Why P2P & why now?

Why P2P & why now?

This week I had the pleasure to support a seminar session run by Canon promoting their P2P offering. This is the transcript of my presentation

P2P has always been important – important in the sense that it has always been important to ensure that the correct approval is given before something is bought. It’s important in the sense that it has always been important to ensure that suppliers are paid according to contractual terms – and important in the sense that it’s important to ensure that the details on an invoice sent by a supplier match what was asked for and what was delivered.

But P2P has taken on a greater importance in recent years and there are three things that have put P2P in the spotlight

  • Visibility
  • Accountability
  • Automation

Purchasing Insight logoIt seems that in every aspect of our lives, visibility is becoming a bigger deal. Visibility of what we do and what we did in the past is increasing at a frightening rate both with and without our consent.

The growth in visibility we see in our personal lives is mirrored in the increase in visibility across and from outside the enterprise. Technology means we can see more and see more accurately. Shareholders and regulators demand visibility and openness and this links into the second driver of P2P – accountability.

In an increasingly open world, it’s more difficult to hide. Since Enron and more recently the global financial crisis, shareholders, regulators and governments demand to see more info. They demand that we run a tight ship and they want to see demonstrable controls to ensure that measures are being taken ensure things run as they should. And in this new open world we can see who is to blame – who is accountable – and they are increasingly called to account.

Automation. It’s a cliché to note that technology has transformed the world. It is allowing us to join the dots in ways that would have been unimaginable 20 years ago. Supply chains run more efficiently when partners collaborate and today, buyers and suppliers can share the same data in the cloud to make better decisions faster.

Purchasing professionals can offer their customers catalogues from approved suppliers with automated approval workflow that captures the complexity of the Sarbanes Oxley regulations. E-procurement, properly deployed accommodates the complexity of a tightly controlled business environment and it releases procurement to tackle greater value-add activities instead of creating paper POs. Similarly, AP automation – using electronic invoicing, scanning and capture – frees finance to take on a more strategic role.

What could possibly go wrong?

The importance of Purchase to Pay is best illustrated with a few “what could possibly go wrong” examples – things that I see every day.

Take poor compliance to preferred supplier lists – the maverick departments that know better than procurement. The marketing people that have to do things differently. The senior managers and execs that have to go off-piste for legal spend. The traveller who knows how to get a better deal.

“We can get it cheaper/better/quicker” Yeah, right!

There are so many things wrong with this behavior. Preferred supplier lists are there for a very good set of reasons. Procurement invests significant time and expertise in ensuring that suppliers don’t introduce financial, commercial or reputational risk to the business. How, for example, does the maverick buyer know that their favorite supplier doesn’t employ children in the Far East to manufacture their products? Imagine the potential for reputational damage that that kind of oversight can cause.

What about the paper PO process? Some are reassured by paper. They know where it is. Put documents in the cloud? They don’t know where or what the cloud is. Paper is safe. What could possibly go wrong with a paper process?

In the worst case I’ve ever seen, a paper PO was signed 12 times to be approved – 3 times by the same person.

This isn’t bad just because it’s paper and inefficient. The real impact of inefficient paper processes is delay – and if the delay is unacceptable, the business finds a way round the process.

Ever heard of anyone buying things and claiming on expenses?

Buy things on expenses and it could be the wrong supplier, the wrong price, the wrong part, the wrong Ts&Cs. Worst of all, there’s no MI. The business doesn’t know what it’s buying and so can’t control its spend.

Get real!

There’s a lot that can go wrong but in reality many organisations are prepared to put up with these risks and shortcomings. Let’s face it, you’re in business to do business and you will do whatever it takes to remain competitive. Front office is what it about – not back office.

This is misguided. Of course the interests of your core business are paramount but without properly implemented P2P there are some serious issues that can arise which can literally put you out of business.

An inefficient back office can lead to late payment of suppliers. If those suppliers are your key strategic suppliers and they put you on hold, your business grinds to a halt. You’d be amazed at some of the near misses I’ve seen in very large organizations because they haven’t invested in P2P. (After a near miss they do!)

And then there’s fraud. You may not realize it but there are many poor P2P practices that are very common that can be exploited to commit fraud. If exploited by determined fraudster or unscrupulous employee, it’s like giving them the keys to the safe.

The P2P decision.

Failure to implement P2P is an active decision. If you don’t do something about P2P, you’re are actively choosing to operate in an inefficient and more importantly an uncontrolled environment you are choosing to work in that way. And when you are robbed – because you will be – the auditors – and the police – will want to know why that decision was made. You may not be accused of fraud, but you may well be found culpable through your negligence.

Pete Loughlin can be found on twitter @peteloughlin

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