Six Best Practices for Procure-to-pay in a Recession

Gaining visibility into, and control over, your organization's procure-to-pay process can help you weather the current economy and emerge stronger


By Ari Salonen

During the current recession, the strategic game plan of most companies is to cut costs, streamline operations and work more efficiently. Nowhere are these strategies more important than in the procure-to-pay arena. Achieving visibility and control over purchasing goods and services, as well as paying for them, is critical to effectively managing your organization's finances, especially in the current economic climate.

Together, Procurement and Accounts Payable provide an important profile of an organization's spend, cash flow and economic health. In Procurement, spending plans are developed and financial commitments are made, while the Accounts Payable department contains actual information on how an organization's spending plan has been implemented and how, where and with whom its money has been spent. Achieving visibility in these areas helps organizations understand their spending patterns, and this visibility is the first step to achieving control of expenses and making smarter purchasing decisions.

While procure-to-pay may not have been a key area for technology investment in the past, in this economic climate it is becoming more essential as organizations realize that they need to find efficient and effective ways to monitor and control their expenses. As many organizations have seen, merely implementing corporate purchasing policies is not enough to control spend. The combination of policies backed by automation enables them to effectively enforce the rules they have established. Additionally, companies are using automated systems to gain key insights that help them manage their spend, cash flow and working capital. They can see, for example, where they are spending money, which vendors they are using, and where opportunities lie for volume discounts and other savings.

Following are best practices for achieving cost savings and efficiencies in procure-to-pay. These practices, based on the experiences of world-class organizations, are particularly beneficial now as organizations look for ways to positively impact the bottom line and cut expenses.

1. Win over the maverick buyers. Maverick buyers circumnavigate established processes by conducting indirect purchases outside of the system. Maverick buyers pose a financial problem because you don't have visibility into, or control over, how they are spending your organization's money. While this is an issue in all economic climates, it is even more important at a time when organizations can't afford to waste money or lose savings opportunities.

To tackle this problem, organizations need a purchasing system that is so effortless and easy to use that it encourages widespread adoption. Many automated systems offer "punch out" catalogs connecting users to catalogs using standard Web interfaces, as well as "in house" catalogs. This makes it easy for employees to order supplies and allows approvals and receipts to be tracked and managed through electronic catalog management.

The city of Helsinki, for example, uses an e-procurement system that enables more than 7,000 users and 50 professional buyers from 30 different divisions to handle hundreds of thousands of purchase-related transactions annually. The system makes it easy for users to select contract-based products from electronic catalogs, or type in the items for which they are looking. Using this technology, the city has achieved a very high degree of automation and a matching rate of more than 80 percent. Also the system automates complex bookkeeping standards and general ledger rules, as well as organizational business rules and policies that simplify purchasing, and it offers drill-down menus that make it easy to view and track financial data.

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