Procurement must ‘own’ P2P for corporate payment success

24 September 2014

The purchase-to-pay process must be acknowledged by an organisation as being a “mega process” which is owned by the procurement department.

Larry Beard, director of EIPSC and a former CPO at multiple blue chip organisations, said businesses only have a few other “mega processes” – such as innovation to cash or record to report, and they should be recognised as such, with a focus on efficiency and effectiveness.

He was speaking during an SM webinar highlighting five steps to corporate billing success, held in association with AirPlus International, earlier today.

“Very few departments want to own processes but if procurement owns the P2P process they have the opportunity for efficiency and to drive benefit for the business and the suppliers,” he said. “If the finance department drives the process it just becomes about transactional performance. If it’s procurement driven its benefits driven.”

Key performance indicators will assist in this process, he added, in particular implementing a system in which there is first time invoice match. “When an invoice first comes in it either goes through a two, three or four-way match and if it can be matched the first time, as far as payment is concerned you have pretty efficient process.”

Beard also said companies should fully utilise purchasing and travel and expenses cards by having a separate policy for each, which procurement, rather than HR, should have ownership of.

“Policies need to be clear, simple and understood. If you want people to work to them they need to be understood and simple. Anything over three pages and I would lose the will to read and understand it,” he added.

Fellow speaker Jeremy Kirsten, procurement category manager and supply chain systems manager at Carter Holt Harvey Pulp & Paper, said purchasing a service or intangible aspect of procurement has not been given the attention that is required, particularly in the P2P process.

“Services spend has not be subject to the same level of management robustness as materials for example and there are many reasons for this. There has been this belief that users – or somebody in your business - know best how to obtain these services.

"The responsibility is delegated down to that level to manage the commercial relationship. Quite rightly a big spotlight is now being shone on this.”

He added that procurement professionals needed to define the activity and the service fully in order to manage payments efficiently, and that it was vital for procurement functions to be honest with their suppliers if there was an issue with payments. “In the bigger relational aspect to this, being honest with your suppliers [about any payment problems] will allow you to have a much more value-added relationship,” he said.

A replay of the webinar, Five tips for corporate payments success, is available to watch online here

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