We discuss the Procure-to-Pay (P2P) process frequently on Payables Place because of its central importance to CFOsand AP operations. We also see it is as a “Hot Button” issue for AP groups in 2014, as noted in this article.
P2P processes involve the various stages of a business’ transactions with its supplier and these processes have become integral to driving overall enterprise efficiency. Among other things, this process ensures that the proper goods and services are purchased at the right price from the right supplier(s) and are delivered to the correct place and and paid as appropriate. All of this seems straightforward, right? We do it at home all the time…. or do we?
In a few weeks we celebrate Presidents’ Day which has become a big shopping day in the US. I swell with pride as an American knowing that our forefathers did such great things for our country and that we can honor their achievements by cutting 40% on your mattress pricing today, and today only.
But seriously, how often do we review consumer reports or online reviews before making a purchase or before we even decide what store sells the best item at the best price? How many of us are handy with a shopping apps so that we can always find the best deal in or around town. Do many of us even read the circulars before deciding what food to buy this week. If a couple with kids can’t optimize the family buying, what chance does a globally-dispersed company of highly educated (and opinionated) professionals who are spending money that is not theirs have?
When framed like that, is it any wonder that many organizations face challenges around compliance, efficiency, visibility, process optimization, lost savings and more due to the fragmentation and disconnected nature of their organizations and their P2P processes, and systems.
Historically, procurement groups (and many P2P solution providers for that matter) left out the second “P” in their P2P strategies and initiatives. Until recently, AP or the second P was considered outside the responsibility of procurement and it was not uncommon to see organizations implement procurement solutions (e.g., eProcurement) independent of any consideration of the invoicing and payment processes. About five years ago (a little more for the industry leaders), that started to change – P2P became a functional reality – and in 2014, a majority of businesses in the market understand the value in linking P to P, even if budgets and politics have kept them from taking action. In a relatively short period of time, the value of a connected P2P process is much better understood by global enterprises and much better supported by the solutions in the market.
One of the most consistent problems organizations face in the P2P process is undetected savings leakage where savings that procurement has generated through sourcing (or other) activities are lost due to non-compliance (intentional or not). To stem these losses, enterprises are integrating their P2P processes from both a process and systems standpoint and for promoting collaboration between the procurement and AP groups.
Overall, what we have found in our research and in our conversations with various P2P professionals is that P2P operations that are streamlined and well-connected can drive significant benefits from process efficiencies, process improvements (from areas like sourcing savings and reductions in maverick spend), and specific cash management strategies tied to the timing and execution of supplier payments. The potential value that exists within a well connected P2P process signals that technology deployments in this area are will likely trend toward a suite approach in the future.
So, what can organizations do to better connect their P2P processes?
- Remove paper from the invoice process – If the procurement (requisition to order) process is automated, but the AP staff is still dealing with manual data entry of invoice information, there is a disconnect that can lead to sizable errors, delays and missed opportunities.
- Place any current or future procurement or AP initiatives 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. Whether you’re considering eProcurement, contract management or eInvoicing solutions, the larger P2P process must be considered.
- Formalize the procurement and AP partnership – If the P2P process and technology is to be streamlined, efficient and comprehensive, the partnership between procurement and AP must 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 which 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.
Our next in this series will discuss management and ownership of the end-to-end P2P process.
