Purchase to Pay – an engine room of growth

Purchase to Pay – an engine room of growth

Posted by Pete Loughlin in Dynamic Discounting, Financial Supply Chain Management, Purchase to Pay, Working Capital Management 15 Sep 2011

You think purchase to pay is a back office function? e-invoicing is a technical innovation? AP automation an incremental improvement to financial supply chain management? And you wonder why nothing ever gets achieved.

P2P is as boring as you make it. The reality is though, that purchase to pay, positioned properly, can deliver commercial benefits on a scale that would astound most executives.

Purchasing Insight logoIt depends where in the organization P2P sits, what level of sponsorship it has and how much investment is made in it but purchase to pay is nearly always undervalued. Whether it is seen as a fire fighting function, a reactive team that fixes the problems that fall out of a dysfunctional supply chain operation, or simply a necessary evil that meets the requirements of Sarbanes Oxley, it is difficult to paint P2P in a great light light. Compared to the sales organization that delivers the revenue – or the marketing organization that puts the shine on the customer facing side of the business – or the finance team that turn revenue to profit – purchasing and P2P are relatively unglamorous – and it’s their own fault!

Purchasing and P2P don’t do themselves any favors. There’s some serious cash locked away within supply chains – both physical and financial – that can be released if only P2P gets some teeth. Dynamic discounting for example, can generate a return on capital well in excess of 20%. That’s not fantasy – but to a treasury manager it’s a dream. Within some segments of your supply chain, you could double your DPO by using methods like reverse factoring. A procurement person might not get this this but your CFO will sit up and take notice. I’m not talking here about incremental change – these P2P initiatives are game changers that do much more than save money – they make your organization thrive and grow.

But these kinds of initiatives are not without their challenges. This, for many organizations, would be uncharted territory. To be successful, deep political waters with dangerous undertows need to be navigated. It’s not for the feint hearted. But the rewards are there if you dare to deliver.

Purchase to pay gets a bad press. In the glamour stakes, purchase to pay doesn’t rank that high within the world of AP, purchasing and supply chain – and let’s face it, in the world of AP, purchasing and supply chain, the bar isn’t exactly high! But just because P2P sits behind AP and procurement, which itself sits behind the business, which in turn sits behind it own airbrushed and spray tanned marketing exterior – the real glamorous end of the business world – doesn’t mean it has to believe its own bad press.

Putting your P2P head up from behind the safety of the back office parapets may be daunting, but dare to deliver, and you can turn P2P into the engine room of growth.

Post a comment