobile devices, and allow either a PO or non-PO approach to non-merch management. If you can get buy-in, an e-procurement solution can allow casual buyers to easily create requisitions from internal and punch-out catalogs and even enter goods receipt online. Alternatively, a strong business rules engine can automate non-PO invoice routing, default coding, and mobile approval.

Best in class retailers are using specialized AP workflows (not customized general workflows and document management systems). The key factors for these companies are usability and solutions fit for the intended purpose, so you can deploy the technology easily and get users on-board quickly and without cumbersome training.  

3. Measure KPIs in real-time and compare to relevant benchmarks

"How can I forecast without knowing actual spend?" - CIO Marc Jacobs

One of the biggest blind spots for most retailers is found in the accruals for non-merch spend. Sophisticated companies are employing e-invoicing and an AP workflow to get real-time accrual reporting with complete accuracy. Using this comprehensive indirect spend analysis allows them to measure their adherence to budget mid-month and ensure they drive their business decisions based on real-time financial data.

And that is why tracking the KPIs of your accounts payable process is so crucial. If you want to get the benefits of early payment discounts or lower operational costs for accounting and management, you need to measure the right things and benchmark yourself against industry peers. Get started now by watching this webinar recording: Benchmark your AP invoice processing efficiency.

Feel free to contact me to discuss your specific challenges when it comes to non-merch spend control specifically or automated AP workflows in general, and I would be happy to share my experiences.

Dmitri Krasik

Dmitri Krasik

Director of Sales, Medius North America