Alternative Finances

Where AP And Procurement (Should) Collide

A new report points to a problem within many enterprises, where accounts-payable and procurement teams, while often having similar goals, generally don’t work with one another. In today’s business environment, where efficiency and cost reductions are chief drivers for success, confusion often exists as to where internal alliances should rest. So what’s a company to do? PYMNTs.com takes a look.

Relationships between accounts-payable (AP) and procurement departments are of increased importance, as companies rely on the ability to work together to drive greater cost savings, improve processes, greater compliance, and more innovation. However, despite their shared interests, there is often confusion as to who reports to whom, and how success is measured, a new report suggests.

In its recently published annual report, “ePayables 2014: The Quest,” Ardent Partners notes that, while many chief procurement officers (CPOs) report to the chief financial officer (CFO), particularly in North American enterprises, a majority of CPOs do not report into finance. And among those who do, they do not always share common business values and performance metrics.

Moreover, accounts payable and procurement often measure success differently, with one focusing on cost savings, demand management, and spend under management, and the other focusing on faster processing times, achieving early payment discounts, and effectively balancing budgets, according to the report. “As a result, the value that procurement brings to the enterprise is often not recognized by finance, but ought to be,” Ardent noted in its report summary.

In its research, Ardent staff ’s spoke with over 190 accounts payable, finance, and other professionals across 25 different industries to produce a comprehensive overview of the state of accounts payable. The report also examines ePayables technology and systems and a manes for accounts payable teams to benchmark themselves against the best in class and improve their overall performance.

Now and in the coming years, the AP-Procurement relationship is particularly necessary to drive enterprise efficiency. By linking systems and processes, collaborating, and automating the entire procure-to-pay (P2P) process, the two stakeholders within a business with the most at stake can realize greater strategic value for the enterprise, Ardent contends.

Greater cost savings, more efficient processes, greater compliance and more innovation are not just good for procurement, they’re good for AP staff, regardless of whether their boss is the CPO or the CFO, the report notes.

“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,” Ardent notes. “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.”

Historically, AP and procurement teams have operated independently, with each responsible for certain parts of the procure-to-pay (P2P) process. “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,” Ardent notes. “But the fact is that they should – they co-manage a single process and can both benefit from greater collaboration.”

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,” Ardent notes in its report summary. “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.”

As PYMNTS.com reported recently, Ardent Partners found in earlier report “CPO Rising 2014: Convergence” that, over the past few years, chief procurement officers and their staffs have taken on increased supply risk-management responsibilities. Typical procurement departments, however, still use relatively unsophisticated practices to support the role change, and many still are focused only on taking fundamental risk-management steps.

Combine the findings of the two reports, and it suggests businesses are not paying enough attention to the importance of their procurement departments, which not only can play significant roles helping accounts payable to cost costs and improve efficiency, but also in the risk associated with supply management.

 

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