Editor’s Note: Ardent Partners is proud to announce the publication of a new report on the trends and value drivers for AP and procurement, sponsored by Corcentric, and available here (registration required). Today’s article will share some thoughts on a theme similar to that report.
Change is one of the few constants in the modern business world, including new technologies, new competitors, and even new ways of doing things. This environment of ever-present upheaval includes internal operations departments, like procurement and accounts payable (AP), that have historically functioned as “back-office” teams designed to perform a specific set of tasks that allow the enterprise to meet its obligations in a timely fashion.
In recent years, however, there have been a number of trends causing the procurement function to adapt and grow in order to drive further enterprise value. Each of these trends also has a corresponding effect on AP, which in many organizations either works closely with procurement or reports to procurement leadership. Three of these trends are agile sourcing, a technology focus, and enhanced collaboration across functional lines.
Agile Sourcing
The word “agility” is used often in the business world to describe organizations that must be responsive to the changing environment. In procurement, agile sourcing refers to the ability to react quickly to shifting stakeholder needs, fluctuations in supplier capabilities, and even unstable market conditions. Essentially, a procurement team that uses agile sourcing techniques can quickly find alternative sources for a given commodity, part, or service in the event of a supply disruption or new business requirement.
What this means for AP is that procurement will be more responsive to change and more nimble in how they react to internal and external stimuli. This can also translate into the ability to quickly find documentation to approve invoices or the ability to quickly answer any questions AP may have. Fostering agility in procurement, in essence, makes the team a better functional partner in the short and long term.
A Focus on Technology
In order to meet the goals of creating an agile procurement team, many organizations turn to an increased technology profile. According to Ardent Partners’ most recent procurement survey, in fact, 40% of enterprises leverage improved technology—through either a new purchase or upgrading an existing system—to adapt to changing procurement needs.
In addition to helping procurement meet its own goals, improving technology also tends to offer greater visibility into procurement’s day-to-day operations. For AP, which occupies the final stage in the procure-to-pay (P2P) process, visibility into procurement’s systems can be a game-changer. AP may need to go back to a supplier contract in order to verify the amount on an invoice, for example, and technology that allows that, such as a contract management solution, can streamline that process tremendously.
Collaboration Across Functional Lines
Ardent Partners has written extensively about collaboration trends in AP and procurement, and has lauded the change on both sides of the P2P equation throughout its decade-long research on supply management. The fact remains that greater collaboration internally and externally remains one of the most persistent trends across the entire enterprise; procurement’s increased partnerships with internal and external stakeholders is no exception.
In terms of AP, 62% of respondents to Ardent’s most recent procurement survey noted that procurement has either “good” or “strong” levels of collaboration with AP. This partnership between the two teams allows for both to achieve better results than either one could alone. AP’s information on supplier invoices may inform contract negotiations down the line, for example, and procurement’s contract management solution may also possibly make the difference between capturing or losing an early payment discount based on contract terms.
Final Thoughts
There are a huge number of internal and external factors that constantly buffet the enterprise, forcing many organizations to keep a wary eye on the business environment. Procurement’s trends toward agility, improved technology, and greater collaboration with stakeholders can help the enterprise at large weather the storms of the current business climate, as well as help their partners in AP achieve greater things than either team could manage alone.
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