The payment process of moving raw materials required to produce your product or perform your service along the supply chain should flow smoothly. You order the materials you need, and pay an amount that seems fair for everyone involved. Unfortunately, the reality is not always that simple. That is why Procure-to-Pay best practices and strategies have taken on such importance for businesses of all sizes and across industries.
Chances are you recognize the need for an effective Procure-to-Pay (P2P) process. Without it, you risk being at the mercy of a supplier that has more sophisticated means in place to negotiate and leverage its position. Additional drawbacks include resource waste and a lack of transparency that could hurt your business in the long-term.
To avoid these drawbacks, it makes sense to take a closer look at your P2P process. More specifically, here are five best practices in managing the procure to pay process that can help your business maximize efficiency and more successfully manage its supply chain.
Procure-to-Pay Best Practices for Your Business
1) Standardize the Process
First, standardization is key. Without it, you risk treating every contract negotiation as a unique event, losing consistency in the process. This standardization strategy needs to include four individual components:
- A clear definition of duties of all individuals involved in the process.
- Standardized training that emphasizes how invoices and requests are processed.
- Policies that outline why deviation from the process is unacceptable, along with potential consequences for doing so.
- Simplifying processes wherever possible to reduce complexity and ambiguity.
The goal of standardization in P2P should be to create a process that relies not on individual people, but set policies and guidelines. It makes sense to build a mechanism into your policies that encourages revisions depending on changing environments and requirements. However, even that improvement process needs to be driven strategically, not based on a hunch.
2) Encourage Collaboration
An optimized Procure to Pay process needs to include and encourage collaboration across multiple levels. To start, all departments and individuals involved (from purchasing to accounting) need to be on the same page about roles and responsibilities in addition to the standards mentioned above. Only close collaboration between each direct stakeholder can accomplish a successful process that saves your business time and money.
But the need for collaboration doesn’t end there. C-suite buy-in is essential, especially when moving to a new P2P process. The more demonstrative the buy-in from leadership is, the easier implementation of a new system and new set of policies will become.
Finally, don’t underestimate the importance of collaboration as it relates to suppliers. Ultimately, the goal of any procurement manager is to not only conduct efficient transactions but to build long-lasting relationships that are mutually beneficial for both sides of the transaction. Effective P2P, therefore, has to include a transparency and communication component that allows the supplier limited and regulated input into the process.
3) Outline Measurable Goals
What exactly do you hope to accomplish from your procurement process? Answers to this question tend to range from increased accountability to better efficiency and cost savings along with speed of delivery. Identifying and prioritizing your goals helps you better manage and improve your P2P capabilities.
All goals must be measurable. KPIs from time to finished contract to cost per unit could all play into the equation. But just as measurability matters, so does the data collection and analysis process. Make sure to find software that helps you track your most important KPIs, increasing transparency and data-backed decision making.
4) Maximize Visibility and Control
How visible is your P2P process at the moment? If you cannot answer that question, you might want to take a second look. Ideally, every bit of the system should be easily reconcilable with your procurement agents’ daily work and operations. The more visible the process, the more easily you can make adjustments.
Fortunately, digital technology can help you improve your spend visibility and control. Oracle outlines several case studies that have embraced these capabilities, from SITA to Land O’Lakes. Spend analytics and process centralization can help to ensure a transparent, highly visible process that even introduces some self-service opportunities within set and limited parameters.
5) Embrace Automation
Finally, it’s difficult to overstate the importance of automation in the procure to pay process. Electronic invoices and supplier portals can streamline the system, minimizing manual errors. Purchase orders and invoices can be filed automatically and electronically. All documents get routed directly to the relevant department, while workflows move the process forward.
What sounds like science fiction to some smaller businesses is already a reality for larger enterprises. Find the right procurement software, and these types of automated workflows are integrated more easily than you think. Implemented the right way, automation of your procure to pay process can help you accomplish all of the above best practices, from analyzing your procurement data to encouraging collaboration across the supply chain.
You may also be interested in: Hidden Cost Savings in Your Procure to Pay Cycle
Of course, automation is not a best practice you can implement on your own. Instead, you need P2P software that helps you build the workflows needed to streamline the process. That’s where ProcurePort comes in. Our spend management software can play a significant part in helping you not only automate but improve your procure to pay cycle. Contact us to learn more about ProcurePort’s Spend Management Software, and how your company can benefit from P2P automation.