FROM PROCUREMENT TO PAYMENT: WHAT IS THE REAL RECIPE FOR SUCCESS?

The layers of processes, priorities and flows involved in the organizational supply chain can be overwhelming. Sometimes, it can feel like there are too many cooks in the proverbial kitchen.

Automation and process improvement are on most AP managers’ lists of priorities, but because AP is traditionally a cost center, it doesn’t often get much attention during organizational budget planning. Instead, other organizational priorities usually take precedence.

It doesn’t have to be that way. While attending the IOFM AP/P2P Fall Conference, I pieced together the best possible recipe for success within your organization’s supply chain. Here are five key ingredients to ensuring your supply chain processes and key stakeholders are really ready to implement automation strategies:

Start Strong: People First

Begin by focusing on the single most important component as your base. It’s not a technical improvement such as invoice automation, workflow process flow, and electronic payment strategies. People – not process – should be the main ingredient.

Prioritizing communication and partnership among procurement, accounts payable and other organizational stakeholders is the best way to successfully implement new, more productive and cost-saving Procure to Pay (P2P) processes.

Build Trust Between Departments

What do the CFO and other executive sponsors see as the highest priorities for your supply chain? Do they want to reduce costs or increase efficiency – or both? Or is it key metrics such as paid-on-time percentage and cash flow forecasting? From a high level, they want lower operational costs and more efficient processes. Revenue generation would be icing on the cake (we’ll talk about that coming up).

You know the executive team wants to lower costs and make processes more efficient, but what about the departments around you? What changes and new processes should you implement together to best reach these goals? These questions cannot be answered (or accomplished) by a single department. And without communication, an improvement in one department could have a negative impact on another. Be sure to engage the following departments when you are brainstorming ways to implement organizational priorities: Strategic Sourcing, Shared Services, Information Technology, Finance and Accounting, Procurement, Purchasing, Product Owners, Sales, and Accounts Payable.

Furthermore, trust is frequently lacking between departments, especially at larger companies. From purchasing and procurement to accounts payable, lack of communication and siloed procedures can cause friction and erode trust over time. Consider sitting down with an individual from another department once or twice per month for an honest, one-on-one discussion. Talk about what’s working and what isn’t, get their expert opinions on improvements, and ask their preferences and concerns about choosing an AP automation and payments system.

Ideally, these systems should be integrated with one another, so make sure hands-on employees who will be utilizing the system(s) have a voice in the selection process. Finally, be sure to maintain good communication by including these individuals in emails about your department’s selection process and demonstration of these systems.

Remove Friction in the Supply Chain

From procurement to payment, many companies experience friction – also known as resistance, conflict or struggle to get something done. And if you are part of the accounts payable team, you’re the last line of defense against friction and need to do something about it – fast.

In addition to lack of trust and unclear priorities, here are some of the most common causes of friction in the supply chain:

  • Disparate (not centralized) processes in the supply chain
  • Manual, paper-based invoice receipt and processing
  • Increasingly complex or non-standard purchase-to-pay agreements
  • AP department spends too much time on invoice matching and transaction processing
  • Too many invoices without an associated purchase order
  • Invoices with no goods receipt, causing companies to hold unpaid balances
  • Manual processes, such as paper check payments, cause errors and delays in payments to suppliers

From procurement to payment, the entire process can be impacted by friction. In procurement, automation can greatly improve invoice capture, allowing invoices to flow straight through without human intervention, thereby removing a major source of friction. In this process, an invoice flows as data through a network directly from the supplier to the buyer. Order to cash (O2C), also known as sales order automation, helps automate processes companywide while improving cash flow forecasting. For the AP team, automation systems can help companies with invoice processing, and electronic payments companies can greatly improve the payment process. Friction in payments includes slow, costly paper-based payments, incorrect or missing remittance information, and logging into multiple bank portals.

 A Pinch of True Automation, A Dash of Integration

When departments cooperate and communicate with one another, people (before processes) can work together to minimize friction in the supply chain. Gather together to discuss and simplify the organization’s priorities into actionable objectives, and communicate on a regular basis to define exactly what your organization needs from an automation standpoint.

Make sure your automation is “real” – PDFs sent via email are usually printed and the data is manually entered. This is not true automation! Then, make sure your automation systems work well together. Invoice, AP and payments automation systems should be integrated before you implement them, to provide the most efficient transition from manual processes to automation.

The Final Ingredient – Revenue Generation

Surprise and delight executives with the idea that AP can be a revenue center, not just a cost center. Implementing an electronic payment process that focuses on virtual cards can not only reduce or eliminate manual processes, it can generate a rebate and make you look like a rock star to the CFO. Make sure to choose a company like EML, with an in-house team that is skilled at enrolling your vendors and suppliers onto a virtual card, and pays a monthly (not yearly) rebate.