Know the duress presented by the 4 procure-to-pay steps
Article29.05.2012 Comments (0)
Sorting out procure to pay is a journey. This is often an over-used word, but it sticks here because it’s so fitting. There are four steps in this journey: centralisation, consolidation, standardisation, and automation.
The general assumption is that the first two steps are the hard ones and the latter two steps are ‘easy’. The terms that are used for the first two include ‘organisational transformation’ and ‘re-engineering’. If you have done these two, it is generally considered that you have ‘done’ shared services (though I would beg to differ). So all those that have been through steps one and two believe that this is the hard bit, and that the next two steps are a breeze.
What adds to this pre-conception is that steps three and four are commonly referred to as ‘continuous improvement’.
This label suggests these steps are lower-investment and a walk in the park compared to steps one and two.
This is wrong.
Steps three and four are harder than the first two. The reason being is that the process of centralisation and consolidation are undisputedly significant, but success dependencies lie exclusively within the confines of the company, ie within your circle of influence and maybe even control.
When you get to standardising a process, and then automate it, the success of your project lies with how well your suppliers play ball.
This is complicated for many reasons:
1/ Most high volume procure to pay organisations have 1,000 to 100,000 suppliers. To get all these separate organisations to comply with your required changes like quoting a PO in order to get paid, or sending an invoice electronically, takes a huge communications effort.
2/ To successfully standardise the purchase to pay process means finance and procurement have to become bed-fellows. Without this alignment, the end-to-end standardisation will falter. You can actually progress quite well with steps one and two without this alignment, but collaboration for steps three and four is critical.
3/ Getting all your invoices into one location is relatively straight forward. But getting all those invoices to match first time is less so. Often companies start with 50% exceptions. This 50% can equal one million transactions. To fix all these invoices takes focused, precise attention, often beginning with an investigation.
When companies realise that it’s the standardisation and automation steps that are harder than the centralisation and consolidation, there will be a much needed shift in how a company plans, budgets and resources for these changes.