Purchase to Pay KPIs – Why Are You Only Counting Half of Them?

Purchase to Pay KPIs – Why Are You Only Counting Half of Them?

Posted by Pete Loughlin in Purchase to Pay 23 Jul 2010

Purchase to Pay, P2P and Dynamic DiscountingIt is said that only half of advertising actually works, and you can never be sure which half. Better safe than sorry I guess. You don’t want to cut your advertising budget in half if you lose the half that works. But what about the other way round? What if you knew that 100% of your budget worked – but you chose to only spend half of it? That doesn’t make sense does it? So why then do you do it?

“Who? Me?” – Yes you! – Well perhaps you if you have anything to do with Purchase to Pay in your organization.

Most  purchase to pay governance structures overlook either the purchase part of the process or the payment part of the process. It’s not intentional. It’s a consequence of housing the P2P organization in either the procurement function, in which case procurement business requirements are emphasised, or the finance function, in which case it is the accounts payable business requirements that are given a greater focus. The result of this bias is that only half of the purchase to pay key performance indicators (KPIs) get measured and as a consequence only half of the benefits get recognized.  That is crazy! Where else would you only claim half the credit for the success of your work? But more to the point, what do you do about it?

Collating the Full Set of Purchase to Pay KPIs

Purchase to Pay KPIs

Example Purchase to Pay KPIs

If you are within finance and you are charged with identifying appropriate P2P KPIs you are unlikely to have a good understanding of why procurement would want to measure maverick spend. You may not even understand what maverick spend is. The same from procurement biased P2P people. How many would understand what GRNI is let alone appreciate the importance of minimizing it.

The key to is communication. In order to establish a full set of P2P KPIs, purchasing and finance need to buy in to P2P and contribute equally. Only by doing so will the full benefits of P2P be measured and the full recognition of Purchase to Pay be gained.

(There’s a useful article on Purchase to Pay KPIs at purchasetopay.org)

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