PROCUREMENT OPTIMIZATION BLOG

“Where are you going?”

It’s a question we consistently ask our clients, our platform partners and ourselves as we continue to lead our clients in platform enabled procurement optimization. The answer often starts with “What do you mean?” and more often than you’d think, ends with “…I’m not sure we know yet.”

For procurement programs and platform implementations in particular, this question can dramatically shift the course of the project (in the short-term) and the entire program (in the long-term) as your vision is refined.  This question can even alter the decision of which platform to implement – and who to partner with on that implementation.

Common Theme

Answering the question “Where are you going?” is complex and important. It requires a lot of stakeholder involvement.  However, no matter where you are ultimately going, every procurement function has one thing in common: it must pay the right vendor the right amount of money at the right time.

Simple, right?  This should be obvious to anyone implementing an AP automation project but it becomes less obvious as you work your way upstream.  If you’re focused on standardizing your receiving processes, streamlining your approvals, introducing a new contract lifecycle management tool or winning great new terms with a strategic supplier… if you don’t pay the right supplier the right amount at the right time, the relationship eventually falls apart.  You can kiss your winnings goodbye.

We’ve all seen a flowchart of procurement before—the order of tasks and who performs them. Many vary, but most of them look something like this:

Regardless of whether it’s a spot buy, a strategically sourced vendor or a simple free-form requisition – every flow has at least two things in common:

• The red “Payment” box towards the end (gotta pay the right vendor the right amount at the right time)
• Multiple up-stream activities leading up to the eventual Payment

One way to think about good platform implementation and program optimization is that you want to make invoicing and payment as easy, programmatic and predictable as possible. Surprises are not a good thing when it comes to this area.  Whatever else your platform and your program do for you, they should work together to ensure we keep paying the right vendor the right amount at the right time.

How do we get it right every single time?  Enter AP.

You don’t always think about it, but there is a role in your organization whose job it is to do exactly what we’re talking about.  There’s a group that takes the down-stream effects of your procurement processes and must turn them into accurate vendor payments.  While procurement and sourcing are out winning the next deal and ensuring organizational purchasing needs are being met, the accounts payable team is working day-in, day-out to make sure your organization keeps its commitments.  Whether you are undergoing a transformation or practicing continuous improvement, this stakeholder just went from “eventually responsible” to “must be consulted” on your RACI charts.

How do we get it right every time? It all starts with getting the right people in the room.

When do we first involve AP during an engagement?

• Early
• During platform selection (if possible)
• During road-mapping
• Especially during program design

When should AP be most heavily involved?

• Informed at every major milestone
• Defining accounting structures in your platform
• Designing workflows to ensure correct accounting
• Solving for the complexities that come with invoicing compliance (process and technology)
• Selecting and designing Invoicing Channels
• Supplier Enablement
• Testing
• Change Management
• Go-Live
• Continuous improvement

What is AP’s role in continuous improvement?

• Access to well-defined escalation channels (see our previous post on the importance of Post-Implementation Support)
• Top-down support for AP priorities as the program and platform evolve
• Regular health-checks involving all other major stakeholders

Closing

Knowing where you are going is the first – and most important – step in successful platform implementation and program optimization.  Whether you are building out a global category management strategy, or just getting a toe-hold with an AP automation initiative, don’t lose sight of that common theme to all procurement successes: paying the right vendor the right amount at the right time.  Wherever you’re going, accounts payable is an indispensable ally along the way.

Ted King
Principal