The Tug-of-War in Source to Pay

Failure to make the right decisions, do the right tasks (and do the tasks right) can deteriorate your competitiveness, especially when it feels like Procurement, Finance, and Treasury are playing a nonstop game of tug-of-war.

Every workday we want to make a positive contribution to our team. In the business world, like in any other ecosystem where teams and individuals work together, there is a need for methods and guidance. We want everyone pulling in the same direction, taking into consideration the inputs of others to create the best results for the common team.

For your source-to-pay functions, it comes down to three important areas with three equally important tasks:

1. Procurement needs to ensure a healthy relationship with their suppliers and ensure that you get the best deal possible.

2. Finance, and within that unit in particular the Accounts Payable (AP) function, ensures that supplier payments and issues are managed and that historical financial information for the whole company is accurately reported to company stakeholders.

3. Treasury is accountable for managing cash, including optimising the company’s liquidity, making sure that the bills are paid when they’re due, and assisting in a company’s long-term financial viability.

Get Procurement, Finance, and Treasury on the same page

It is often the case that Procurement, Finance and Treasury are not fully aligned around the same targets. Everybody is for sure doing what they deem is best individually, and typically they do a stellar job. In the grand scheme of things, that doesn’t always lead to results that are optimal for the organisation at large.

Procurement is for sure capable of finding the right suppliers, agreeing on favourable terms, and landing the best deals. But that can come at a higher administrative burden (given accounts payable is not always aware of the details of the deal) that at times could offset the benefits of a deal.

Accounts Payable within the Finance department, in turn, is the team that ensures the invoice handling process run smoothly so that approvals and exceptions are managed swiftly. But they might not pay that much attention to the best to pay an invoice. When AP knows why Procurement does what they do, it becomes easier to pick an exception out of a line-up and focus on those that increase business value first.

Treasury, in turn, is all about cash management and extracting value from using cash. Then again, they may not consider the relationship with suppliers, nor the supplier risks. They may be unaware of the opportunity to save money with early payment discounts even though at first it may seem suboptimal from a working capital or liquidity position. Afterall, “a penny saved is a penny earned."

Create a Team

The great part is, no one is doing a “bad job.” In fact, things work quite well, and everyone is pulling their own weight. However, with a little bit of coordination and focus, the full function could reach new levels of efficiency.

With such capable players, how can we create a winning tug-of-war team, one that can make 1+1+1 become bigger than 3? The answer is a common set of tools and rules between the different parties:

1. First, it is important that everyone has access to the same information to make their own decisions to ensure that your system for Procurement and Accounts Payable handling integrates and speaks fluently with the ERP

2. Second, an actionable analytics tool that provides end-to-end visibility and insights for all stakeholders adds tremendous value

3. Third, a cloud system that can scale with the business and that is able to continuously evolve with leading-edge innovation 

Then comes buy-in from all stakeholders. A lack of buy-in from senior executives makes it nearly impossible to get the project off the ground at all. A lack of buy-in from those employees on the front line can lead to a tedious and difficult adoption process. And without buy-in from your middle managers, you won’t have any support in implementing best change management practices.

It is important to establish a forum in which targets can be set and issues can be resolved: The establishment of an empowered cross-unit functional steering team is needed.

It is striking how different teams within the organisation even use different terminology for the same thing, or how a savings target is interpreted differently depending if you work in Treasury or in Procurement. By sitting down together, you can address these differences together and take necessary action to stay ahead of the competition.

The goal: Ensure that Procurement, AP and, Treasury have a common objective--secure the best deal from the supplier together, ensure the best use of cash together, and manage supplier risk. Together.

Ready to learn more?

For more information about how you can ensure the best use of cash without creating unnecessary pain for your teams or for your suppliers, check out the white paper 5 Ways to Optimise Working Capital.

Let’s keep in touch! We’d love to show you how Basware can help you simplify your operations and spend smarter.