What AP Can Learn From Procurement
As promised, we have our ‘counterpoint’ to last week’s blog. This week it’s your turn AP! There is so much you can learn from your peers in procurement. I cannot wait to dive in!
Procurement is often seen as the “spend gatekeeper” within organizations. They seem to love to make you jump through seemingly endless hoops to get anything from printer paper to complicated multi-million dollar services agreements, all the while chiding departments who dare to spend outside of procurement’s systems and processes. (You rouges! You know who you are.)
It can be maddening, we get it.
But please take a moment to appreciate that those systems and those processes are there for a reason. Thinking holistically about the entire source-to-pay (key word: pay) process, removing silos and automating and securing parts of the chain can lead to a whole lot of saved time and effort, yes, but more importantly they have one very key end result: risk mitigation.
So in the spirit of removing the silos and working together to create something greater than the two parts, here’s what we’ve learned from Procurement, AP.
Myriad reasons over the past 18 months have led to procurement taking a long, hard look at how they approach supplier relationships with a focus to improve communication, work through 360-degee feedback programs, develop diverse suppliers, make sure everyone gets paid on time, etc. And to be clear: all of this effort is about risk reduction. Procurement is on the hook to not only get the goods and services people need to where they need to be at the right time, they also need to make sure that suppliers are paid securely and on time.
Procurement is ensuring that suppliers are taken care of (which makes sure their/your businesses are taken care of). In support, AP should ask how and what they can do to take more action to improve supplier relationships. In other words, it’s well past the time for AP to see more in a supplier than just an invoice with some net terms. The supplier is helping your organization to do their work- and AP and Procurement make that happen- together.
“When you strategically source and you want to onboard that supplier, this is the part where you’re going to want to have information about that supplier that is not just data about them getting paid,” said Pierre Mitchell, Managing Director and Chief Research Officer at Spend Matters. “This is where a lot of friction occurs because you have this kind of segregation of duties between purchasing and payables. You do that so that there’s no fraud. … AP may have historically done some of that kind of risk and compliance work, but that is really becoming more of a broader procurement responsibility to basically own the supplier relationship and all the data in it, even though some of that data will be delegated to groups like AP.”
In other words: the responsibility is shared. And in sharing, stronger relationships can be built.
Let’s talk about category management and supplier management overall, across the entire vendor lifecycle. Whereas procurement has, historically, been very targeted in its approach to impacting specific source-to-pay processes one at a time, AP has been more lifecycle-driven in its approach to invoicing from end-to-end. But, as we have clearly seen over the past 18 months, the center does not hold.* Now, both functions need to work together to create systems that are successful (for the suppliers AND the organization) and seamless from start to finish.
“Not all goods and services should be managed the same,” Mitchell said. “Some areas are going to need higher controls than others, because they’re higher spend or they’re really sensitive. Other areas, [procurement] may not focus as much, for instance office supplies. For the processes for how to manage those, AP can take the lead and really tailor.”
Dividing, it seems, also means conquering… together. Finding the right cut lines for ownership and process, so you have controls in place, while still leveraging the strengths of each team will create success from the top to the tail on everything your organization spends.
Learn more about how PaymentWorks makes both AP and Procurement professionals win by watching our “How it Works” video here.
*This is my second W.B. Yeats “The Second Coming” shout out in a blog. See if you can find the first one. Email firstname.lastname@example.org when you do, and we’ll send you some swag.