Why does spend visibility matter the most in the beginning of the procurement journey?
Procurement Category Directors and Chief Procurement Officers often start by analyzing the company spend. They want to understand who the suppliers are, how much is spent with each, and in what region, country, and location.
It starts with spend visibility. Quite often spend data is hard to gather into one single location. That journey usually involves finance teams who have such knowledge because they hold past invoicing data. Ultimately, what you pay, when you pay, and how you pay your suppliers matters the most.
Procure-to-pay (P2P) solutions bring the biggest value if they follow the same natural approach. You can manage only what you can measure, right?
P2P is a journey. Procurement and Finance processes gain maturity over time, learning from not only from the vertical they operate in, but also from the organization and its people. From experience, it doesn’t make much sense to create complex procurement processes at Headquarters, then spend years to roll them out to the various entities. You end up with foggy visibility and compliance on “paper”, but such programs usually fail. This leads to frustration for both the CFO and CPO because of large upfront investments that don't bring the expected return on investment (ROI). So, we suggest a “reversed” approach to your P2P implementation.
This reversed approach means to manage the spend starting with the visibility that is provided on the invoice. When that visibility is reached at least partially, you can set the targets of savings and supplier consolidation and streamline processes over time. Every new invoice that comes in is an opportunity for the company to better understand how employees work. The number of “uncompliant” invoices (spend made with non-approved suppliers) reveals the healthiness of the company’s procurement organization.
Is it possible to realize visibility at the early stages of a P2P implementation?
Let’s be honest, every company is not perfect and most larger organizations have legacy ERP's or procurement systems that they are familiar with and are a fit for their specific vertical. While the change goes on, the P2P solution should provide as much visibility as procurement needs during its lifecycle.
Importing the purchase requisitions and purchase orders (PO's) from the ERP systems or legacy procurement systems while starting to manage some of the spend in the P2P solution is the only way to create the best procurement visibility from day one. Of course, overseeing the invoice data that is not linked to any PO or spend plan and creating KPI’s for those will bring even more value to managing the spend. When all those actions can be done seamlessly with the least amount of “clicks” in one, single P2P solution, you’ll undeniably gain the most out of your P2P system’s value.
How a reversed approach to your P2P strategy supports your CSR targets
Most recently, companies try to embrace strong corporate social responsibility (CSR) targets, including not only legal and environmental targets but also philanthropic and economic targets. In today’s economy, what matters most is the ability to buy locally, find means to support local economies, and provide a decent life to local communities – especially in these times of inflation.
Starting with spend visibility to manage suppliers and maximize value from them, will increase transparency and compliance in your everyday practice. Understanding what suppliers share your CSR goals, creates stronger buyer-supplier relationships. This approach ultimately leads to process efficiencies and people empowerment: trust and be trusted.
A P2P implementation that begins with AP as the foundation, will support long-term ROI, lower the total cost of ownership, and drive CPOs and CFOs towards real savings. This solid foundation enables both procurement and AP functions to work towards the same goal of growth and sound business practices.
More on P2P Maturity
For more on Basware’s approach to a smooth P2P journey, check out these whitepapers where we cover practical steps on how to succeed in implementing an electronic procurement (e-procurement) solution, Maturing Procurement on Your P2P Journey – Part 1 and how to develop your procurement strategy further, Maturing Procurement on Your P2P Journey – Part 2.