Considering the volume and complexity of transactions related to the Procure-to-Pay or P2P processes, we find that companies rarely look at this area in a true integrated, end-to-end fashion. In most companies, the various stakeholder groups including Procurement, AP/Finance, Legal, IT, Treasury, Audit and others tend to view P2P through their own lens.
Whether it be Procurement focusing on spend analytics and sourcing; AP/Finance focusing on transaction processing; legal on contracts etc. etc. the point being that silos remain within the P2P domain.
More and more of our clients are beginning to break down these barriers and share the benefits associated with a comprehensive review of this process. Increasingly, we are seeing Procurement and AP teaming together to lead the charge in this area by combining their agendas. Naturally, AP is focused on the payment side of the process while ensuring adequate financial controls are in place. Procurement on the other hand is more focused on the overall procurement process including, spend classification, strategic sourcing, supplier management, etc. Other stakeholders, including Legal, IT, and Treasury, also have a vested interest in the overall process.
The Procurement and Finance agendas associated with the P2P process share many common attributes and can be more efficiently addressed as one. Many AP departments perform periodic initiatives to improve cash flow and their companies’ working capital position. These projects (i.e. duplicate payment recovery, extending payment terms, negotiating discount, etc.) are often performed with minimal input or involvement from other key stakeholders. Likewise, most procurement organizations today are performing some form of periodic or ongoing classification and monitoring of third party spend to varying levels of sophistication.
Rather than performing these initiatives as separate activities, companies are beginning to see the advantage of driving these types of analysis in a combined assessment. The common link for both an AP driven initiative and a Procurement driven initiative is the AP data which serves as the principal source of information and intelligence for these events. In many cases the financial recoveries associated with finding duplicate payments, applying unused credits etc. can be the funding mechanism for other initiatives which might include spend classification, supplier master file cleanup and governance improvement, strategic sourcing opportunity assessment, and others.
In addition to immediate bottom line savings, combining an AP initiative with a more traditional Procurement/Spend assessment provides several benefits including:
Improved working capital/cash flow management
Spend transparency enabling strategic sourcing
Lower AP and transaction cost management
Supplier Master File management opportunities
Enhanced Contract Management capabilities
As companies continue to seek and identify opportunities to improve their organizations, considering a holistic approach to addressing their procure-to-pay process can yield substantial benefits.
Procurement and Finance – along with support from other key stakeholder groups – can work together to drive immediate benefits in the form of recoveries, improving the management of working capital, identifying process improvement opportunities, improving data integrity and ultimately supporting a procure-to-pay process that can deliver increased value to the entity.
The illustration below summarizes the activities and benefits that could be available through this approach.