Many organisations miss the opportunity to make major savings on their procurement, says Edward Burgers, Head of Global Procurement at Exact. “Companies which structure their Purchase to Pay processes (P2P) can add a few percent to their profit. And if you invest your savings into a good procurement team, you’ll earn double.”
Leeway comes before purchase
P2P literally means ‘from purchase to payment’. I’d like to expand P2P by involving the step prior to purchase. This is where there’s an opportunity to earn money, because there’s room to negotiate. Many companies work with fixed suppliers, where the price isn’t strictly monitored. By actively requesting and negotiating prices, you can often purchase better quality for less money. Another option is using a single supplier for your procurement and agreeing on a reduction.
Many P2P processes rely on forms
There is a lot of waste in P2P in the majority of organisations; a lot of people tend to be involved. The process starts with a request form for a purchase order, followed by approval from the budget holder. After the order is placed, goods are delivered or a service is provided. The purchase invoice is subsequently sent to the administrative staff. They check the accuracy, organise the approval and make the payment. We make this process as lean as possible for our customers. We create as much value as possible by making the process as simple and visible as possible. This allows us to save a considerable amount of time and money.
Every dollar you save on your expenses is direct profit
Many people within an organisation are only aware something has been ordered when the invoice comes in. In a structured process, this is visible at a much earlier stage and you won’t be surprised by financial obligations. Naturally, we also work with our own P2P software at Exact. It provides insights into the expenditure of our 24 offices in 15 countries at any time of day.
When I sit down with my IT director, I can show him a dynamic dashboard that tells him, how high his IT expenses are in Asia that week. If it appears that a Malaysian data centre is significantly more expensive than one in America, there may be a valid reason for this - for example, because IT services or installations are more expensive there. But when expenses are simply illogical, you have the means to respond.
There’s no ambiguity after the fact
In many companies, time is wasted working in the old fashioned way. Invoices are sent by post or e-mail, envelopes have to be opened, someone has to assess what it is and which department or location the invoice has to be sent to. Then someone has to register delivery of the machine so that the invoice can subsequently be readied for payment. With our P2P solution it’s clear at the start how costs have to be booked. Orders are never sent to suppliers without approval from the budget holder. This prevents ambiguity about who ordered what and who has to pay. Investing these savings into a good procurement team will earn you double!