Accounts Payable and Procurement – It’s Time to Collaborate!

January 17, 2013

Nowadays, both Accounts Payable and Procurement functions are looking to take more strategic approaches to cost management and have started investing significant resources in to shifting business processes. The last couple of years have seen a healthy upturn in leveraging technology to inch closer to best in class processes.

However, this approach has been relatively siloed in that procurement and A/P have been taking separate approaches, including using mostly different specialist technologies for their designated areas of responsibility, for example invoicing and transactional procurement through separate solutions.

While these individual efforts by each department may be providing some immediate results in cost containment and increased efficiencies, there is an entirely other level of opportunity for cost savings and inter-enterprise business process efficiency that can and should be obtained through true collaboration between Accounts Payable and Procurement.

Increased synergy is indeed becoming more and more of a focus point for organizations, particularly recently through the development of shared services functions and CFOs taking a lead in overseeing procurement functions. This shift in process and reporting structure is visibly facilitating better collaboration between the two functions.

Why stop at sharing a process and communicating more but continue to use separate technologies to perform tasks? True collaboration means not only increased communication and working together towards aligned goals, which is a great start in the right direction, but collaboration in terms of sharing data and clear visibility on both sides which can only be achieved by working through one shared technology which supports a seamless course from sourcing all the way through to payment.

Today’s business networks bridge the disconnect between finance and procurement. Through their collaborative nature they not only encourage buyer/supplier collaboration, but the depth of intelligence through these platforms enables a seamless flow throughout the entire source to pay process, from supplier identification all the way through to invoice payment. In fact, according to McKinsey on Business Technology “Networked enterprises were 50% more likely than their peers to have increased sales, higher profit margins, gain market share, and be a market leader.”

Leveraging a business network as one combined platform for both functions means adding intelligence throughout the business process, extending this intelligence across trading partners, resulting in more on-contract purchases, more invoice automation, and importantly, more accurate transaction processing. According to Aberdeen Group, the use of business networks brings 17% more spend under management and results in 20% more contract-compliant spend.

By uniting procurement and A/P transactions, first time invoice match rates can reach percentages in the high 90’s and companies are seeing significant increased savings through the ability to take advantage of early pay discounts and eliminating manual invoice processing. These savings would not have been possible by just automating procurement and finance tasks in silos.

The question has been raised if Accounts Payable and Procurement are friend or foe. They are certainly shifting towards friend but they still reside separately, as individual entities rather than a unit. They are making good individual efforts but to really become best in class, the two functions must collaborate, share one seamless process, leveraging one shared technology, then and only then, will organizations be able to gain a handle on the millions of dollars they are leaving on the table by working separately.

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