Transformation challenge – Taming your Procure-to-Pay process

15 September 2014

Andrew Gunn

Andrew Gunn

Consultant

Do you really know who owns your Procure to Pay (P2P) process within your organisation?  There are a number of key processes in a Local Authorities and this is one which is important to get right. If you cannot answer the simple question posed with a single named individual then it is time to investigate how you might better govern and manage the delivery of this key business process.

What is a P2P business process?

The P2P business process covers all the business steps which should be followed from the point of identifying goods or services required; the authorisations steps; the issue of contracts and purchase orders; the receipt of goods or services and the payment of supplier invoices and auditable accounting for goods and services delivered.

Why is a well-run P2P business process important to a Local Authority?

Local Authorities do have an opportunity to simplify their P2P process and save cash by transforming how they manage and deliver this key business process.

One such example of simplification can be found within Accounts Payable (AP), a key part of the overall P2P process. By focusing on a systematic approach to AP it is possible to reduce the costs of AP processing by as much as 93% (1).  If no one person owns your P2P business process then you are more likely to struggle to gain real tangible benefits from AP simplification.

 

 

If you are still processing lots of paper, email, fax based invoices as well as making and taking countless phone calls then it’s also likely that you’re receiving invoices with wrong PO numbers and or values. You will be finding it difficult to match invoices to purchase orders causing difficulty in financial reporting and lack of visibility of accurate procurement spend.  This could cost an authority anywhere from £0.5 (re-keying into ERP platform) to £20 + (exception and resolution processing) per invoice to process.

Only you know your invoice volumes. So do the sums - you could be missing out conservatively on £100, 000 plus in efficiency saving per annum in just one area of the P2P business process.

Recognise any of these symptoms within your organisation?  Then it’s time to think about gaining control and simplifying your P2P business process.

There are many innovations which can be applied throughout your P2P business process.  Each and every potential innovation below can be applied – the key driver being the amount of transformational benefit sought as a whole and where you are in terms of your P2P process maturity.  In the following blog you will find 10 ways to simplify your procure-to-pay processes.

The benefits to your stakeholders

Below we have listed some of the benefits in response to the “So what” test for each group of stakeholders who should have a vested interest in the improvement of your P2P business processes.

The Chief Executive

For the larger authorities with high volume processing transforming Procure-to-Pay processing can save upwards of £0.5 million per annum in efficiency savings; an ideal opportunity to help your smaller boroughs and districts save costs  and improve your political reputation as well as your supplier / vendor eco-systems;

  • Save up to £0.5m (1) admin processing costs per annum on innovation 1 alone (see below)
  • Reduce your liabilities
  • Improve your legislative compliance
  • Improve cash flow
  • Improve relations with your suppliers
  • Identify and reduce inappropriate spend and help drive additional revenue
  • Make life more simple for your partner organisations

The Head of Procurement

You can reduce your P2P transactional costs by up to 93%, significantly reduce errors, and reduce the elapsed time from receipt of an invoice to posting it. Heads of Procurement simply cannot afford not to consider the benefits of a leaner approach to the Procure-to-Pay process:

  • Innovate with supplier discounting particularly for high value/volume supplies
  • Reduce invoice processing cost significantly
  • Provide greater organisational capacity to innovate
  • Maximise straight through processing of invoices
  • Real time liability information
  • Improve the quality of your procurement management information
  • Simplify invoice exception handling through workflow
  • Eradicate paper processing
  • Exploit self-service processing
  • Improved contract delivery
  • Leverage P-cards  for low value transactions
  • Enforce financial policies e.g. no-purchase order no-payment
  • Mobile enablement of purchasing activities

The Head of Transformation

By driving out manual processing in the Procure-to-Pay processes and greater enablement of supplier self-services, the use of “mobile by default” as a platform service can all be used to “kick-on” into further areas to transform such as employee self-service, human resources,  order-to-cash;  record to reporting self-service business transformation.

