Can purchase to pay vendors really add value across the full spectrum?

Can purchase to pay vendors really add value across the full spectrum?

Posted by Pete Loughlin in Ariba Buyer, Financial Supply Chain Management, Procurement Process, Purchase to Pay, Purchase to Pay Process 11 Jul 2011

There are few that would disagree that Ariba sits firmly amongst the best in class procurement vendors. Its heritage goes back to the pioneering days of e-procurement and it has continued to innovate successfully ever since, diversifying its portfolio of solutions across the P2P spectrum. But while its procurement credentials are impeccable – the first P – how credible is Ariba at addressing the second P at the payment end of the spectrum?

Purchasing Insight logoModern day P2P crawled from the muddy swamps of procurement in the 1990s. There was always a purchase to pay process of course but the term didn’t become standard parlance until the standalone procurement tools became more closely integrated with ERP applications. The emergence of tools like Ariba and the development of supplier networks transformed the purchasing process in many industries. The ERP vendors struggled to keep up.  Token user interface adjustments were made to their clunky and over complex purchasing modules allowing Ariba to establish a foothold that they retain to this day.

Today, Ariba is one of a few best in class e-invoice providers too but does that make it an effective one stop shop as a purchase to pay vendor? Well, despite the fact that Ariba has a few payables tricks up its sleeve, if you ask AP professionals what they would choose as a P2P solution, Ariba probably isn’t even on the radar.

The problem is that,  viewed from the purchasing side of the fence, AP looks straightforward, even trivial. The reality is that it’s complex – very complex. There’s more to the second P than e-invoicing and dynamic discounting and supply chain finance can be a minefield. GRNI may be off the purchasing agenda but it’s a key measure of P2P health for the finance team.

I’m not picking on Ariba here. Ariba probably has the strongest claim – outside of the ERP vendors – to offer a true end-to-end purchase to pay solution – or “source to settle” as they would call it – but it’s not a P2P solution – and it shouldn’t try to be. Payables and the associated accounting and reporting processes operate deep within the world of general and sub-ledgers, accruals and journals, amortization and depreciation.  It’s as alien to purchasing people as a Kraljic matrix is to an accountant.

Joining up all of the business process from purchasing through to payment and accounting requires a very diverse skill set and today at least, there’s no such thing as a purchase to pay solution.

  • John Vasili July 12, 2011 at 9:59 am /

    Interesting, Arriba is a great solution but it is P2 and needs the second P (payment) this can be simply achieved by plugging in the settlement engine from Invapay thus making Arriba the only true P2P / S2S including e-invoicing even from the long tail.
    For a cloud based end-to-end purchase to pay / “source to settle” solution for indirect spend check out http://www.invapay,com

  • Peregrine July 12, 2011 at 10:15 am /

    I think you’re missing the point John. I know you want to evangelise the merits of Invapay but the real point is that purchasing people – and I include myself in that group, tend to over simplify the payment end of P2P. When you take a look at P2P from a finance perspective, some of these great “P2” tools like Ariba and Invapay are simply not fit for purpose.

  • John Vasili July 12, 2011 at 10:52 am /

    Peregrine, I agree we do tend to over simplify the payment end of P2P, however i have to correct you, Invapay is a true Source to settle/P2P cloud based tool which has been based on my hands on experience of processing 12.5 million AP invoices per month.
    Settlement options include Pcards, credit & debits cards (use your cards with a non card accepting vendors ,clever eh!) , SCF, working capital , ewallets and many more thus providing DPO & DSO management , working capital management, rebates, dynamic discounting. & einvoicing from event the smallest of your vendors.

  • Lucy July 14, 2011 at 7:35 am /

    Peter – I think you have touched on an extremely valid point that most organisations that I have come across in the UK over the last six months are missing too. In fact I have woken up at some ungodly hour this morning thinking about this very issue. Every tender I have received over the last 6 months has been driven by procurement control which is clearly a vital control point and essential to truly successful spend management and analysis. However is it realistic to try and put so much effort into the upfront purchase control, are systems from this perspective ever going to be able to do the down stream corrections always required in the AP function, the detailed slice and dice reporting that the financial managers want. As an example, is a procurement driven system going to do the automated debit note type functionality so many UK organisations seem to want today ? Are they so focussed in this direction because Purchasing create the tenders, or is it just a phase we have to go through on the road to truly mature P2P automation, or is it perhaps a cultural thing in the UK ? Very thought provoking blog – irrespective of the vendor mentioned….

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