The goal of a procure-to-pay software system is to enable companies to automate the process of requisitioning and...
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
paying for goods and services.
However, statistics indicate "pretty low levels of implementation of actual transactional-level automation," said Amy Fong, purchase-to-pay practice leader at The Hackett Group Inc., a Miami-based consultancy.
For instance, although many companies have implemented e-invoicing systems, the average company only has about 20% of its invoices coming in electronically.
"It's not that people haven't been spending money [in this space] -- it's that they haven't necessarily made it all the way to the goal post in successfully getting the value out of their purchases," Fong said. "This is something that CFOs need to think about."
Before investing in a P2P system, CFOs should carefully consider their technology options and overall strategy, she said.
"Do we want a combination of best of breed that lets us pick and choose individual solutions based on what our requirements are?" she said. "Or, are we looking for one platform that goes across source-to-pay?"
Chet Taff, managing director of operations and service line lead at DayBlink Consulting, based in McLean, Va., said one CFO might want to ensure that all the transactions are electronic, including payables, while another might look for a system that simplifies the supplier adoption process.
Chet Taffmanaging director of operations and service line lead, DayBlink Consulting
"You have to be clear about what your No. 1 priority is and not look at [P2P] software as a panacea to do everything," Taff said.
Some vendors offer single, integrated platforms that cover the P2P process end-to-end, while systems from niche providers may only handle a particular step in the process, although those vendors are considered the best at what they do, Fong said.
"Unless you've already purchased something, I would say stay open to both," she said. "It's just [a matter of] understanding the infrastructure strategy that you have for the process."
Who will use the procure-to-pay software?
Before making a final decision, Fong also recommended getting user input from employees involved in the requisitioning, purchasing and accounts payable processes as well as from suppliers.
"This is a type of software that touches your internal and your supplier customers. Most of these solutions now offer some kind of supplier portal, so you may have suppliers and employees also using it," she said. "You might have to think about it a little differently than other pieces of finance software that are purely back office."
The P2P process involves cross-functional interaction throughout the company, Fong said. That means if a company has a team working on analytics and finance, that team needs to partner with the sourcing analytics team.
"You should understand their needs and test out the capabilities to meet their needs with each vendor that you're considering," Fong said. "And if you are able to do any kind of predictive analytics, like looking at forward-looking pricing that can help you model costs in advance, sourcing is the [team] to partner with. But there may be other people in the finance side, as well as IT, [who] can help with that."
CFOs who think about their business processes from the perspectives of their internal and external customers -- the people who are going to be affected by using procure-to-pay software -- will be the most successful, said Henry Ijams, vice president of product management at AvidXchange Inc., a provider of automated bill payment and invoice services in Charlotte, N.C.
"Think about who your customers are," said Ijams, who is also managing director of PayStream Advisors, a Charlotte-based research firm. "Are they your department managers, suppliers, central purchasing? You have to support all of them is what we've learned from the most innovative companies."
In payments, that means optimizing the strategy to fit the value of the supplier and the purchasing organization, he said.
Taff concurred with this strategy. In fact, he said companies that select and implement P2P without the input of their internal customers will most likely fail.
"The companies that do it great, they'll get the admins across their company -- typically, the ones who are doing the ordering -- to go out and tell them what's important, as opposed to them telling the admins what they're going to get," he said.
In that example, the procurement department will also seek the input of other adjacent processes, including accounts payable, according to Taff.
"They'll find out what the clerks do" he said. "The accounts payable functions aren't always aligned with procurement. And their goals aren't always aligned with what procurement's goals are."
Sketching out a P2P system
Before implementing procure-to-pay software, the CFO should ensure that the business process is solidified, said Amit Patel, managing director of the enterprise solutions practice at Huron Consulting Group Inc. in Chicago.
"Then put on paper what pieces of that are going to be standard processes supported by the software, what pieces will be automated and what pieces will remain manual until they stabilize on the system," Patel said. "Modern-day software should allow you to take what you do on paper and transition it to a digital organization."
Most of Huron's clients also want to have better internal controls, mainly for segregation of duties and ensuring that the right individuals are procuring and the right individuals are paying, he said. Next-gen procure-to-pay software should also let CFOs address that issue.
Patel said another key element Huron recommends as part of the implementation cycle is for companies to consider either the source of the data or the kind of data they're going to put in the system.
"You want to make sure it's clean," he said. "If it's not clean, we recommend you manually clean it up or get some tools to clean it."
For Nagi Prabhu, chief product officer at Icertis, a provider of contract management software based in Bellevue, Wash., a procure-to-pay system is only as good as the contracting system that is associated with it.
"If the contract solution is not robust enough, the procure-to-pay solution just becomes a process organizer and doesn't really provide a lot of benefits," he said.
Therefore, CFOs should look for procure-to-pay software that can help them manage risks because every procure-to-pay workflow has a risk associated with it, according to Prabhu.
For example, a contracting system underneath a procure-to-pay system could help a company eliminate the risk that a vendor will be noncompliant, he said.
"We have an integration with D&B and Thomson Reuters where we constantly check, as part of the contracting and post-contracting risk mitigation process [for a customer], that the vendors are compliant," Prabhu said. "We also check that they don't have any legal issues where [our customer] should stop interacting with certain vendors, or maybe find a way to eliminate the risks [they] may incur because of the vendors' noncompliance."
Finally, Fong noted that procure-to-pay software has evolved over the years and now includes many advanced features and functions. Because of that, she advised CFOs to look carefully at those enhanced features.
"You should dig a couple layers deep, talk to other customers, talk to people like Hackett or other analysts or advisors," she said. "Understand what is really valid and what is vaporware."
Learn more about procure-to-pay trends
Read an e-procurement buyer's guide
Get finance and procurement to work together