Procure to Pay Automation – Best Practices and Benefits
Procure to pay automation has come a long way in the world of procurement. The influence of automation is increasing day by day.
Let’s begin with an analogy from television crime dramas. Fans of the genre would know that many TV’s favourite detectives solve crimes by relying on their “gut feeling”, a “hunch”, or their brilliant instincts. Although, this “a-ha” moment makes for great viewing, but we know that crimes are solved based on hard facts in real life. However, criminal cases are built piece-by-piece, backed up by exhaustive research and forensic science.
Once upon a time in procurement, a Chief Procurement Officer (CPO) may have been able to make decisions by relying on their instinct; after all, instinct is simply the product of years of distilled experience. But today, in the age of Big Data, ‘reimagining’ the procure-to-pay process means a data-driven and fact-based approach for proven business results.
Now one may argue that all this research takes time!
If only human procurement practitioners were involved, the answer would be yes, but this is the digital era. You can perform a task such as spend analysis or category market analysis in next to no time with the aid of a smart procurement solution. In other words, gathering facts before making a procurement decision doesn’t necessarily mean lengthy delays.
Procure-to-Pay Automation: Identifying Process Gaps
The key imperative behind re-assessing your P2P process is to move away from siloed business functions.
1) Streamlined user experience promotes greater adoption, ease-of-use resulting in a high-value realization
2) Embedded analytics links strategic goals to operational metrics, supporting continuous improvement
3) Tighter end-to-end integration enables fully automated processes, lower operating costs, reduction in FTEs etc.
Procure to pay automation isn’t difficult, but it does require a strategic approach. “How” and “When” to start? What are the incremental steps? are some of the most common questions. Here’s a webinar that talks about the process and benefits of P2P automation. Some focus areas that need automation are:
Purchase Requisition and Purchase Order Approvals
PR and PO approvals can be automated as per administrative policies of an organization and reduce manual intervention and scope of error.
- Undefined workflows and complex hierarchical structures can lead to delays
- Traditional time-consuming, email-based processes are far from seamless and require constant follow-ups
- Maintaining hard and soft copies add redundant steps and can be labour intensive as well
One of the most complex tasks for procurement teams is extracting invoices from emails, matching them with relevant POs, and collecting hard copies with them. By setting automated processes, invoices can be processed once matched automatically.
- Invoices that don’t match 3-way can trigger alerts and can be rectified with human intervention. While the rest can be smoothly processed. Three-way matching can help highlight discrepancies in three main documents in the purchasing process; purchase orders, order receipts, and invoices, which helps avoid duplicate payments and prepare for an audit.
Digitizing the vendor management process has multiple advantages, first being able to supervise vendors in a centralized manner saves a huge amount of back-and-forth and leaves time for strategic tasks.
- Switching to an automated solution, procurement teams can streamline vendor selection and easily track their performance on pre-established conditions
- Organizations can identify discrepancies and areas of problems facing the vendor and resolve them quickly
- Supplier information, transaction history, and past orders can easily be mapped and enable better decision making
The final step to the procure-to-pay cycle is the payment of invoices to the vendors; however, this involves the finance team, which explores the strategic aspects of payment like exploring discounting options, favourable payment terms, building supplier synergy, etc.
- One of the main mantra for the procurement and finance team is to optimize cash flow and focus on cost savings
- With the help of modern solutions, you can leverage favourable payment terms. It can benefit both vendors and purchasers from overspending and save valuable time
Recognizing Pre-requisites and First Principles for Automation Project
The first step in the automation journey starts with understanding the objectives and pre-requisites of the project. However, every organization is unique with respect to its policies, people, hierarchy, practices etc. therefore, chalking out key areas of improvement, redundant processes etc., is a good starting point. Some key areas that need to be put under the scanner are:
- The sourcing process
- Supplier information, transaction history, and past orders can easily be mapped. This will enable you to take better decisions
- Consistency in the procedure for approvals and same kinds of purchasing
Building Clean Data
Owing to the complexity of work that procurement departments deal with, access to clean data is difficult. However, clean data is a non-negotiable prerequisite; an automated process is an enabler to building clean and reliable data. Even a good governance model cannot be sufficient as capture, interpretation, and data entry in a system may vary.
Some discrepancies that arise are:
- Supplier information and tracking prices
- Maverick spending on account of inconsistent information
- Compliance issues
Opting for the Right Technology
With the advent of cloud-based solutions, there are plenty of options out there. Zycus’ P2P Suite is a powerful-yet, easy to use solution that creates a simple and intuitive shopping experience with high visibility into product and supplier details. Some points to note before making the big decision are:
- On-premise vs Cloud-based
- ROI consideration
- Implementation and User-adoption
- Future roadmap
On-boarding External Stakeholders
Getting external stakeholders like suppliers and vendors on-boarded can be quite daunting once you’ve finalized a software. Hence, the most effective way to achieve supplier support is to communicate the value proposition to them, which is
- Faster processing for orders and payments
- Beneficial payment terms
- Effective grievance resolution
- Reduced work-load
From the beginning, the promise of P2P (Procure-to-Pay) solutions was that they would automate lower value, high volume transactional and tactical procurement tasks. This would free up time to reallocate procurement resources to more strategic, high-value activities. Therefore, it is now imperative to move towards a “Touchless” P2P process, and with that mantra, organizations can achieve real-time cost savings and efficiency.
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