21 Feb 2013 Purchase to Pay best practice – the cost of ignoring it
How much does it cost to implement purchase to pay best practice? Having spoken to many senior finance and procurement people, I get the impression that many of them think more about how much they can save by ignoring it. Sure, they value the basics but the whole nine yards is seen as an expensive luxury.
So how much does best practice cost to implement? How long is a piece of string? It depends of course on the size and scale of the organization and it may be better to ask an alternative question: How much does it cost not to implement best practice? There’s some really interesting research that’s just been published by OB10 that can help answer that question.
Working in collaboration with sharedserviceslink.com, the OB10 research, published in the form of an infographic, reveals the astonishing cost of managing exceptions in AP originating almost exclusively from errors in the purchase to pay process. According to the research, for a medium sized company handling 250,000-500,000 invoices per annum, nearly 80 people are required just to handle exceptions. That could amount to (at an average cost per FTE of $50,000) about $4 million per annum.
Now, ask the original question again. How much does it cost to implement purchase to pay best practice? When you try to answer, factor in the potential savings of eliminating exceptions.
Purchase to pay tools should not be seen as an expensive luxury. They are essential in minimizing supply chain disruption, controlling fraud and managing operating costs. Rather than fearing the question “Why have you spent so much on P2P?” senior finance and procurement people should fear the question “Why do you spend so much on managing exceptions?”
See the infographic below and to download a free eBook, Rooting out Invoice Exceptions: The path to straight-through processing, follow this link.