- Manage Your P2P Process through Procurement and Finance Cross-Collaboration
Manage Your P2P Process through Procurement and Finance Cross-Collaboration
According to Gartner’s report, “Make APIA Part of Procure-to-Pay to Maximise Procurement Efficiencies,” e-procurement and accounts payable invoice automation (APIA) vendors are changing the way they do business. They’re expanding their offerings to not only support their specialist services, but also support end-to-end P2P processes. Read more to learn how application leaders for both finance and procurement should take advantage of this change.
Traditionally, AP and Procurement have seen themselves as two very separate entities. Both have separate processes and different ways of looking at managing spend. This led to the need for different solutions for procurement and accounts payable invoice automation (APIA) even though there’s a clear trend showing the functions as being quite intertwined. Even now, there are many organisations who separate their procurement and APIA processes due to the historical differences in their duties. And for organisations where procurement does not directly report to Finance, the separation is even greater. But, according to Gartner, this separation is “no longer necessary since this is addressed by approval workflows and full digital audit trails available for inspection departments.”
Aligning Goals Between Finance APIA and Procurement Processes
As we progress more and more into the fourth industrial revolution, packed to the brim with innovation, technology, and intelligent applications, AP’s and Procurement’s strategic goals become more aligned. Automation, digitisation, and the changing state of global commerce increase the pressure on Finance and requires them to reevaluate their roles. Finance becomes, then, more than its traditional function of treasury and regulations. It expands into strategy including integrating technology, harvesting data, and actionable insights to guide the business forward. Similarly, procurement has progressed beyond their reactive and passive roles and have become strategic advisors for their organisations by contributing to value-add priorities such as increasing cost savings, improving supplier relationships, integrating automated technologies, and gaining spend visibility.
But as the roles of procurement and finance merge closer and closer, one thing becomes apparent—no one actually “owns” the full procure-to-pay (P2P) process. Because of this lack of ownership, application leaders need to urge finance users to think beyond the traditional roles of finance and encourage procurement to think bigger than their “outside in” perspective. Both roles need to understand how each strengthens the other and both can work together to take ownership.
Challenges in Procurement and Finance Collaboration
But this sort of collaborative thinking isn’t met without its challenges. For many organisations, there’s a sort of “We’ve always done it this way!” approach to things, and this sort of outdated thinking creates resistance. For years, Finance has played the role of the sole financial masters within their organisations. They may feel uncomfortable with the idea of breaking down silo walls that for so long seemed to be foundational to financial operations and security.
Additionally, when there’s no standard process, communication and therefore collaboration becomes even more difficult. Beyond mere communication issues caused by the need to protect departmental information, Finance and Procurement departments are often chasing separate goals without considering that many of their goals actually align.
Lastly, there are plenty of misconceptions that surround the concept of collaboration. Collaboration, to many, may lead to questions regarding the elimination of jobs due to improved efficiency and questions alluding to the actual need for digital transformation. Find out more about the implementation and challenges of P2P.
Procurement and Finance Collaboration
Both Finance and Procurement are facing a time of immense change. According to the EIU report “What’s now and next for procurement and finance,” over the next two years, three global macrotrends are predicted to greatly affect these roles—Automation, digitisation, and the changes in global trade. Here’s how respondents believe the trends will impact:
1. Respondents to this report believe that the automation of various finance and procurement processes will have the biggest impact on their organisation’s day-to-day activities. When asked which automation trend would have the greatest impact over the next 2 years, respondents selected "automation of payments."
2. Automation of procurement processes, supply-chain management, and automation across other business departments were deemed the second most important automation trend.
3. Finally, the most likely trend we will see as a result of a more automated workplace is a reduced need for staff and less function-specific roles. This will call for collaboration across the Finance and Procurement roles.
So, what’s the best way to unite Finance and Procurement and have them take equal responsibility of the end-to-end P2P ownership? Make sure that regardless of what solution you choose, it offers a flexible B2B document network with high integration capabilities.
