Purchase to Pay

In many organisations, purchase to pay is like a car crash. Like something dreadful – something that despite yourself, you can’t stop watching. Unbelievable. Horrific. Shocking even. Yet compelling. Alright, perhaps not quite that bad - but it can be pretty bad. I also mean it’s like a car crash in the sense that if you ask a few witnesses what they saw, they’ll all tell you something different. It's like they’re describing completely different events. It’s something I’ve written about before – the wide variety of views that people have of the same thing depending on their perspective. Finance people see P2P as an opportunity to account for things more accurately. Purchasing people see it as an opportunity to make savings through compliance and, indirectly, through better spend analysis to get better value for money. Ask a P2P operations person, they’ll tell you it’s about better process and straight through processing. They’re all valid perspectives and they are all correct but I have a question. Which perspective delivers the biggest benefit and more importantly, which is the one that will persuade a board to invest in P2P? In other words, what is the real business case for P2P? It's not what you might think.

It’s quite easy to “get” the benefits of e-procurement – electronic catalogues linked to a purchase approval workflow. It’s a no brainer and it was one of the most successful B2B technology of the 1990s as the opportunity was seen to emulate the ease of buying that amazon, Dell and eBay offered. But it was never as straightforward as the B2C equivalent. You don’t need to account for everything you buy on eBay and apply GL codes and cost centres and we don’t need a 3 way match. That’s why Amazon is easy. (How many times have you heard someone in business complain about their ERP purchasing module asking why it can’t be like Amazon?) And what about e-invoicing? That seems like a compelling proposition until you try to automate Accounts Payable in an environment where the purchasing process is out of control.

Would you impose purchase to pay policies on people in your organization if those policies, whether followed or not, have no real consequences? Think about it – if someone goes off piste and buys some stationery from a non-preferred supplier and expenses it – a few dollars in a few billion dollars of spend – are you really going to crack down on them? They’re going outside of a policy and they know it. Interpreted strictly, they’re breaking the rules and they could be disciplined for such behaviour. Should we develop a sense of perspective? What difference does this behaviour make?

 Israel Aerospace Industries (IAI) has revealed it is now managing its entire procurement and financial activities with its suppliers in a paperless and automated environment.

Over 3,000 suppliers exchange over 20,000 documents each month – from RFPs through purchase orders and invoices to payment confirmations – creating an efficient and environmentally-friendly process with saving of up to 50% in operational resources compared to the manual procure-to-pay process previously in place.

This transformation is enabled by the Nipendo Supplier Cloud platform, which allows organizations to electronically collaborate with all of their trading partners while enabling seamless integration with their ERP systems. With over 3,000 IAI suppliers using the platform and more than 90% of invoices electronic, paperless process enables dramatic error reduction, savings of up to 50%

The purchase to pay police aren’t naturally an attractive bunch of people. Like auditors, they only bring ugly messages about compliance and process. And they don’t make their lives easier by tarnishing further their image by moaning about their lot. So how do you get the perfectly rational P2P messages across effectively? How do you prevent it from being perceived as a pointless dictat from an area of the business too remote to understand commercial realities?

It’s astonishing! At a time when we have Sarbanes Oxley and a culture of control, in the climate of transparency and scrutiny and a fetishistic focus on finance – how is it that fraudsters have been able to get away with a more than 50% increase in procurement related theft? But it’s not that astonishing really. A cursory glance at the procurement practices and purchase to pay processes in any organization will reveal opportunities to defraud and while we should never forget that it is the fraudster that’s to blame, the responsibility is shared with the executives who choose to turn a blind eye and underinvest in proper P2P.

On the back of the extraordinary announcements over recent weeks , MasterCard and Basware have just declared another supply chain finance deal. It's a big deal and it's another sign if we needed it that products and services providing working capital support to business is one of the faster growing areas in B2B. I chatted to Esa Tihilä, CEO of Basware and Hany Fam, President, Global Strategic Alliances at MasterCard last week about this new partnership. It's good news for Basware - they now have an important new string to their bow, but I think it's even better news for MasterCard who couldn't have chosen a better partner.