Harmonizing Procurement and Payables

P2P Harmony Blog

Hit all the right notes by getting procurement and payables in sync.

One definition of harmony is the combination of simultaneously sounded musical notes to produce chords and chord progressions having a pleasing effect.  When music is in harmony, in an orchestra for instance, there are a number of tones that are produced creating an amazing distribution of sounds; collective sounds from multiple instruments that can not be reproduced on their own.

Similarly in an organization, when individuals or departments work together there is an objective that can be achieved that produces an equivalent to musical harmony: efficiency and compliance. For procurement, it’s effectiveness within procure to order. For accounts payable (AP), it’s efficiency in invoicing. But for procurement and accounts payable together, the ability to create harmony has often been prevented by an inability to collaborate. There are several reasons for this:

1) The two groups are motivated by differing requirements: Procurement’s is identifying savings; AP’s is identifying accuracy in payment.

2) The two groups often report to a different lead: Procurement reports to a CPO, and AP to Finance.

3) The two groups are chasing different goals: Procurement wants to ensure end users shop and buy from pre-approved vendors and catalogs; AP wants to ensure they can easily identify which supplier to pay based on what purchases were made and delivered.

The same old song.

While this may be a simplistic approach to looking at the relationship, the amount of collaboration that needs to occur between the two groups is often underestimated. The fact that there isn’t more concurrence is generally due to a lack of proper processes being established between them.

Procure-to-pay technology has looked to prevent this divide by helping broker automation. In the early days, this automation was about improving the procurement process to make it easier to select catalog items into the proverbial shopping cart.

Procurement’s objective was to optimize the number of purchases going through the system using proper workflows. This would then generate purchase orders that are sent to suppliers for the maximum number of users. In contrast, AP’s objective was about digitizing the invoicing process to more easily and effectively match invoices to requisitions to purchase orders, and allow an “OK to pay” to be sent to an ERP.

But even with this technology having been around for more than a decade, P2P in many organizations is still looking for the big “so what?” The “so what?” in the form of justifying the cost of technology is often based on enabling procurement and AP organizations, and the value that is supposed to be derived in term of effectiveness and efficiency. Yet many organizations have not quite achieved the value that they envisioned when deploying P2P technology in the first place.

Getting procurement and payables in tune.

One of the arguments that could be made is that, until now, technology has not truly enabled the collaboration that needs to take place in the form of harmony. Meaning, insight and visibility were restricted to the sphere of influence that procurement and AP traditionally take part in. But today, with the evolution of SaaS and a platform approach to managing procure to pay, the constraints of visibility into process are removed by the ability to click through and identify missing pieces. This achievement, visibility in shared data and ease of use via a cloud platform, is what we call Platformance.

For instance, using a platform approach and a common data model, procurement can now easily identify the linkage between the contracts and catalogs being used by those in the field. Likewise, AP can now more easily identify the history of procurement documents — the requisitions, purchase orders and contracts — that are linked to invoices for the purposes of reconciling payments.

This visibility is easily expanded because all the processes and data are configured and stored in one place. The pieces in between, such as suppliers or other relevant financial information, are available for both groups to leverage as a means of better understanding their respective functions.

The bottom line.

Harmony is more easily established because the platform enables not only more insight into procurement and AP’s respective areas, but also the ability to promote collaboration between the two organizations. They’re able to look at a common framework and identify when a hand-off occurs between the purchase and the payment being made.

To learn more about the ideas around creating harmony between AP and procurement, join us tomorrow, March 23, for a live webinar with PayStream Advisors as we discuss this topic in more detail.

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