10 Reasons for Procurement to Work with Payments

September 20, 2013 Jason Busch
This subscription research piece was originally published on spendmatters.com. The first two pieces can be found here and here.

JASON BUSCH - July 23, 2013

top10Sometime shortly after the phrase “P2P” was born, we managed to collectively forget what the second “P” meant. A friendly reminder: it stands for “pay.” Rather than spanning the length of a transaction from an initial order to payment to a vendor, P2P became known (while companies wrote RFPs for solutions and as vendors marketed tools) as the combination of eProcurement and e-invoicing. This duo, while extremely valuable, doesn’t exactly impact payment all that much (if at all).

But payment matters much more than most folks we talk to in procurement think. By taking control of payments, for example, we can do an end-run around the administration hassles – and supplier headaches – that poorly run accounts payable (A/P) functions create. And this is just one reason to consider getting more involved in payment strategy and execution.

We can think of at least ten reasons that should factor into a business case for procurement to seize control and initiative around payments:

1) Overall control and oversight of the end-to-end transaction with suppliers, which allows procurement to confront an antiquated funds transfer system while also serving to enrich third-parties at the expense of supplier financial health.

2) Building greater invoice/transaction insight because payment mechanisms to bridge the visibility gap in getting line-level detail to supplier invoices without having to request information from suppliers.

3) The quantifiable effect on efficiency-driven metrics -- it’s really about truly addressing payments head-on across a broader supply base, which requires tackling the e-invoicing question as well. Providers such as Taulia know this already, and it is one of the reasons they’ve been successful at building discounting adoption within their customer base faster than legacy models in the market.

4) Reducing supplier risk.

5) Capturing savings and reducing contract/compliance leakage by closing the transaction, invoice and payment loop.

6) Avoiding being taken advantage of by vendors that mask the total cost of P2P fees and implementations by not clarifying and disclosing the amount suppliers will be charged over the life of the SaaS/network contract.

7) Facilitate greater visibility into supplier engagement models and supplier network fees, focusing specifically on discounts that networks can enable suppliers to take without explicit buyer-driven permissions.

8) Investigate and potentially benefit from the new securitization/capitalization opportunities that new payment/discount treatments can provide.

9) Forces addressing the “payment clock” question as early as possible to capitalize on opportunities.

10) Creates powerful information exhaust around the optimal means of engaging with suppliers on a total cost basis.

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