Many moons ago when starting out my career in Accounts Payable automation, I was told a universal truth.
Accounts Payable is focused on documents, while Procurement focuses on spend.
However, as both my own personal knowledge and the world of AP automation have advanced, I am starting to challenge this piece of universal wisdom; especially when talking about Procure to Pay.
Let’s step back to AP Automation 101. The primary focus is getting as many touchless invoices as possible; with the three main challenges being entering data, fixing exceptions, and handling queries. If an invoice enters the organisation and doesn’t need any AP interaction from these three areas, then it would be considered touchless—a key KPI for a modern AP department.
Given the technology at an AP department’s disposal today, we tend to focus on the suppliers sending in the largest volume of invoices. A good example would be e-invoicing, where targeting one supplier that does 10,000 invoices a year saves at a minimum 10,000 pieces of paper that have to be typed in. An important distinction to make is that paperless does not equal touchless, though; an electronic invoice may still need to have an exception resolved or a supplier query dealt with. Conversely, to our spend-based friends in Procurement, £100m in spend with one supplier is a large sum and definitely worthy of being under management; regardless of how many invoices they send.
Leap forward to today and both Accounts Payable and Procurement have adopted technology which has resulted in streamlined teams where labour arbitrage is no longer the primary objective of automation. Both departments are recognising that they belong to a connected process and as such are merging together to form Procure to Pay.
It’s at this point, or slightly before, that we see the spark of Accounts Payable starting to add “spend thinking” into their process. AP look to their colleagues in Procurement for cleaner POs to aid matching and start to initiate discussions around contract and services-based spend (e.g. that 500+ line Telco invoice which takes forever to assign accounting information or the utility bill for the HQ which never really fell under No-PO-No-Pay). In fact, No-PO-No-Pay is a perfect example of a great Procurement-only initiative which caused increased work for AP; so many invoices have been incorrectly constrained to a PO like a square peg in a round hole.
Technology available today, such as matching invoices against contracts, time card flipping, and service entry sheets, means both parties can come together for a spend-based discussion; and once you have one invoice automated, you have a blueprint for all other invoices in that spend category to be automated.
So this is where the paradigm shift of Procure to Pay happens; when looking at the entire process of how a company buys and pays for goods & services, it can start to have serious discussions about what can be done so all parties benefit. And the results can be game changing, with automated contract matching, as an example, saving up to 14% of spend or the clean data from e-invoicing saving up to 5% of spend when passed to spend analysis and sourcing.
To finish, I am reminded of the first time I encountered this way of thinking with a quote from the head of global P2P: “Son, the operational savings you have shown me for AP is a rounding error; the automated compliance and clean data it gives me for spend analysis moves the needle.”
