It’s mid-season and time to reintroduce the “MMQ” concept: during football season in the US, sports reporters, commentators, and fans wake up on Monday morning and start calling, posting, emailing, and voicing their opinions on all aspects of the games played the day before in an exercise that is called playing “Monday Morning Quarterback.” It is a great sports pastime and a huge cottage industry. The debates or conversations are often informative and interesting and they can sometimes get heated; but the best part is that anyone with an opinion can chime in.
In a similar vein, on many Mondays during football season, we will present a “Monday Morning Query” where we pose a question to our readership that has been gnawing at us or is something that we feel is worthy of reflection. Perhaps the debates or conversations will get heated; we hope they are informative and interesting. Most of all, if YOU have an opinion, please chime in.
MMQ: Should Procurement Own Accounts Payable?
The question is not one of convenience, necessarily, but one of process or value.
The Context
Whatever challenges a Chief Procurement Officer and the entire procurement department face within the enterprise, the sledding is that much tougher for accounts payable (“AP”).
First, there is no Chief Payables Officer – to take up the charge, begin a transformation effort, or drive Best-in-Class performance – nor will there ever be.
Second, accounts payable is the red-headed, step-child (i.e. not a favorite or high-profile group) of the finance department.
I have had novice procurement departments preen to me about their superiority over AP. “You may think we’re bad, but that is nothing compared to our accounts payable department. Chuckle, chuckle.” OK, you win – but what game do you think you are playing?
Yes, sourcing may be sexier and far more interesting than payables (truth be told, we find it more interesting to cover); but the accounts payable process is part of the procure-to-pay or (source-to-settle) process. And, it is an important part of the process at that (which is why we cover it).
Procurement departments in the middle of their own overhaul may not be ready or equipped to tackle AP; but CPOs, who have their houses largely in order, may be looking for a new challenge to tackle….. and, AP may fit the bill.
Is anyone in your enterprise looking at AP? Have you looked at AP recently? You may see the opportunity. You may find that the accounts payable department is worth owning.
I agree with Andrew on this – Procurement should own A/P from a more end-to-end process (S2P) standpoint to render it more effective than simply efficient.
Much debate on this topic. I have managed AP with sourcing for 15 years – my preference is to have AP within sourcing.
Pro’s — driving efficiency in procure-to-pay cycle, collaborating with sourcing on policy compliance, linking expense reports and associated policy with travel strategy, centralizing system operations and strategy for eProcurement and payables systems.
Con’s — a distraction from strategy, accounting controls, reconciliations, balancing, etc. are more core to an accounting function than sourcing.
I feel that there is a clear requirement for separation of duties between Procurement and A/P. Controls are compromised when A/P is included in Procurement, because the overall ownership puts payment disbursement into the hands of the negotiators. This sets the stage for ease of fraud and corruption in the process. Being proactive with controls can eliminate fraud, while audit is a tool to catch and firefight it. P2P can be a single process with multiple responsibility owners…it does not have to reside in a single silo.
Outsourcing aspects of procurement and AP also can work. Regardless of same org, or not, P2P process requires coordination and cooperation. Put it together in 1994/95 at Aetna Inc…and never looked back except for the positives achieved!
In this day and age, there need not be a hard and fast answer to this. What is important is the process, its integration with the various aspects and the measurement of performance and compliance. Whether is the same org or not is then a moot point.
All –
Some really great comments – thank you!
One comment on the above – As with most of these MM-Queries, I am not necessarily advocating a position, really just hoping to foster a discussion.
Somewhat coincidentally, I just finished a call with a CPO in the financial services industry that owned AP when he started at his company but has since given it up due to potential conflict of interest reasons.