  • Simplify Procure to Pay processes
  • Eradicate manual processing of invoices
  • Simplify partner organisations interactions
  • Centralise invoice processing
  • Mobile supplier self-service enablement Improve the quality of your business information and reporting

The Head of Customer Services

Instant access to the Procure-to-Pay business information will provide the ability to address supplier queries simply and efficiently, driving up first time call resolution from within your contact centre;

  • Reduce the number of complaints raised for non-timely payment
  • Reduce time spent by long tail invoice queries
  • Supplier self-service will reduce telephony interaction costs

The Finance Managers

For the Finance manager and budget holder a well-orchestrated and simplified P2P process will enable the following transformational benefits;

  • The ability to see, in real time, spend data and analytics
  • Reduced financial processing times
  • Reduction in duplicate payments
  • Better spend Audit and visibility
  • Compliance to financial process

Suppliers

Suppliers will have a greater desire to “do business” with your authority and be more likely to carry out most of the work you would typically perform through the use of supplier/vendor self-service mobile enabled solutions;

  • Greater visibility of payments processing times
  • Simplified query management process
  • Improved perceptions of the Council
  • Enhanced feeling of loyalty
  • Quicker settlements
  • Automated remittance processing
  • Self-service “mobile by default” access to Supplier’s account
  • Greater visibility of pipeline of future opportunity

P2P innovations – creating a healthier organisation

The following lists just some of the innovations which can be applied to the end-to-end P2P business process which can be used to simplify and improve your end-to-end business process.

  • Innovation 1. Accounts Payable transformation - Automated Supplier invoice payment processing (paperless workflow enabled AP invoice processing) – Digitising paper invoices at point of business entry and making the Procure-to-Pay business process systematic for approval
  • Innovation 2. Supplier self- service transformation (submitting / tracking/querying/statement of account/remittances) enablement al via mobile devices and or Supplier portal
  • Innovation 3. Dynamic discounting based upon early settlement of supplier invoices
  • Innovation 4. Shifting AP query processing to self-service, provide all data to your suppliers.
  • Innovation 5. Procure-to-Pay shared service across multiple authorities and organisations leveraging a single Procure-to-Pay service.
  • Innovation 6. The use of Purchasing Cards for low value, high volumes
  • Innovation 7. The use of EDI (Electronic Data Interchange)
  • Innovation 8. Buy like Amazon, make your buying experience simple and intuitive

The following infographic illustrates just one example of AP transformation i.e.  Innovation 1.  A systematic process for managing accounts payable sub-process of Procure-to-Pay transformation.

 

 

Further key questions to ask about your P2P business process

We covered one key question at the start - do you have a single process owner? Here are some more key questions to ask about P2P end-to-end process:

  • What governance and procedures do you have in place to support your P2P business process?
  • Are your managers equipped with the right management information to be able to manage the P2P business process?
  • Do they have access to accurate data (e.g. what was bought, and by whom) to allow effective management of budgets and spend forecasts?
  • When did you last perform a spend analysis to determine if you are spending wisely with your suppliers?
  • What is your payment performance like? When did you last test the temperature with your suppliers?
  • Do you know how efficient your end-to-end processes really are?

If you cannot answer these questions then this indicates it’s time to investigate further the performance of your P2P business process and supporting technology.

Procure-to-Pay transformation – some top tips

In the following we highlight some top tips for the P2P process owner and key stakeholders which will greatly enhance the value of tackling your current challenges with your P2P business process.

Making P2P work – get the basics in place

  • Appoint a single process owner empowered to make improvement decisions
  • Make sure that you have a well communicated P2P process to your organisation and all of your stakeholders
  • Ensure that P2P is viewed as an integrated cross-functional process which involves  Procurement, Finance and and other departments
  • Make sure that clear P2P policies and procedures are in place and well designed.  Think “no PO - no Pay”
  • Simplify and extend the use of IT  to support more elements of the end-to-end process

Early stakeholder engagement – it’s more than procurement

  • Make sure that when you investigate your P2P process that you engage early Finance, Procurement and others to ensure that you have captured all perspectives and requirements
  • Engage internally with your buyers and requisitioners, and externally with your suppliers,  to gain insight into shortcomings
  • Make sure that you capture all the opportunities for transactional efficiency savings

Business strategy alignment – collaborate for success

  • Make sure that alignment is achieved across functions and departments and avoid a silo mentality  - an integrated approach will deliver higher benefits
  • Articulate the benefits aligned to your Business strategy to gain greater business acceptance and to increase momentum

Measurement – know how well you are doing

  • Make sure that you have a well thought through set of management information about the end-to-end process available for  stakeholders to access
  • Challenge the value of information to be captured. Is the information of value? If not it is pointless
  • Does the data captured support the continuous improvement of process?  .
  • Are you managing off-catalogue (maverick) spending Effectively? Can you even see where this is happening?

