Historically, AP and procurement teams have operated in business silos; each responsible for certain parts of the procure-to-pay (P2P) process, but rarely cooperating as true teammates. Perhaps it’s because they come from two different worlds (one financial, one more operational), frequently leverage different technologies and solutions, often have different priorities for the organization, measure success differently, and report to different bosses that they don’t collaborate more than they do. But the fact is that they should – they co-manage a single process and can both benefit from greater collaboration.
Let’s recall the basic function of each within the organization: At their core, procurement buys goods and services for the organization, and then AP pays for them. It would seem that the two departments were made for each other – the literal right and left hands of the same organization. Unfortunately, it’s not always the case. But if they could learn to play ball with each other, they’d realize greater cost savings and bring greater value to their organization.
After procurement has negotiated and inked contracts with suppliers, it then has to manage the contracts, ensure that staff buys against the contracts, and ensure that their suppliers deliver the promised value. But procurements efforts aren’t optimized if it can’t successfully hand off the process to AP, which then has to ensure the company pays its bills on time or early. If the two departments are using different systems that don’t “talk” to each other– if “procure” and “pay” are not rolled up under the same process or system, or aren’t compatible – collaboration can be difficult. But, if procurement and AP are truly aligned under the P2P process, then purchase orders and invoices should flow freely and integrate seamlessly from procurement to AP, and things shouldn’t get lost in the shuffle. Commonality and compatibility of systems leads to greater communication, visibility, and intelligence, which leads to greater collaboration, and ultimately to better results.
For example, compatible systems between procurement and finance, mated with clearly understood processes, can lead to faster invoice processing times, faster payment, and early payment discounts. At scale, early payment discounts can drive significant savings for enterprises, and allow procurement and finance to demonstrate the value of greater collaboration – everyone wins.
Despite shared interests, there is often confusion as to who reports to whom, and how success is measured. While many CPOs report to the CFO, particularly in North American enterprises, a majority of CPOs do not report into finance. Those CPOs who do report to a CFO do not always share common business values and performance metrics. As a corollary, accounts payable and procurement often measure success differently – one focusing on cost savings, demand management, and spend under management; the other focusing on faster processing times, achieving early payment discounts, and effectively balancing budgets. As a result, the value that procurement brings to the enterprise is often not recognized by finance, but ought to be.
The AP-Procurement relationship is a must have for enterprises – now and in the coming years, as more companies strive to drive greater cost savings, improve processes, greater compliance, and more innovation. By linking systems and processes, collaborating, and automating the entire P2P process, the two internal stakeholders with the most at stake can realize greater, strategic value for the enterprise. Greater cost savings, more efficient processes, greater compliance, and more innovation are not just good for procurement, they’re good for AP – whether their boss is the CPO or the CFO.
Although it may seem like AP and procurement are two corporate bodies with two separate hearts, they share the same body, pump the same blood, and feed the same brain, which will live or die depending on how well the work together. In the new economy, surviving is no longer good enough. So instead of being at odds with each other, AP and procurement must collaborate to thrive in the new economy.
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