Part 3/3 | The Three Princes of Purchase to Pay (P2P)

April 22, 2014 Matthew Stammers
prince-of-p2p-finance
 

Finance and Accounts Payable – faster, cheaper better!

Most of the world’s largest businesses now have shared services centres, and nearly all of those have finance and administration at their heart. And there’s no denying it, the mantra for shared services is “faster, cheaper, better”. In other words, you want a process like accounts payable done as quickly and most efficiently as possible, for the least cost, while constantly improving service levels. 

However, in a shared services operation, suppliers oftentimes are calling in, asking for invoice and payment status and details, burning staff’s time with simple changes and inquiries. If you’re not careful, suppliers can start to be seen as a burden, rather than as an intrinsic part of the business’ strategy, success and overall supply chain strength.

In a small business, this is a pain. In a Global 2000 business, where there might be 20,000 plus suppliers, this is a major logistical headache!  

So how do Innovative Payables leaders respond to this? 

At present, there are two options: 

  1. Throw more people at the problem
  2. Look for ways to automate the operation

Option 1 isn’t ideal in a modern-day shared service organisation because it just incurs additional costs through recruiting, salaries and training. In reality, adding more people can often complicate a process, compromising the overall efficiency.     

Option 2 feels attractive, as it will get rid of paper and reduce headcount. While this approach adds a little more to the bottom line, it’s not the real needle-mover that businesses need to affect overall business performance.

These days, forward-thinking Shared Service, Finance and Accounts Payable leaders are starting to change their shared service operation strategy. The mantra of faster, cheaper, better has taken them to a point, but it can only go so far. 

How can you change the focus to feed into the company’s business objectives and strategy? 

Imagine if suppliers felt more connected to the business, were more responsive, were more empowered and were actually happy that you paid them less.

Companies need to change the relationship between the buying organisation and suppliers from one of negotiation, supply and fixed payment, to one where enabling technology can automate and optimise the trading relationships, adding transparency, trust and commitment to the supply chain.

Wait, what’s that about paying suppliers less?

With today’s technologies, you can invest in your supply chain to offer suppliers early payment in exchange for a small discount. With Dynamic Discounting, suppliers are no longer faced with predatory financing options and have the option to leverage the platform they already use for eInvoicing and self-services to accelerate approved invoices for competitive rates, that dynamically adjust depending on how early they choose to be paid. Your investment in your supply chain gives your suppliers the opportunity to invest in their respective supply chains, funding optimisation, growth and expansion.

Together, the business is stronger.

In short, Finance owns the Accounts Payable process, Procurement owns the supplier relationships and Treasury owns the cash that actually makes a dynamic discounting initiative possible. 

So like Procurement and Treasury, the only way to change the relationship between a buying organisation and its suppliers is to bring about a new reality, one where the three princes step out of their fiefdoms and work together for the betterment of the kingdom!

Get to know the other princes of P2P: 
Part 1: Procurement
Part 2: Treasury

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