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Rethinking the Procure-to-Pay Value Chain

Thursday, October 29, 2020

5 minute read

Rethinking the Procure-to-Pay Value Chain

By Kyle Appell, Director, Business Performance Improvement, Protiviti

Basware partner, Protiviti, discusses how forward-looking companies are rethinking the procure-to-pay (P2P) value chain in this guest blog. Read to learn why transforming your operations leads to greater savings and what can be done to further minimize manual touchpoints through your P2P.

 

Talk to procurement executives about how they measure the performance of their procure-to-pay (P2P) process and you will undoubtedly have a very spirited discussion about a wide variety of metrics. Commonly mentioned indicators include savings, cycle times, quality of products delivered, ease of ordering, spend on contract, and so forth. All of these are good and important factors to be managing.

However, you rarely hear discussions of how companies are going to the next level and minimizing the manual touchpoints from purchase approval to payment. Many businesses have invested in tools that automate specific tasks, such as digital purchase orders or optical scanning of invoices, but a deeper look at the process will reveal that there are still a lot of steps that require manual intervention, which is time-consuming and costly.

A (Not So) Simple Process

Imagine for a moment that you have a fully approved purchase requisition. The supplier is well-known and preferred by the organization, and the spend is budgeted. From this point, all the way to the physical receipt and payment of the goods or service, the entire process can have a green light, with no need for humans to stop, check, and make decisions on the way.

Nonetheless, a straightforward process like that often takes a great deal of human intervention. Supplier and/or product information may be incorrect or has not been set up properly. GL coding of the transaction may be wrong. Someone needs to email the PO to the supplier. Invoices are scanned, but the character recognition is not accurate, requiring the information to be reviewed and rekeyed. A separate workflow is required to approve payment.

Rethinking the Procurement Value Chain

Forward-looking companies are rethinking the procurement value chain and asking the right questions: Why, once the requisition is complete and fully approved, does anyone need to touch the transaction again? How can we automate and streamline such processes so that the manual touchpoints are drastically reduced or eliminated?

Today, it is commonplace to exchange data electronically. It is no longer a huge challenge to integrate ordering and invoice systems with suppliers. Even in situations where the suppliers lack technical sophistication, there are a number of third parties that can convert nonelectronic invoices to a digital format with a guaranteed high degree of accuracy. An AP clerk does not have to review a queue of scanned invoices for errors and can be free to focus on higher-value activities.

In addition, modern P2P systems are very powerful and already automate much of the process. With easy-to-configure, built-in application programming interfaces (APIs), businesses can build end-to-end, seamless source-to-pay (S2P) systems.

If such a system is properly implemented, the objective then becomes continuous improvement. If organizations want to see efficiency and improvement in their P2P process, then they need to carefully monitor for any “fail” points, where a person needs to intervene in the process and strive to eliminate these points. Often, that means integrating intelligent automation and machine learning into the process to extract even greater efficiencies and value from the P2P chain.

Less Grunt Work, More Value

The bulk of P2P should not be pushing paperwork. Greater savings and real value arise from high-performance activities such as spend analysis, strategic sourcing, contract management, and supplier performance. These are capabilities that will embolden and strengthen the business and, most importantly, increase business-line satisfaction with procurement.

Implementing such a transformation can seem daunting. For example, procurement only owns half of the process, so it requires coordination with finance. There are software considerations, which require coordination with IT to implement. Finding the right partners and solutions is another factor, as is building a business case to justify the investment. However, proven solutions exist to overcome all of these challenges, and the efficiency gains are worth it.

Learn More About Protiviti

Protiviti is a global consulting firm that delivers deep expertise, objective insights, a tailored approach, and unparalleled collaboration to help leaders confidently face the future.

Our experts deliver innovative solutions in operations, supply chain, finance, technology, and governance. We work with clients to improve processes, increase the accuracy of operations planning, reduce inventory, optimize warehouse management, decrease costs, and reduce working capital across all industries.

You can read how Protiviti delivered a P2P transformation that resulted in over $30 million in savings in our latest procurement client story.