Focusing on entire Purchase-to-Pay cycle in Shared Service Center drives insightful analytics and amplifies supplier negotiations
Tuesday, 2 Jun 2015
“We wanted to maximize the decision-making capabilities of the business and enable smart procurement strategies to work alongside group-wide SOX compliance,” explains European Project and Process Manager Jane Pilkington.
Product Marketing Manager
In my last blog, I discussed the fundamental importance of standard invoice handling processes to an efficient Shared Services Center. As Shared Services Centers continue to mature and elevate their value, the metrics evolve from pure functional efficiency into process efficiency. What's more, the metrics start to address the procurement aspects of the full Purchase-to-Pay cycle.
Process-centricity requires integrated teams
As a Shared Services Center evolves towards process-centricity, it must integrate its business practices with procurement teams. Otherwise, it risks falling short of the targets set for financial operations.
If a corporation is consolidating financial operations and strategic sourcing to a Shared Services Center, the operational procurement teams can reside either in the business units of that corporation, or in its subsidiaries. If the Shared Service Center provides business process outsourcing services, the procurement teams can be entirely part of the customer organization. Regardless of the corporate structure, collaborating with these procurement teams is key to better financial performance.
I recently had the opportunity to talk with Shared Services leaders in Manchester, UK. Many of those attending the event had progressed to this level, and were looking for further benefits from and to build a more strategic role for the Shared Services Center. The Shared Services Center needs to present compelling objectives for the procurement teams to amplify the overall negotiation power with the suppliers, and help with better tools to ease purchasing.
Choosing the right Purchase-to-Pay Solutions for your Shared Service Center
Shared Services Centers choose Purchase-to-Pay (P2P) solutions for their customers. For those customers without a procurement solution in place, the solution picked by the SSC should cover the entire Purchase-to-Pay cycle. It should also integrate with as many existing material management or procurement systems as possible. By choosing the right P2P solution, the Shared Services Center can establish an end-to-end P2P process which is also integrated with customer ERPs.
Acco brands, a leading supplier of office products, saw complete control of the P2P cycle as a key enabler of true business transformation. Acco established a European SSC using Basware solutions. They were able to enable real-time analysis and versatile reporting:
“We now have a view of all spend commitments and a much tighter handle on accruals — all of which gives us a far more accurate finance snapshot of where we are at any given time,” says Jane Pilkington of Acco Brands.
Integrated systems open vast opportunities for efficiency gains
By deploying an integrated Purchase-to-Pay solution, a Shared Service Center can eliminate manual invoice handling. They can automatically match purchase orders and direct orders to purchase invoices. The Shared Service Center can perform data mining for customers’ invoice data, and set up recurring payment plans against customer budget or payment schedule. They can also work with procurement departments and suppliers to mature the incoming invoice quality.
Direct purchasing has typically been more automated with order management and invoice matching with ERP and material management solutions, but there are huge opportunities for automation in the area of indirect purchases. We recommend a “No PO, no Pay”-policy for indirect purchases to ensure that PO numbers are consistently available to match with purchase invoices. Agreeing on how additional costs (e.g. freight) are handled in invoices further improves automatic matching rates.
Basware has solid experience in integration. Our solutions have been integrated with over 250 different ERP solutions. Many of our customers use multiple purchasing systems and maintain high Accounts Payable automation levels.
This automation instantly frees up time in the Shared Services Center. As incoming invoices can be automatically processed for payment or sent for review and approval – perhaps with coding details readily populated – the Shared Service Center can shift focus to versatile reporting and more detailed analysis with the procurement teams. By applying spend category mapping against the general ledger for every new customer, the Shared Services Center can get insights into purchasing behavior on a category and cost-center basis. This is something that the customer might before have not had time to do for themselves.
A pervasive topic in many Shared Services Centers and financial organizations, the approaching retirement of the baby boom generation has created a challenge for people-intensive activities. Senate Properties – a long-term customer of Basware - stated that the electronic methods in the purchase-to-pay process has allowed for improved task rotation and less need for recruitment.
Purchase-to-Pay practices enable faster business expansion
Business leaders in customer organizations will gain new competitive advantages as Shared Services Center raise both process and technical capability.
First, because the entire corporation follows the same P2P process, SSC is able to analyze the entire volume of invoice data, and make recommendations about better arrangements and practices with suppliers. Customers can use insights to improve their supplier contract templates, increase financial performance and enhance supplier satisfaction. For example: our customer, Senate Properties, automatically processes 20% of their invoices, and sends 94% of their invoices to automated workflows.
Second, as companies grow by way of mergers, any new subsidiary can be instantly plugged into the Shared Services Center. This means the acquiring organization can easily roll out their existing purchasing and invoicing process, and see the real spend of the newly acquired business. This is also true for geographic expansion. Our cloud-based solution ensures regulatory and legislative compliance.
Efficiency gains may satisfy business owners, but not ambitious SSC leaders
Centralizing the financing organization brings many improvements and benefits. So far, I have discussed only those benefits arising from efficiency gains. There is much more to the story. Gains from efficiency will be far exceeded by working capital gains in the later stages of the maturity. How these new value streams can be unlocked, I will discuss in my next blog. Stay tuned!