How to Get Real ROI with Purchase to Pay

Make sure you're not being sold smoke and mirrors for a purchase-to-pay solution.

Buying enterprise software is no easy undertaking – there’s a lot of factors to consider, multiple stakeholders to please and a lot of due diligence that must happen to ensure you can get the ROI that is being promised. Unfortunately, in the world of Purchase to Pay (P2P), most systems available today cannot truly deliver the ROI that is being touted across marketing channels and promised by sales reps because of inherent limitations in the solution.

So, how can you be sure that you are looking at real numbers when comparing procure-to-pay solutions and not some fabricated figure that is only attainable on paper?

Ask these two questions

There are two primary questions you should ask when reviewing procure-to-pay solutions and providers:

1. Is the ROI real, or is it fabricated?

 
​Often what happens in the solution seeking process is that a business case is written, either by an internal person, or a consultant, or a solution provider.  The business case includes all kinds of detail about the cost savings and efficiencies the company will achieve by implementing the solution. In the case of procure to pay, these cost savings are in things like reducing off-contract spend, negotiating better pricing, taking advantage of terms discounts, eliminating paper from the process, reducing or redeploying accounts payable (AP) processing headcount, and similar cost efficiencies. But there are real obstacles to achieving the level of savings being promised, and organizations need to choose a provider that can meet those challenges with real answers (more on overcoming these obstacles later).

2. Will the solution continue providing value in the future, or will it be a short-term win that sends you searching for a replacement system in a few short years? 

Too often we are only looking five inches in front of our face when making a technology investment decision. The organization is only looking at the current problem, not the long-term value. Little functional enhancements in procure to pay may offer some incremental value, but are not what the future of procure to pay is about. The future of procure to pay is all about deriving more value from centrally capturing and leveraging all that transactional data, all those POs and invoices, across millions of organisations. The future of procure to pay (and even today to a large extent) is about using applications sitting on top of that transactional data to create a competitive advantage. Apps like these will empower you to answer questions like: How am I doing against industry benchmarks? Are there opportunities for better leveraging spend in buying groups to get better pricing? Can I fund company growth initiatives through working capital optimization solutions?
 

Find out if the solution can process 100% of your transactions

Back to the obstacles we mention above – where do those come from and how can you overcome these challenges? Obstacles arise because of one simple factor: all the cost efficiencies in the business plan are assuming you get 100% of your purchasing and AP transactions running through the system, and most procure to pay systems cannot accomplish that level of automation.

You must choose a provider that can help you achieve:

• 100% Supplier On-Boarding: First, you have to get all of your suppliers connected to your procure-to-pay system.  If you don’t, you can’t access all available terms discounts; you can’t truly eliminate paper; you can’t achieve all of the supply chain efficiencies from the business case. Most P2P systems are only designed to connect to the sophisticated suppliers, who can send XML or EDI transactions. What about that long tail of mid-size and small suppliers, who aren’t that technologically advanced? What about those suppliers that still send paper invoices? You must have a solution for connecting them to your procure-to-pay system, and it has to be easy for them to do so.

• 100% User Adoption: Secondly, all your procurement must be processed through the procure-to-pay solution, which means the end users have to use it – not just some of the end users, or most of the end users, but truly all of your end users have to be putting 100% of their purchasing through the system. You can’t achieve that status by mandating it, and you can’t even achieve it by having a procurement system that is “user friendly.” The procure-to-pay system has to actually be designed to fit seamlessly into the way that end user is already doing their job. In other words, employees use the procurement system because it is truly the easiest way to get the stuff they need, not because it’s been mandated by the procurement department.

• 100% Spend Visibility: Lastly, all your invoices – for both direct and indirect spend – must be running through the procure-to-pay system. This is very rare in the reality of most procure-to-pay systems. Most procure-to-pay systems are only good at automating the invoices that originated from the indirect procurement solution. What about all your direct invoices? What about all your non-PO invoices, facilities invoices, invoices generated from manufacturing? If the procure-to-pay system can’t effectively handle 100% of your invoicing transactions, your ROI just got reduced tremendously, or perhaps even eliminated. The AP side of the procure-to-pay system must be a true AP transaction hub for all your invoices, regardless of type of invoice.

So, what does all of this culminate to in the end? One word: data. If the system you choose can deliver real ROI, you begin building a critical asset – a data set of all your financial data in one single location. Then, you can begin using innovative add-ons, like predictive/prescriptive analytics, robotics, artificial intelligence, etc. and see that ROI multiply.
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This blog originally appeared on Procurious.com.