I will never forget the first time I set foot in an Accounts Payable department. I was working as the lead consultant on a project to completely transform and rebuild a company’s procurement function. Everything was going exceptionally well: processes, reporting, technology implementation, and upskilling the current team. The CPO mentioned to me that I should stop in and introduce myself to the AP lead before the project moved much further forward. I dutifully did so – although when I walked onto the floor and heads suspiciously popped up from cubicles all around me, I knew something was up.
The head of AP came walking out of her office and asked, “Is something wrong?”
As I quickly learned, no one from procurement ever went down to AP unless something was wrong. Seeing someone from procurement anywhere but the cafeteria was bad news, even though procurement and AP both reported to the same VP.
Same page, same side.
I knew things had to change, so I decided to skip the introductory meeting. “Want to grab dinner?” I asked. The head of AP would become one of my closest allies on that project, just because I showed up in person, asked questions and listened to their answers. Imagine how much sooner the company could have realized those benefits if someone who actually worked at the company had done the same.
Now I know this situation doesn’t represent the status quo in all organizations. Sometimes, procurement and AP work closely together on a regular basis to amazing effect. In other cases, procurement may think they work well with AP, when AP would tell a very different story.
As desirable as it might be to bring procurement and AP into closer alignment, wanting it will not make it happen. There must be something tangible for people from both teams to work towards – data alignment, supplier management, or working capital management. With a clear objective in sight, procurement and AP can come together and form a productive goal-oriented partnership rather than being awkwardly shoved into a “blind date”.
Shared success: Where procurement and AP overlap.
Procurement is responsible for spend analysis, sourcing, contract negotiation, and supplier performance and relationship management. All of these activities can be improved by greater information exchange with AP. Here are some examples:
- Spend analysis: Technology provides data and enrichment, but in many cases, the people responsible for approving and making the payments will be able to add to the story in a way that measurably benefits procurement.
- Sourcing: Not only can AP shed additional light on the budget numbers procurement is working with, they should be allowed to provide any input they have about what it is like to work with an incumbent supplier’s finance/accounting team.
- Contract negotiation: Each contract must contain specific payment terms. If the supplier wants to deviate from the company’s standard terms, AP is a great place to start to find out if the company will, under the circumstances, even entertain the exception.
- Supplier performance and relationship management: A company can only pay its suppliers on time if the invoices/purchase orders are issued in the expected format and with the required information. If there is even a chance that a supplier will raise concerns about the timeliness of payments during a review meeting, procurement should be prepared to discuss feedback from AP about the supplier’s documentation.
“Aligned” leads to “alliance.”
These are process-driven examples of how procurement and AP can productively increase their contact. But, it does not begin to capture the total opportunity made possible by greater collaboration between these two groups. When the executive team comes looking for value-oriented opportunities associated with spend and supplier management, procurement should sit down with AP to see what ideas they can come up with together. By adding their perspective to ours, we more accurately address a greater portion of the source-to-pay process.
Final thought: in today’s digital work environment, functions are often defined by their systems as much as their objectives. If procurement and AP use solutions that either sit on the same platform or are integrated well enough to “play nice”, there is an increased chance that their users will too.
Learn first-hand how to bring your procurement and accounts payable teams into better alignment – register for our upcoming webinar with PayStream.