Best practices for AP and Procurement in 2021 and beyond
Increasing collaboration shouldn’t add more to your to-do list. Here’s why strengthening the AP and procurement relationship should be one of your New Year’s resolutions.
Aligning Accounts Payable and Procurement
Although part of the same P2P process, AP and Procurement teams often function as separate entities within a business. Procurement is historically focused on strategic sourcing and developing long-term, favorable relationships with suppliers, while the AP department is concerned with having visibility of commitments, tracking spend, and ensuring payments are paid on time.
By linking your accounts payable and procurement departments and processes you can streamline your supply chain. The benefits of streamlining are increased cash flow, savings, and improved supplier relationships. The most effective method for maximising this alignment is through AP automation.
AP and Procurement Priorities for 2021 (and Beyond)
Although Procurement and AP teams sit within the finance function of a business, employees from each team often report to different managers and have different priorities. Often, this leads to a lack of regular communication and collaboration, even when working toward complementary objectives.
Here’s what we found when we polled AP and procurement teams at leading organisations to determine their priorities for 2021:
The Top AP Objectives
According to those polled, AP departments will be focusing on the following in 2021:
- Early visibility of commitments
- Control of DPOs (on-time payments)
- Mastering straight-through processing
- Automatic three-way matching
- Creating effective workflows for approval
- Strengthening purchasing approval processes (driving PO adoption and usage)
- Moving toward electronic invoice processing
- Adding value to the business
The Top Procurement Objectives
According to those polled, procurement departments will be focusing on the following in 2021:
- Sourcing strategy
- Vendor analysis
- Master vendor data
- Vendor consolidation
- Cost savings (removing maverick spend)
- Risk mitigation (requisition, contract, and purchase order compliance)
- Electronic procurement for visibility of spend patterns via robust analytics
- Improved relationships with suppliers
These objectives may look different on paper, but they’re two sides of the same coin. While early visibility of commitments will allow AP teams to work strategically and have insight into what’s coming, it becomes nearly impossible without a consistent sourcing strategy that allows for efficient vendor analysis. Similarly, procurement teams can’t improve their supplier relationships if AP teams aren’t in control of DPOs.
Leveraging What We’ve Learned
For insights into the benefits of automating AP and aligning AP and procurement departments, we spoke with our Total AP customers. Here’s what they recommend:
- To directly and effectively target processes and ensure backoffice AP collaboration with your BPO provider and ERP, promote alignment between process owners and those monitoring the account and its behaviour
- Provide continuous training as people and roles change
- Create a monthly newsletter to share progress updates and encourage feedback
Thermo Fisher Scientific
- Confirm alignment before beginning implementation
- Great communication isn’t enough; all streams must be convinced about the benefits
Orange Business Services
- Organisations without AP-procurement alignment miss the opportunity to engage procurement in the process of facilitating supplier adoption of e-invoicing
- Determine roles and responsibilities, and develop best practices for working with suppliers
Will AP and Procurement Alignment Help?
When AP and procurement departments share data and work together, they can improve efficiency, cost control, and accuracy.
By automating AP with Tungsten Network, you gain:
- End-to-end process visibility of 100% of your invoices
- Real-time access to line-level data to identify price variances, optimise spend, and improve procurement decisions
- Guaranteed digital invoice delivery and real-time invoice status for suppliers, reducing manual labor and associated costs
- Eradication of invoice exceptions, eliminating blocked payments
- Full compliance with government mandates
- Reduced fraud and risk due to improved internal controls
- Secure and compliant invoice archiving
- Control of your payment terms
The advanced analytics from automated AP enable procurement to cut costs, claim lost resources, improve supplier relations, and innovate — rather than focus entirely on mundane tasks.
By automating AP, organisations can achieve all of their AP and procurement goals for 2021. By implementing mechanisms for consistent communication, collaboration, learning and buy-in, they can optimise the value of their digitisation.
Recommendations for 2021 and Beyond
With your AP and procurement teams working together, you can increase cash flow, save money, and improve your supplier relationships. By automating AP, you can facilitate the alignment of these two departments and streamline your entire P2P process, providing more value to the business.
To start collaborating more effectively in 2021, we recommend that you:
- Focus on ongoing, quality communication throughout the business
- Align teams by scheduling collaborative sessions leading up to, during, and after implementation
- Avoid risk by identifying consequences of potential misalignment between the two businesses, including effects on supplier payments and discounts
For more insights into the most common obstacles to successful collaboration facing finance teams today, as well as the top strategies for building strong AP-procurement alignment, watch our New Year’s Resolutions for AP and Procurement webinar.
The Road to World Class
If you haven’t yet transitioned from manual to automated, there’s never been a more urgent need.
With Total AP from Tungsten Network, you upload your invoice to the platform for buyer review, processing and approval, and upon approval payment is sent — and you can accommodate all your suppliers, regardless of size, location or maturity. Plus, you’re 100% digitised from day one.
Did you know that the top-performing purchase-to-pay organisations report 10% year-on-year improvements in efficiency and effectiveness?