How To Take Advantage Of The Surprising Benefits That Come From Aligning Procurement and Accounts Payable
Procurement and Accounts Payable should be a match made in heaven. One brings goods and services into your company and the other pays for them. They’re two halves of the same Procure-To-Pay (P2P) process. Working together just makes sense.
In many organizations, however, Procurement and AP aren’t getting along so well. Historically, they’ve operated in business silos with the company treating them as two discrete departments. One is financial, the other more operational. The two departments often have different priorities, measures of success, and technology solutions. Topping this off, they often report to bosses who also don’t spend much time collaborating.
But what would happen if they did start working together?
Individually, Procurement and AP both work to save money and improve company efficiency. They’re two parts of the same process, and if they keep working independently they miss out on valuable collaborative opportunities.
Benefits From Linking AP and Procurement
Procurement and Accounts Payable technically do work as separate functions. The two departments have different tasks and requirements. Aligning them to work together does not change that. It does, however, open up several significant benefits for your organization.
Increased Negotiating Power
Negotiating with suppliers is one of the most overlooked ways to save money. When the AP department is running smoothly and powered by automation software, that gives you the tools you need to take advantage of early-pay discounts. Negotiating for these discounts isn’t something AP can do alone, though, at least not effectively. You’ll save a lot more money if Procurement works with AP to figure out what type of payment terms are reasonable and then negotiate for them with suppliers.
More Efficient Sourcing
Sourcing is typically a procurement task, but it’s one that AP can help with. The AP department knows more about the budget that is available to procurement and can offer in-depth insights regarding the availability of funds. They can also offer input about what it’s like to work with each supplier from their end. By working together, AP and Procurement can help ensure your company stays within budget and only works with the most reliable suppliers.
Improve Supplier Relationships
Your suppliers have to work with both your Procurement and AP department. In their eyes, though, it’s usually viewed as the same thing – just one company that places orders and then pays for them. If your departments are working at cross-purposes or fail to communicate, it can lead to mix-ups in your relationship with suppliers. On the other hand, when AP and Procurement work together you can work with suppliers much more efficiently.
Better Spend Analytics
Accurate, accessible data is a cornerstone of making long-range financial decisions. Both Accounts Payable and Procurement produce a large quantity of data related to company finances. When the people responsible for placing orders, approving orders, and making payments all work together this data become even more powerful. It provides an overview of the entire procure-to-pay process. The more closely these two departments work together, the more you’ll be able to optimize cash flow and free up company resources.
Minimize Risks and Mistakes
With Accounts Payable and Procurement working together, you can cut back on costly mistakes. Real-time collaboration between these two departments ensures that neither one is caught by surprise. No more unexpected invoices showing up that AP wasn’t prepared for and resulting in costly investigations and payment delays. Improved communication between the two departments also ensures you’ll learn about issues that come up in any part of the P2P process far more quickly.
Tips For Aligning AP and Procurement
Clearly, your company can get significant advantages from aligning Accounts Payable and Procurement. But how, exactly, do you accomplish those goals?
Implement Software Automation
Business process automation is the best way to improve both the Accounts Payable and Procurement processes. Separately, each department realizes significant improvements from automation software. In AP, you’ll get faster invoice processing, reduced operating cost, and improved flexibility, among other advantages. With Procurement automation, you get a more user-friendly system, tighter controls, and improved organization as just a few of the many advantages. When you automate both using software programs that can work together, you’ll realize even greater improvements in both departments.
Define Common Goals
Software automation is the foundation for getting AP and Procurement to work together. How well that alignment functions, though, is largely up to the people working in each department. If you’re going to get Procurement and AP to work together, they’ll need to agree on common goals and metrics. Without that, the two departments can quickly find themselves functioning as separate entities again even with collaborative software available.
Reevaluate Company Culture
In organizations where Accounts Payable and Procurement have a long history of working in silos, it can be difficult to change that approach. For many organizations, these two departments have only interacted if something was wrong. That’s going to have to change if you want to align procurement and AP. This starts at the top, with the heads of each department figuring out how to strengthen relationships between the two departments. There’s also value in taking such collaboration outside the office by hosting inter-team lunches and other activities to foster a sense of camaraderie among the two departments.
Agree On How To Handle Suppliers
One of the reasons for having AP and Procurement work together in the first place is so that you can improve supplier relationships. To achieve those goals, AP and Procurement are going to have to agree on a unified method for dealing with suppliers. Both departments should be working from the same vendor master list from the very start. Then, going forward, the two departments need to agree on standards for evaluating and adding new suppliers.
Commit To Information Sharing
The advantages of having AP and Procurement data available to both departments won’t mean anything if they’re not actually sharing data. Early in the collaboration, the two departments should come up with a list of crucial information they will share on an ongoing basis. For example, AP needs to inform Procurement of any payment holds or maverick spending. In turn, Procurement needs to inform AP of any errors that they catch in orders placed and/or received.
Finding A Reliable Software Suite
One of the great things about choosing NextProcess for your AP and Procurement automation is that we’ve designed all our software products to work together. If you want to bundle AP and Procurement together, we can make that happen.
As with all implementations here at NextProcess, we take our commitment to delivering a fully-functional software system seriously. We have one of the highest implementation rates in the industry. Plus, we’ll work with both your AP and Procurement departments to customize the software just the way you want and keep things running smoothly.
If you’d like to see exactly how our accounts payable and procurement automation systems can help your company, contact us today. We’ll be happy to answer all your questions and schedule a free demonstration so you can see our software in action.