Ensure that you have a clear understanding of what your potential vendors offer when they say “P2P.” Make sure they’ll allow you to maximise the use of advanced tools such as automated matching and dynamic discounting to reduce process bottlenecks and improve invoice cycle times.
Gartner recommends that Finance think outside their confines and work alongside procurement to align on their pain points and goals for improvement. Additionally, teams should “use a spend analysis approach to identify all source systems for POs and evaluate whether they should be kept as PO source or if requisitioning and PO creation, should be moved to the P2P solution.” Finally, Gartner recommends only adopting a singular APIA solution when there’s no definitive reason for a more general P2P solution.
During adoption, be sure to have a digital transformation plan in place. Application leaders should realise that digital transformation isn’t just adopting new tech, it’s a development of cross-departmental collaboration, typically defined by 3 Ps:
1. Platforms: This is the technology piece – in this case, your P2P solution.
2. Processes: The operational aspects of how you do business and how that will evolve as a result of new, digital workflows.
3. People: This is the change management effort that addresses how Finance and Procurement will come together to work alongside technology and each other
Ultimately, Gartner expresses that regardless of the P2P solution a business decides on, the vendor should at least be able to integrate the necessary PO sources and match invoices against POs coming from external or additional systems. And when a vendor talks about “open networks” and “APIs,” don’t just take their word at face value. Use information provide by references, case studies, and by openly asking the vendor themselves.
Best practices in aligning Procurement and Finance
Here are a few ways your organisation can improve the alignment between Procurement and Finance functions while also increasing collaboration between the two departments:
Determine, evaluate, criticise, and understand your organisation’s current capabilities and needs.
Set clear, measurable goals for both teams and track their progression over time.
Develop an ongoing process to continuously review your collaborative efforts and the results of them.
Bring your C-suite into the conversation and demonstrate to them the importance of a centralised data management process to enhance cross-departmental collaboration
Work together with other departments to select, implement, and adopt a cloud-based solution to improve communication and collaboration, from any device or any location
Easy integrations, open commerce network, and automated invoice-to-PO matching
The Basware Network is the largest open commerce network in the world. Being an open network means a couple things.
We have a massive scale of 1.2 million organisations connected, meaning over 1.2 million buyers and sellers connect using our network.
We have over 220 interoperability partners available right there on our network. In other words, your supplier doesn’t have to be directly connected to The Basware Network, just connected to one of our interoperability partners’ networks.
We’re many-to-many. Using just one connection point, suppliers can transact and perform business with all their buyers on the network. Better business interactions, simplified.
The Basware Network is the only true any-to-any e-Procurement Network player—other providers build EDI point-to-point connections and only offer portals.
The Basware Network is also FREE for all of your suppliers, regardless of whether you buy from them every day, or just occasionally. And regardless if they send you paper invoices or if they’re fully integrated into EDI or XML invoicing. So, as a buyer, you can easily get all your suppliers on the network, and as a supplier, it’s free and easy to jump on the network bandwagon and continue with business as usual.
Just as Gartner mentioned, your P2P should also be able to easily integrate with all your ERPs, intelligent applications, and ecosystem plugins and become the central hub of financial data between the systems. At Basware, we have experience with over 250 different ERPs. This ease of integration minimises the need for additional configurations since everything needed for integration lives in the solution itself.
Final recommendations from Gartner include ensuring your Finance and Procurement roles maximise the use of automated invoice-to-PO matching and that your business can ultimately improve overall cash management through reduced invoice cycle times. Basware customer Heineken Nederland, for example, has been able to achieve automated matching rates of up to 97% on electronic invoices. Now, 75% of their order-related paper invoices and 93% of their order-related electronic invoices are now matched automatically using 3-way matching.
You might also like…
Read how automation, digitisation, and the changing dynamics of global trade are influencing Finance and Procurement in the free EIU report here.
Learn what changes are expected to impact Finance and Procurement in the next years in this blog.
Ready to learn more?
When it comes to APIA strength, Basware was ranked as a Leader. According to the Gartner Critical Capabilities for Procure to Pay Suites Report 2019, Basware came in 1st amongst 13 competing vendors for AP automation.
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