09 Aug 2011 What’s the point of purchase to pay?
I wonder if it’s just me that recalls that embarrassing teenage episode when one of your friends declares their new membership of the biker club. Proudly carrying their full face helmet, they don’t volunteer that they haven’t actually managed to save enough money for the bike yet. I cringe when think of it the same way I cringe when I hear CPOs claim their savings.
The thing about procurement savings is that you only get them when you spend. Is it any wonder that some people don’t get it? And this is what makes procurement a hard sell sometimes. Organizations buy stuff and the value that a procurement organization offers it to reduce the cost and risk of that operation. One of the problems is proving that the savings are real. If a great deal is negotiated with a supplier and the organization doesn’t, or worse can’t, take advantage of that great deal, then no savings materialize.
This is what purchase to pay is all about. It isn’t just the boring back office function that oils the wheels of supply chain, it’s the set of processes and practices that turn great procurement negotiations onto a real financial saving. It’s the e-procurement tools that offer access to people in the organization that need to buy things. It’s the “no PO no pay” policy that enforces compliance and makes sure that suppliers get paid on time. It’s the set of rules and principles that make sure that all of the savings don’t go up in smoke when the auditors arrive and impose corrective actions that cost more than the savings themselves.
Purchase to pay is the important component that makes the headline procurement savings a reality. Without it, procurement has no value. Procurement without P2P is like a violin without a bow, a bottle of fine wine without a corkscrew, Lady Gaga without the bacon.
Purchase to pay needs to be taken seriously as a critical component within procurement organizations. It shouldn’t be seen as a necessary evil or as a finance issue. It’s the piece that brings it all together and without it, the CPO looks like an idiot.