Tapping into the unexplored
Every day we rely on helpers like post-its, to do-lists and calendar reminders to keep our tasks front of mind, and to flag matters that would otherwise be forgotten or ignored. They lead us to different information points, new contacts and dates we weren’t aware of, tapping us into other worlds we were oblivious to.
Visibility is incredibly helpful when working closely with other different teams and departments, but also equally unhelpful if there is a lack of it. It can lead to a number of obstacles, including poor communication and disjointed actions, which in the long-term, can then result in serious problems for a business.
The consequences of poor visibility affect businesses the most in procurement and finance departments, and are always costly. More often than not this is due to inefficient Purchase to Pay (P2P) processes that don’t effectively link the three core departments involved: procurement, finance and IT.
Quite simply, everyday operations in procurement and finance are going to be prone to error if work is mainly paper-based, with no system in place to link up the different departments to ensure full visibility of real-time information.
Poor compliance with P2P guidelines could then result in unnecessary spending and increased supply chain risk - in many cases, a business won’t even be aware. If finance is unable to see the contracts drawn up by the procurement team, details are hidden and opportunities will certainly be missed. Issues like these limit the strategic benefits of financial forecasting and planning considerably.
With teams unaware of who is buying what within a company, there is no way of controlling and monitoring purchases, and authorisation, in line with company policy and wider industry regulation.
Finance departments are painfully aware of the consequences of poor P2P visibility, from unbalanced cash-flows, late payments and resulting penalties, to increased risk of fraud within the organisation. PricewaterhouseCoopers’ Global Economic Crime Survey 2014 stated that 56% of financial fraud cases were committed by someone on the inside of an organisation. Along with the obvious financial loss, it can damage staff morale and business reputation.
The recently opened investigation surrounding FIFA and its internal finance processes is one of the most prominent examples of inadequate checks and controls within an organisation, with the worst possible results. With suspicious activity linked to money laundering in more than 50 cases, it is a considerable number of suspected irregularities - even for an organisation as large as FIFA.
So how does a company enhance visibility of P2P processes to address problems before they cause any damage?
The best approach is harnessing the power of internal communication and start breaking down departmental siloes. Improving visibility into invoice and payment data is among the top three priorities for finance departments according to Ardent Partners, so there is a clear desire to streamline communication and enhance overall visibility.
Often, it is the differences in perspective between the IT, procurement and finance departments that lead to disjointed communication and actions during the payment process.
For instance, finance understands little about the responsibilities of the procurement department. Access to contracts and purchase information is the missing entrance into the formerly unexplored world of procurement.
An automated P2P system can act as the entry gate for all three departments.
With access to the various touch points, there is ample opportunity for collaboration, and encouraging communication across departments will reduce errors in the P2P process considerably. If the purchase order, invoice and the confirmation of receipt all match up, payments go through easily and efficiently. To guarantee clear visibility of this three-way match, all data from involved parties needs to be consistent and compatible, and herein lies the challenge to this otherwise straightforward P2P best practice.
Ideally, a P2P automation system combines access to supplier contracts, purchase orders, receipts and invoice processing in one platform. That way, data is made visible, and internal communication is fruitful. From a security and compliance perspective, automated P2P improves traceability of information and facilitates reporting and audits, relieving businesses of the duty completely.
It’s really that simple: making payment processes visible and accessible helps to eliminate error and avoid the tedious task of hunting down data. Not only that, it is an opportunity to get to know the complete P2P process, and start learning what to look for when problems occur, and other new things.
This is an opportunity for department leaders to tap into the unexplored, and discover a world of value existing just beneath the visible surface, to improve all areas of the business.