Get your data and content right

  • Are your procurement catalogues well-presented and accurate, if not then make it so.
  • Is your supplier and material master data correct, timely and accurate?  Most organisations have master data issues which need to be addressed to support a more effective PTP process.
  • Could the extension of supplier self-service options shift some of the master data management burden?

Ensure your shop is engaging and simple

  • Is it easy for people to buy mobile by default, if not think Amazon
  • When did you last ask stakeholders “So how easy was it then”? You might be surprised.
  • How do you engage your suppliers? If you make it easy for suppliers and vendors to engage with your P2P process then you will gain additional insight as to how to improve your process.
  • Be constantly looking for ways to improve your relationships both internally and with your supplier community

Make it easy for your suppliers and vendors

Everything about P2P should be centred on reducing the transactional cost. Is the behaviour of your suppliers and vendors changing? Are they more likely to self-serve?
Make it easy for supplier and vendors to self-serve with their Master Data.

Sing from the roof top

Reward good supplier behaviour, think about win-win financial benefits in terms of discounting
Encourage collaboration across your supplier community

Our approach, co-creating your transformation journey

Local Authorities have a significant opportunity to simplify your current Procure-to-Pay business process supported by practical deployments of “mobile by default” technologies and even the possibility of adoption of Procure-to-Pay shared services transformation with your partner organisations.

Bluefin Solutions would welcome the opportunity to come in to your organisation and discuss with you your own specific challenges with your P2P business process.  We don’t have a fancy methodology as we believe that most organisations will have their own unique challenges. We believe in listening first, then keeping things simple.  We do recommend our simple 4 stage Discovery process, which involves working with you collaboratively to help you to gain clarity of vision, a defined set of objectives and a roadmap, informed by a high level business case.

  • Procure-to-Pay challenge. 1 hour assessment of your own procure to pay challenges
  • Procure-to-Pay vision. Accelerated innovation workshop – P2P transformation vision, goals and opportunities
  • Procure-to-Pay business case. Delivery of high level business case
  • Procure-to-Pay roadmap. A Digital transformation roadmap

“For large and small authorities with a need or desire to save costs whilst supporting their partner, supplier, vendor ecosystems Procure-to-Pay transformation can deliver significant tangible benefits”. Andrew Gunn, Principle Consultant, Public Sector to book time with a Bluefin expert to discuss your challenges please contact: [ Andrew Gunn]

Our research sources

  • Aberdeen Group. From the Shadows to the Forefront, 2013(1)
  • Aberdeen Group, AP Invoice Management in a Networked Economy, 2012(2)
  • Institute of Finance and Management (3)
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About the author

Andrew Gunn

Consultant

Coming from Newcastle my simple analogy to my entire career is to think about the many marvellous bridges across the River Tyne. I have spent over 24 years bridging the gap between client’s business challenges and technology helping my clients spend wisely. I am a highly experienced Digital Transformation evangelist specialising in the field of Information Management using Big Data and Mobile technologies delivered through the Bluefin Solutions Public Sector and Services business unit.

Simply speaking, I work for my clients in local government in either Customer services, Finance, Procurement or HR, helping them to get more value from the right data at the right time. These challenges are not new, they are simply bigger because there is more stuff to process.

I have worked on more than 15 projects in Public sector over the years - ranging from client side digital strategy engagements (£20k+) to forming an integral part of larger teams delivering mega projects (£500m+) for my clients in various roles such as Technical Design Authority, Digital Strategist, Business Architecture Design and Programme Management. A key aspect of my Digital Transformation passion is to ensure that I identify and deliver real transformational led savings with examples ranging from £0.5m to £20m per annum saved across a wide range of organisations.

What frustrates me is that many firms bamboozle their clients with complexity. Often recommending unnecessarily overly engineered solutions costing in excess of £5m. Big data challenges are not new, it’s about the right data at the right time in the right format, managed properly. I believe that working collaboratively with our clients to deliver complex Enterprise Information Management challenges simply is vital to achieving sustainable results. This, rather than doing transformation to our clients, as adopted by certain organisations, is the way I like to work.

Bluefin and SAP S/4HANA - welcome to the one horse race