Procure-to-Pay in the Networked Economy | Part 3
In this last installment of my interview with James McDonald, director of procurement operations, ING U.S., he discusses the value of aligning AP and procurement, and provides advice for organizations still struggling with paper invoices. You can hear James discuss how ING is achieving procure-to-pay excellence in his session, Aligning Procure with Pay: Bringing Procurement and Finance Together for Real Results, at the PayStream Advisors Innovate 2013 Conference, Sept. 16-18, in Charlotte, N.C.
At ING, AP reports to procurement. Explain the rationale and why more organizations don’t follow this structure.
Traditionally, procurement and accounts payable have operated as silos, where procurement manages the buying process and accounts payable handles the payment process. The lack of synergy between the two organizations can lead to conflicting metrics and incentives; for procurement, around the contract to purchase requisitioning process, and for accounts payable, for just paying the invoice. At ING, we saw great value from having procurement and AP collaborate as partners to establish policies that enforce compliance and help us better manage our spend. A lot of our success is directly related to bringing the two groups together. In my view, the most effective approach is to consolidate procurement and payables into one integrated P2P function, reporting to the CFO. This reporting structure provides visibility to our projects and executive-level support for our policies to ensure broad adoption.
What are some other benefits of aligning procurement and AP and automating the procure-to-pay process?
By aligning procurement and payables, you can shift your focus to more value-added tasks, and work smarter, not harder. If you look at our accounts payable group, before we automated, the focus was on the manual keying of invoices, and one metric we tracked was the number of invoices we would key in a day, a week, or some other timeframe. Today, by automating most of that activity, we’ve reduced our AP staff by over 75 percent, and built up a procurement operations team that is focused on process improvement, supplier enablement, and leveraging technology to help us better manage our spend.
Another benefit is that we have better reporting and enhanced controls. Our procure-to-pay platform is the view into procurement for all of ING. Everyone from sourcing on through to payment is part of the process, and they have visibility into everything from our strategic spend down to individual transactions. To get status on an order or invoice, no one has to call a colleague in AP or procurement. They can access that information themselves. And the system has also made support for external audits a breeze.
How would things differ if you were to be starting this journey today?
Looking back, we probably would have examined the larger source-to-settle process and assessed how complementary solutions could have delivered even greater value. We may have implemented a spend visibility solution earlier, and done a better job bridging the gap between the contracting process and the PO-invoice process. I see more companies today taking a full suite approach to optimize the opportunity. What makes this easier today is that innovations such as cloud applications reduce the dependency on internal IT resources to drive the transformation. Also, there are more industry best practices that exist today that didn’t exist several years ago. The one thing that wouldn’t change would be the alignment of procurement and accounts payable. That’s a best practice that will stand the test of time.
What advice would you give organizations still struggling with manual processing of paper invoices?
You need to really examine the larger P2P process, understand the makeup of your supply base, and develop a strategy with an automation roadmap. Realize that transformation doesn’t happen overnight. It’s a journey that proceeds in phases. Having the roadmap in place will prevent you from implementing stop-gap solutions such as scanning-OCR that will only address one part of the end-to-end process, and that you may walk away from in a year or two.