AP and procurement: two halves of a whole
Does AP have anything to do with procurement? We’ve talked before about the great tag-team benefits accounts payable and treasury can have when they work together, but can that sort of de-siloing work for AP and procurement?
On paper, it’s easy to see why they’ve traditionally been kept separate from one another. Procurement is entirely focused on buying the right quality product at the right price for the organization, while accounts payable is focussed on taking care of invoices.
Part of procurement’s job is negotiating a deal for the product so that the purchase is cost-effective and makes sense for the company. Another part of that job is making sure the company is using reliable and healthy suppliers. In order to do its job,
Accounts payable must pay on-time or early to strategize the company’s cash on hand and get the discounts procurement negotiated. Accounts payable needs to process invoices as fast as the company’s strategy allows for.
So what’s wrong with the status quo of the siloed system? Procurement makes the purchases, and accounts payable pays for them. That sounds like it works just fine. But if you’ve worked in either department for any amount of time, you know what kind of problems a siloed system leads to: everything is on paper and there’s no easy way to update or make sure information is accurate. This leads to mismatched orders, mismatched invoices, and lost opportunities for saving money — as well as distrust between the departments.
It could be better
According to the Hackett Group’s 2019 CPO Agenda, only 54 percent of procurement organizations plan to modernize application platforms in the coming year, and only 32 percent think that digital transformation has a high or very high impact on the achievement of enterprise objectives.
And in the AP world, according to Ardent Partners’ State of ePayables, only 38 percent of AP departments have executive support for total AP transformation. Of course, we’re very keen on automation here at Tradeshift, as it makes superstars out of AP professionals and helps make traditionally reactive departments into proactive strategists.
But ultimately, when you go digital, you can bring together the two halves and make one seamless whole. Although only 32 percent of procurement teams think that digital transformation has a high impact now, 60 percent think it will do so within the next two or three years. And 80 percent of AP organizations think that data and intelligence are an important or critical piece of the accounts payable job function.
What the pros are seeing is that digitization and change are inevitable in the B2B world. We agree, but we believe that you shouldn’t be waiting any longer than you have to; for every department involved in financial aspects of their company, the time is now.
When you make digital the default and implement a platform allowing you to buy and pay on one system, AP and procurement can come together in a far more natural way than when they’re kept separate from one another.
All of a sudden, accounts payable has a wealth of data and insight into all the past payments and invoices that your company has ever paid. And that means AP can now collaborate in real-time with procurement. With a digital system, POs, payments, approvals, and contracts should never get lost in the shuffle. And with a wealth of data to share with procurement, both departments gain greater fiscal intelligence, which leads to more strategic planning, and greater cohesion between departments.
All discounts are negotiated in one place and all parties have full visibility. If procurement negotiates an early payment discount, accounts payable has full insight into the deal and can make sure the discounts are captured with early payment. And all your suppliers have full visibility into the payment process, too, which builds supplier trust and better relationships with your ecosystem of partners.
Now those two focuses can align and work together to build the best of both worlds: a collaborative team effort that can make a huge impact on your organization’s fiscal health.
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