Purchase to Pay Tag

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.

I have sometimes described purchase to pay as sitting at the least glamorous end of the business spectrum. At one end is the sex, drug and rock 'n' roll world of PR, marketing and sales - life at the coal face where business really happens - and then at the other end there's the back office functions like purchasing, finance, internal audit. And if we take a closer look at the back office, sitting quietly right at the wrong end of the glamour spectrum is accounts payable. A colleague once described accounts payable as "the spinsters department". Jason Busch doesn't spare his vitriol in his criticism of AP suggesting that "most companies would likely be better off blowing up their AP function". To be fair he does suggest a more constructive fate for AP by describing how they might transform into a high value add supply chain finance operation - something I would strongly endorse. But for the time being, I want to defend AP. Why? Because much of the criticism is unfair and especially when it comes from purchasing.

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?

I knew somebody a few years ago who ran a small, very successful business. When it came to negotiation he had a unique closing technique. Right at the end, when contacts were to be signed and hands shaken he'd go along to the final meeting with a briefcase and before he signed the contract he'd ask for one final reduction in the price. The reaction was predictable. After weeks, perhaps months of selling, discussing and fine tuning the deal, to be asked for a further discount on top of what was already agreed, the seller would invariably be perplexed and disappointed. Then the briefcase would be opened. Cash. The full amount in cash, now, if they'd take the revised offer. Did they accept the offer?