If you’re thinking about Procure-to-Pay transformation, here are 10 questions which can help you to lean out troublesome procure-to-pay processes across your business.
Before you engage with solution delivery partners or solution vendors who will often pre-judge what you want, challenge your own thinking first regarding what you actually need or can financially afford to achieve. Politics will often get in the way of doing the right things and I’m pretty certain that what you think you need, will not be what you actually need!
1) Do you receive lots of paper supplier and vendor invoices, goods receipts and credit notes?
If the answer is yes, then it’s time to think about driving this from your business. You can save up to 93% of your Accounts Payable (AP) processing time and costs by putting into practice a systematic approach to your AP function.
Just think about how easy it could be to be cost neutral (or better) by offering your AP capability as a shared service to others and sharing the benefits. A new source of revenue should be on your mind, especially if you work in the Public Sector where I am passionate about authorities, both big and small, sharing the processing burden of common front and back office processing.
2) Have you ever thought about incentivising your suppliers and vendors to self-serve?
There’s no need to receive paper anymore. A supplier portal (mobile by default) with real-time validation of supplier submitted invoices (or credit notes) to Purchase order and Good Receipts match against your finance and purchasing system (aka 3-way matching). This is something you can have up and running within a matter of weeks with a small group of suppliers and vendors leveraging mobile by default services. Think Cloud and think HTML5 (I’ll come to this in another blog post).
3) How clean is your customer, supplier and vendor data?
If it’s not clean or well managed then your efficiency and liabilities will be difficult to manage, prone to errors in its use, and of course drive up the internal costs of managing your master data sets.
Think about self-service management of this master data. After all, it’s not really your data…you’re simply ‘borrowing’ it, so why should you be responsible for it? Think about this for a minute.
You can empower your customers, suppliers and vendors to manage and update their own data and incentivise (they will get paid their invoices in a timely or even early – think discounting) them for doing so. So, think about the opportunities to challenge your in-house Master Data Team (MDT) size and traditional processes. Turn your legacy MDT models inside out and think more about the emotional needs of data in your business and how you can exploit supplier self-service to keep your borrowed data clean.
4) Have you implemented a ‘No Purchase Order, no pay’ policy?
Some procurement specialists consider this policy not an acceptable practice politically dependent upon the sector you’re working in (say an invoice from a care home). However, think about this for a moment. You procure services from your supplier and vendor ecosystems and they will want your business. This is DNA engrained in characteristics of any procurement eco-system. Implement this policy and gain greater control. You will actually find that your reputation and relationships with your suppliers and vendors will improve. Actually their perceptions of you will increase as they begin to realise you’re doing this because you’re a professional business and that’s what professional business should be like.
If you perform real time validation of your invoices, credit notes and GRN’s against your finance and procurement systems then the long tail exception handling processes associated with AP will be eliminated and there goes your last 7%. Tackle systematic exception handling head on whilst remembering you are in control.
5) Do you have significant volumes of low value suppliers and vendors creating hundreds of thousands of invoices per annum?
There are a number of approaches to this.
You could analyse your spend with spend analytics and move to fewer more strategic buying strategies
If this strategy is not possible you could provide a simple portal with an electronic pro-forma invoice (mobile by default) which can validate on the fly with your finance and procurement systems prior to submission
If this is not politically correct for social and economic reasons you could resort to question 1 answer.
6) Is your DSO running too high?
If so, think about implementing real-time discounting regimes for early settlement to incentivise your suppliers and vendors. You might also want to consider using the analytics from this to support your risk management processes.
7) Have you attempted to centralise invoice processing for global processing of invoices yet still need to have localised support for in-market exception processing?
Use a supplier self-service portal as your invoice submission process performing real time validation of manually entered invoices. Or scan your paper in market (workflow to centralised location) or at your centralised location. OCR tools are now universal across most languages capable of high recognition rates.
8) Do you often suffer from price and quantity blocking and late payments and poor supplier and vendors relations?
Transfer the ownership, you will find it incredibly refreshing. You can make it easy to submit invoices through a portal (mobile by default). Or you could provide them with a simple web service interface (with the right security model applied) to transact in bulk form in an automated fashion. Provided they send you the right information you can process this on the fly and equally inform them in real time of incorrect data and/or provide straight through processing of remittances. Good e-Invoicing solutions and processes are now commoditised. Perhaps it’s time you considered how to adopt them systematically wrapped in great processes.
9) How do you focus your business on value added strategic processes?
Consider your business architecture for procure-to-pay. You may find that actually by outsourcing this process to a procurement market place that you can save significant costs from stressed budgets.
If you apply Enterprise Architecture to you Target Operating Model design whilst you examine your procure to pay business process you might be surprised to find how easy and low impact it could be to achieve this objective across your business.
10) How do you drive down your interaction costs from suppliers and vendors?
Give them a mobile-by-default statement of account dashboard on their desktop, mobile or tablet. Or deliver the capability through a portal if you don’t fancy using free applications or have capacity to build your own.