Optimising financial processes

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Digitisation Disappointment in Purchase to Pay (P2P)

The process for Sourcing and Buying “Stuff” (goods and services) in a business, whether Direct (input to the supply chain of the product or service delivered to customers) or Indirect (required for the running of the business).

Source to Pay (S2P), Purchase to Pay (P2P) rightly gets focused attention as and end to end value stream, or process, that can benefit from transformation and digitization. This attention is focused with the hope of achieving a particular “aspiration state” for the S2P and P2P process.

What is that aspiration?

We consistently hear 6 high level themes;

  • Reduce maverick spend
    • “improve PO compliance”
  • Reduce cycle time of process
    • “make buying simple”
  • Reduce cost of goods and services
    • “improve contract compliance and vendor oversight”
  • Reduce effort and cost of process operation
    • “eliminate unnecessary (manual) tasks”
  • Optimize working capital
    • “agree and execute optimal payment terms”
  • Manage risk
    • “maintain visibility over supply, master data, cash, conflicts of interest etc”

There is an abundance of technologies claiming to be the ‘silver bullet’ to helping achieve these aspirations.

The reality is more complex and nuanced; there are human and organization issues and compromises and trade-offs that are rarely explained in the RFP and selection process.

In fact, 80% of companies claim disappointment with the returns on their P2P technology investments. That’s a pretty shocking statistic, but maybe understandable if you have been down this road before yourself!

This was the foundation of our ‘Digitisation Disappointment in P2P – A Peek Behind the Curtain!’ webcast. We were joined by guest speaker, Steve Standring, a former senior executive in Shared Services, P2P, AP and latterly in the software industry that serves this same market.  

So, what did we explore, and what did we learn? We covered a lot of ground!

Not least, where do these initiatives fail to deliver on the expectations we set for them?

We talked through the differing objectives of an end-to-end integrated S2P strategy, and S2C, B2R, I2P strategies and more.

The reasons for under achievement are thought provoking and concerning . . .

  • We need a more productive mindset for transformation. Success is far from assured. We need to engage widely amongst stakeholders and participants with curiosity & questioning, rather than absolute confidence. If this surprises you, check out the research of Dunning and Kruger.
  • “What does GOOD look like?”. This is a far harder question to answer than we give it credit for. End to end processes are nuanced. There is no single KPI that captures success. It is more of a balanced scorecard of outcomes we need to balance. Invest in this effort. It pays off.
  • Communication, Collaboration, Understanding. This value stream incorporates complex multi-dimensional interrelationships. Easy to misunderstand, assume and accept received wisdom. Don’t allow or facilitate  “groupthink”.
  • Master Data. Need we say more? 83% of those surveyed identify that aster data does not get the attention it deserves with regard to integrity and governance due to lack of ownership and alignment. Digitization depends on data.
  • Alignment. Easy to say, much harder to achieve. The functional silos of Sourcing, Supply Chain, Procurement, Accounts Payable and of course, the BUYER, create plenty of scope for lack of common understanding and alignment. One key stakeholder group is Suppliers, and how do we best win THEIR support and engagement to participate in our chosen strategy. We need to win hearts and minds on common aspirations and desired outcomes. Otherwise . . .
  • Benefits Case. This is the tangible expression of the level of progress son the points above. If the benefits case does not drive value for all stakeholders, you have failed before you start . . . .
  • Pareto Principle, 80/20 Rule. How do we identify and execute the tactical initiatives that deliver significant value at a fraction of the timescale, cost and effort of our multi year strategic initiatives? These help drive rapid incremental value, sustain stakeholder commitment, inform strategy through practical experience, help the business embrace change and become more agile whilst increasing the potential of the overall strategy.

There are no “Silver Bullets”, “Quick Fixes” or Easy Hacks  to success. Yes, sometimes the suppliers exaggerate their claims, their business value and time to value, but it is our responsibility to identify what is desirable and achievable for our business.

We offered a practical checklist of 15 key actions that can help you succeed where many others have failed.

It is worth a read.

If you want to see a recording of the event, you can see it here – it is 50 minutes of dedicated thought, so not to be undertaken lightly . . . .

To round off, we asked in very few words… What, in your view and experience, is the single biggest challenge in P2P digitization, transformation and process change? The collective response has been summarized in the image below. This in itself tells an important story . . . .