Jump to the Procure-to-Pay Cloud, Just Like Fosbury
In my first post of 2014, I want to talk about a shift I have witnessed in organisations moving away from traditional Accounts Payable towards Procure-to-Pay, which I liken to the Fosbury Flop.
Prior to the 1968 Summer Olympics, most elite high jumpers used the straddle technique to jump over seemingly impossibly high bars, reaching a height of 2.34m, until Dick Fosbury came along with his Fosbury Flop. This new technique now represents the dominant style for the high jump and unsurprisingly holds the world record at 2.45m.
Many larger companies are now hiring job titles such as global process owners, procure-to-pay managers, and business process owners. So what’s going on in these organisations? Well in much the same way as the Fosbury Flop, there is an evolution in technique from silo’d Finance and Procurement departments to a single, combined Procure-to-Pay department.
As many readers will know, there is a classic evolutionary path that Accounts Payable departments take in automation. There was an excellent post just over a year ago by my colleague Chris Rauen detailing this and it’s worth a read.
In summary, large corporations reach a point of automation where their finance teams are as lean as possible and headcount reduction is no longer a primary driver. Companies have centralised their processes; implemented scanning, workflow and EDI; e-invoicing is on the agenda or underway. The 50-strong AP team of yesteryear is now trimmed to 20 and aside for a few last tweaks, it’s hard to see how they could process invoices any faster.
In Europe, most large companies are at this point and thinking what to do next!
Regular readers of this site will know that if you haven’t already done so, the first step is to of course join the Networked Economy by adopting e-invoicing. But it’s also at this point many companies then take a shift towards procure-to-pay.
The efficiencies gained in Accounts Payable have also being going on down the hall in Procurement and there is recognition from both sides that procure-to-pay is a connected process.
To streamline Finance further, we really need to start working closely with suppliers to get less invoice exceptions; this means working with Procurement to get cleaner POs out the door. To do that, our new friends in Procurement need to increase PO compliance by providing the business with friendly and intuitive buying interfaces, but also make sure what is bought is from supplier-maintained data.
Compliance against contracts is another big headache for both parties. When we create a PO, it would be nice if the agreed contract was automatically enforced so things like price breaks were automatically incorporated. Procurement gets the spend compliance, Finance has less exceptions and recovery audits.
I am sure while both parties are designing this new Procure-to-Pay world, the topic of tying services to a blanket PO will undoubtedly come up. With the proper controls in place, we can unleash non-PO invoices tied to a contract that auto validate and code themselves on receipt.
And, finally, while sounding simple, Finance’s gift to the new Procure-to-Pay group will be full and clean invoice line item data. This enables Spend Analytics and Sourcing to fully understand what we are buying, and from whom, to feed into the cycle for the next negotiation round.
Does that all sound a world away? Are you straddling while others are flopping?
Just like the Fosbury Flop in the ‘72 Olympics (the one after the Flop’s debut), others have started adopting the style and recognising it allows them to reach new heights.