Following my previous article on an Ariba Commerce Summit, here is Part II of the discussion we had at the event around connecting processes and systems within the P2P cycle and fostering collaboration.
Benefits of collaboration between procurement and AP
Procurement and AP are already linked by two parts of the same transaction and while the performance of each group, at a high level, can certainly drive value for the larger enterprise, it is only after both of these processes are well managed and tightly linked that a P2P organization can begin to realize its full potential and become a truly strategic operation that supports key business objectives.
Although most enterprises lack a “collaboration mandate,” the potential benefits of successful collaboration are undeniable. The extent to which collaboration is approached in a more formalized manner (e.g., monthly meetings between AP and procurement) the better the combined results are likely to be. One goal of collaboration is to bypass the functional silos that plague many corporations. Some of the potential outcomes of a more tightly linked P2P process and increased collaboration between the various parties can be:
- Optimization of working capital across the P2P process by developing proactive payment strategies and pursuing dynamic discounting opportunities
- Improved supplier relationships by being able to pay suppliers on time (or early) and more accurately, having fewer inquiries and improving response times.
- Better identification of sourcing opportunities through more accurate spend data via invoices and payments
- Improved contract compliance and reduce maverick spend by linking invoices and payments to contracts
- Better success with supplier enablement by leveraging a ‘one-time’ on-boarding process for procurement and AP requirements
Challenges or barriers to procurement and AP working together
The challenge is that in many companies procurement and AP are completly distinct groups with different reporting lines, different goals and objectives, so they’re measured differently. If we compare the two groups, procurement has come a long way over the last decade and although AP may have their own transformation initiatives they traditionally lag behind procurement.
Another part of the challenge is that many organizations may not have considered the entire P2P process when implementing a solution to automate a certain part, so as a result there are disconnects from a process standpoint and a system standpoint. However, organizations are starting to change this and are beginning to think about the processes and technologies in a more holistic manner, starting to look at more suites of technologies, ensuring that technology can support and more tightly link all of the P2P processes.
How can procurement and AP collaboration improve supplier participation in eInvoicing initiatives?
Supplier participation is the single biggest challenge to a successful eInvoicing program, but why is this? Part of the challenge for some suppliers is having to deal with multiple systems, one to receive the PO another to submit invoice. Additionally, they could be managing many different platforms for different customers. One way to change this is by first getting procurement and AP on a single system, and of course if they’re able to leverage a one-time enablement via network capabilities there are several efficiencies and benefits to be gained and more activity overall.
Key technologies that foster collaboration
Thinking about the entire P2P process is key, whether you’re automating one part of it or the whole process. Collaboration is a big theme at present throughout the business world and we found that AP has a tremendous opportunity to collaborate with other groups but it comes down to the linkage between processes and systems, sharing information, having visibility between the groups and also their common denominator the supplier. Some of the key technologies that enable collaboration include eInvoicing, supplier networks and self-service portals. These particular technologies create a platform for receiving, processing and managing information accurately and easily with all the checks and balances that are required.
Recommendations on how AP can become more strategic and work closer with procurement to connect the dots in P2P
- Place the current initiative(s) in the context of a larger P2P initiative and vision – Groups that forego any view of a longer term, cross-functional process for short-term gains in a project may be doomed to repeat and redo their efforts.
- Formalize the finance and procurement partnership – If the partnership between finance and procurement is going to be long-term and meaningful, it is vital that both groups are on the same page as it relates to their responsibilities, goals and objectives. These areas (and the larger relationship) should be developed in a formalized manner with regular interactions and status checks.
- Link and automate a holistic P2P process – If technology budgets today are not available, start by manually, but holistically, linking the processes together. Then work aggressively to build a strong business case for change.
