Procure to pay systems – critical for CPOs to deliver value?

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With businesses constantly on the lookout for innovative ways to cut costs, procure to pay, or P2P, systems are often touted as possible cost saving solutions.  There are, however, those who believe their implementation is a waste of money. We brought together a wide selection of professionals from various sectors and industries to debate this issue.

Industry expert, Mike Crowley, argued that the cost of most P2P solutions did not outweigh the benefits, whereas Phil Joss, Senior Manager at 4C Associates, debated that P2P systems are critical for delivering value. The session took place at The Paramount, Centre Point, London.

The case for: The Benefits of P2P Systems

The benefits of a full P2P system are vast. Efficiently implemented P2P systems deliver a wide range of cashable and non-cashable benefits and should form an integral part of any successful business. Amongst these, and the most useful for procurement, is access to accurate and up-to-date spend data. This ensures greater control of company spending by enabling the enforcement of contract compliance.

Additional benefits for users of P2P systems, include user searchable e-catalogues and enabling the tracking of goods and the removal of the need to sign certain invoices. Moreover, for Finance, there are substantial headcount benefits associated with automating the processing of invoices.

“To get the most out of a P2P system it is essential that the steps between Requisition and PO are carried out effectively.”

In our experience the reason many P2P projects fail is due to ineffective implementation.  4C have identified four pillars of successfully introducing a P2P system. Firstly the solution has to be user friendly and easier than picking up the phone. Secondly, the system must be built around quality content, delivered by Procurement. There must also be a policy in place to provide support for users and finally there is no “one size fits all” approach. Not every requisition should go through Procurement and a range of complimentary, controlled channels, e.g. purchase cards should be available.

Before an implementation strategy is laid out, the case for change needs to be made internally. A robust Benefits Management method must be employed to ensure benefits are quantified and made cashable where possible. This entails understanding the current operation, baselining key metrics, such as Requisition and PO cycle time, and forecasting improvements.

The cultural challenges associated with implementing any IT system are often underestimated. A well planned benefits case will allow finance teams to proactively reduce budgets to ensure budget holders are incentivised to deliver against clear financial targets.

“It’s difficult to argue against P2P systems, once implemented they offer many benefits.”

It is difficult to make a case against P2P systems as a successful implementation invariably delivers increased efficiency. However, organisations must guard against complacency when introducing P2P systems; the cultural change and impact across the business should never be underestimated. The deployment of a robust Benefits Management method should be part of the overall change management strategy to ensure adoption of new ways of working.
The case against: The Alternatives to P2P Systems

On paper, procure to pay makes sense and can deliver a range of benefits. A properly implemented system reduces cost, drives compliance and generates engagement, however, in reality implementation is problematic and expensive.  A full P2P implementation rarely delivers benefits in excess of its high costs. Procurement will often find itself in a situation where logic gives way to corporate culture and much time and energy will be used trying to win over the organisation.

“If you have a great Procurement team you won’t need P2P and if you have a mediocre team then you wouldn’t want them trying to implement it.”

Numerous elements need to be taken into consideration before deciding to force a system on an entire organisation. These include inflexible company culture, the difficulties of linking P2P and finance, getting supply chain on board, and general indifference. Furthermore there are many effective alternatives.“There are numerous credible alternatives to forcing a P2P system on an entire organisation.”Before deciding to implement a full P2P system, businesses should consider less disruptive strategies. It is often much easier and more efficient to transform a company through smaller, incremental changes. Procurement should look at ensuring financial support, securing governance over the commitment or ordering processes, enforcing the need for procurement references for payment requests and making purchase orders mandatory, before even considering implementing a blanket change.“P2P can add value but the difficulty lies in bringing the company culture round to seeing it.”P2P is not an answer in itself and implementing a full-scale process in one move will often prove more problematic than beneficial. The best way to increase efficiency is to work through the identifiable issues before attempting a general restructure. Logically P2P should work, however, organisations are rarely built on logic and each has a unique way of working.

 

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Q&A

The floor questioned Joss’s description of a P2P system. Many felt that what he had described did not accurately reflect what was currently available on the market.  Joss responded that although current systems are not as user friendly as they could be, providers are looking to produce more functional interfaces. Oracle was mentioned as one company working in the domain and looking to Amazon for inspiration.

One participant felt the issue was not the technology but simply that organisations require a system with multiple levels of control and that there is a limit to how user friendly it can be. The point was well received and several attendees were of the opinion that comparisons with Amazon were counter-productive.

When asked where he had gone wrong when implementing a P2P system in the past, Crowley explained that the cultural aspects of the corporation and the scale of the change required should have been given greater consideration. As it turned out, in the case described, manual governance was actually easier to implement and procurement instigated a process which required board approval for certain levels of spending. Crowley found the best practice was to first get the governance in order and then implement P2P as a natural extension.

Crowley made the point that it was possible to waste large amounts of money trying to implement new procedures internally. An attendee with experience trying to introduce a new system, stated his belief that the core issue was not the system itself but rather the lack of effort put into “cultural preparation”.  This was echoed by several participants who agreed this element was often underestimated.

The floor also discussed best practice to achieve corporate acceptance and one attendee explained how his organisation successfully got everyone on board by putting in place a support team. The key was making sure they were always available to help anyone struggling with the system.

Results

Interestingly, in a room of mainly procurement professionals, the majority of attendees voted against “P2P Systems, Critical to Deliver Value?”.

 

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