Consider: Finance & Procurement Align
Posted: 2 April 2018 | Source: Consider Solutions
The governance of End-to-End Processes and the related discipline of Global Process Ownership (GPO) have become hot topics for management over recent years. GPOs are popping up all over the business, with a strong centre of gravity in the Finance and Shared Services functions. Order to Cash (revenue cycle), Source to Pay (expense cycle), Record to Report (general accounting cycle), Hire to Retire (employee/HR cycle) are a few of the popular ones. There are even “Master Data” GPOs, although it is debatable whether master data is, in itself, a process or whether it naturally belongs with the activities that create, nurture and govern it.
Purchase-to-pay (P2P), and its younger sibling Source-to-Pay (S2P), is now widely recognised as an essential process in the organizations’ finance and procurement capability. Businesses are driving efficiency gains, better contract compliance, increased discount capture, capital and operational cost savings, increased accuracy, better exception handling and enhanced auditability and transparency. We had an interesting discussion with the former P2P GPO from BP who shared that some of the benefits of optimisation were not immediately obvious. You can read a summary of what I learned here.
P2P is well established in organizations’ finance processes, typically introduced at the point of a historic ERP implementation or as a by-product of greater process focus under Sarbanes-Oxley. In many organisations however, P2P, is really an ‘Invoice to Pay’ focussed activity in Finance or Shared Services. A broader understanding of the “P” of Purchasing and moving out towards the ‘S’ of Sourcing and management of suppliers leads to a broader view of all the drivers and outcomes related to the organization’s expense cycle.
End to end performance of P2P/S2P is rarely measured. This is typically because finance and procurement leaders are targeting different objectives. Sourcing & Procurement are typically focused on identifying strategic suppliers, developing win/win contractual frameworks, managing supplier risk and driving effective relationships. Finance and Shared Services have typically focussed on the efficiency and control around the invoice to payment process. Clearly these two lenses are complementary and directly affect one another. A common set of objectives, with one version of the truth, is a powerful basis for Global Process Ownership that drives strategic value for the organisation, as some businesses are starting to demonstrate.
When finance, shared services, sourcing and procurement leaders understand each other’s respective lenses and performance measures, they can drive long term value and process efficiency together.
Currently however, only 54% of business say their procurement and finance leaders work together, with many saying this partnership could be much closer and more effective.
Of course, this is starting to change.
With digital transformation becoming a key strategy to better serve the customer and integrate end to end processes, the CIO is also joining the discussion with the CFO and CPO. This team must address the following key elements:
- Alignment on priority outcomes for P2P / S2P
- Design of the integrated end-to-end, Global Process under the stewardship of an executive Global Process Owner
- Renewed focus on Simplification & Standardization in process, policy and execution
- Deployment of Smart Analytics to drive insight into progress, performance, issues, exceptions and priority improvement areas
- Effectiveness of Intelligent automation, optimising system of record, and eliminating the burden of repetitive, error prone, mundane tasks such as managing contracts, tracking spend, and assessing supplier performance.
How are you progressing on this journey?
As always, I’m interested to hear your views. Please share your comments