- Jun 25, 2019,
In Part 1 of this blog, I focused on the time wasted by managers and executives every month in dealing with approvals as a result of the arduous process required to access and navigate multiple corporate applications. In this blog, I’ll focus on the business impact of slow approvals cycles, which is of even greater significance.
It’s not uncommon for the end-to-end cycle times of approvals to take days, weeks, or even months to go through the requisite chain of command. A good example of this would be for a PO request; On average there are 4 or 5 approvers along the way, starting with a manager of finance who checks that all the submitted information is correct and consistent, before it goes to the requester’s supervisor, then on to a regional VP, and then perhaps even to the CFO depending on the size of the PO. As I discussed in an another previous blog (The Top 5 Reasons Why Email-Based Approvals Are Ineffective), the primary means of notifying managers of pending approvals today is via email. And with the average manager receiving over 100 emails a day, it’s understandable that most of the time they get lost in the email inbox. This means that many people don’t even know they’re on the hook to approve something until it’s too late. It’s this “dead time” that accounts for much of the delay in overall approval cycle times.
Determining the business impact of slow approvals cycles, though, is very much dependent on the nature of the type of request, for example:
- One prospect in the retail space recently told me that as a result of their slow cycles for approving employee timesheets, they experienced delays in issuing paychecks on time. Hard as it is to quantify, employees not being paid on time is pretty bad, and a sure-fire way to cause internal uproar and employee dissatisfaction.
- Another prospect in the private banking sector told us that mortgage financing approvals were often taking over 4 weeks, leaving many homebuyers with no other choice but to take their business elsewhere in order to secure financing. That’s far more tangible to the company as it’s a clear loss of business.
Broadly speaking, I’ve seen 3 categories across companies that represent the most common business pain points as a result of approval delays:
- Finance (Procurement)
- These include the day-to-day purchasing transactions required to run any business, including POs, PRs and invoices. Most transactions require payments within some period of time (e.g., “net 30”, “net 45”) and include late fees and penalties should the terms not be met. Typically these fees can be 2-5% of the transaction amount per month. I’ve met with average size customers who have over 100,000 POs per year, and even if a small percentage are hit with late fees, that can be a significant cost.
- A growing number of payment terms also include early payment incentives, such as “2/10 Net 30” which offers a 2% savings of the transaction amount if the payment is made within 10 days. Again, this is very tangible, and for customers looking to excel in business agility, that’s something they can take advantage of and generate some meaningful savings.
- Sales and Services
- As a general rule, Sales teams offer more aggressive discounting as they approach month/quarter/year-end. Similar to the PO chain of command, there’s an approval hierarchy up the sales organization depending on the size and nature of the discounting terms. This is also very tangible as delays in approval turnarounds can result in lost revenue as well as competitor gains.
- On the flip side, once a sales transaction has been closed, a series of internal approvals is often required to validate the submitted paperwork before the cash collection process can be initiated. Again, delays here can materially impact cash collection times.
- For Services teams, billing a customer after the delivery of a service requires the submission and approval of timesheets against the billable hours for the services rendered. Slow cycles here will also have a material and tangible impact on cash collection times.
- Also very common, these include employee expenses to be reimbursed, PTO requests and merit increases. These are harder to measure from a business perspective but they will impact employee satisfaction. I’ve also seen a few instances where companies have lost top candidates during recruitment because of delays in approving and issuing formal offer letters.
By means of example, Volvo Financial Services provides a range of financing options for Volvo’s truck business in 44 countries across EMEA, APAC and the Americas. As you can imagine, they’re in a highly competitive market with lots of alternatives. Prior to adopting Capriza, approving financing terms for a prospect could take days, which had an impact on their ability to close deals and remain competitive. With Capriza, they are now able to significantly reduce approval times down to a matter of hours and win more business as a result.
To learn more about Capriza’s ApproveSimple for consolidating approvals and reducing operational drag on the business, click here.