10 Jan 2011 P2P Perspectives – Why Procurement and Finance Need Each Other
Purchase to Pay is crucial to making promised savings a reality. A great promised saving for a particular procurement category is worthless if you can’t prevent people in your organization going off piste when it comes to purchasing. And a great supplier relationship will be ruined if your finance function pays late.
Because you’re reading this – you probably already know all about P2P. But do you really know what P2P is? Because depending on whether you see it from a finance point of view or a purchasing point of view you could have a very distorted view of what getting P2P right is all about.
It’s a bit like a police investigation. Three different witnesses to a crime can give three entirely different accounts of an incident – so much so that the police could be forgiven for thinking that there was three separate incidents. The witnesses are not stupid and they’re not lying – they simply have different points of view. And its the same with P2P.
If you’re a finance person, Purchase to Pay is about control. It about making sure that things are accounted for properly and it’s about making sure that the accountants’ lives are made easy.
If you’re a purchasing person, P2P is about process. It’s about making sure that the right goods and services are bought for the best price by ensuring compliance to contract and it’s about ensuring that supplier relationship run smoothly.
Both views are right – but they’re different and because they’re different – most organizations are missing a trick – big time.
Just think about supplier relationship management. Purchasing would like suppliers to be paid promptly. It helps smooth the relationship and you can leverage good will. Finance have the opposite agenda. Part of their function is to optimize cash flow. So prompt payment isn’t on the agenda. This apparent conflict can be turned into profit – but only if finance and purchasing work in partnership.
Highly profitable initiatives like dynamic discounting and reverse factoring can only be deployed if P2P spans the purchasing and finance functions in a true sense.
