[Editor’s Note: Over the next few weeks on Payables Place, we’re publishing some “best of” 2019 articles as we reflect on the year and prepare for the new year ahead.]
The way enterprises do business has changed significantly over the past 15 years, and these shifts – in communication technologies, in business-to-business (B2B) commerce, and in financial tools, among others – have impacted few departments more completely than procurement and accounts payable (AP).
As a result of today’s evolving business landscape and a focus on process automation, both the procurement and AP units are in a better position to succeed. Between the revolution in the B2B internet and the increasing dominance of supplier networks, a skilled procurement professional can unlock significant value from supply management activity – from unveiling savings opportunities to providing the greater organization with unrivaled spend visibility.
Similarly, AP has enjoyed newfound executive attention in recent years. More enterprises have realized the inefficiencies of a mostly manual, paper-based AP process (particularly from an employee time perspective) and have begun looking into AP automation technologies to streamline the invoice approval workflow and begin to extract financial value from the process. This financial value focus has swung around to include such things as an eye on the payments portion of the AP process, as well as a new interest in the financial data and reporting that AP can produce, based on the invoice approval process.
Automation and Collaboration
Automation is a highly effective tactic for enterprises that seek to link the processes within the procure-to-pay function and ensure that everyone involved in the P2P process can “talk” and “work” with each other. Many organizations are beginning to look holistically at the full “source-to-settle” process, which means that AP’s invoice-approval process and procurement’s sourcing work is increasingly viewed as two sides of the same workflow. This view tends to result in a much closer relationship between the two teams. In the end, the value that procurement and AP bring from a collaborative perspective is greater than either team could drive of its own accord.
When procurement and AP processes are well-aligned from an organizational standpoint, and tightly linked and automated from a process standpoint, they can jointly pursue a series of opportunities to the benefit of the entire enterprise. Many of these opportunities are a by-product of having visibility into spend, invoices, and processes across the entire spectrum. A whole host of abilities (and benefits) can arise from P2P visibility, including:
- An ability to optimize working capital across the P2P process by developing proactive payment strategies and pursuing dynamic discounting opportunities
- An ability to better identify sourcing opportunities and, thereby, increase savings
- An ability to track supplier performance and, thereby, improve it
- An ability to minimize exceptions and errors and, thereby, speed invoice processing
- An ability to improve supplier relationships by being able to pay suppliers on time (or early) and more accurately, having fewer inquiries, and improving response times.
Final Thoughts
While the transformative trends and value drivers occurring with procurement and AP have helped improve the performance and raise the profile of each function in recent years, there is a force-multiplier effect that occurs when both can harness the same resources and focus them on shared goals and objectives. Simply put, organizations that lack any semblance of continuity and follow-through across their processes miss large opportunities and consistently or, in some cases, quite dramatically erode the value of their work.
