Digitization P2P from a financial perspective
How the digitization of traditional purchasing routines directly benefits finance departments as well
The design and digitization of our customers‘ supply chains and processes is part of our daily business. The importance of corresponding measures and investments is growing unabated, and one gets the feeling that new fields of action are emerging weekly in previously unmapped areas. We have regularly shared our experiences in these projects with you in our publications.
Classically, the projects are initiated in the purchasing departments of our customers and are also commissioned by them – after all, the core of these projects is also about the classic purchasing processes between sourcing (source-to-contract / S2C) and order management (purchase-to-pay / P2P).
What is new is that the proportion of orders from finance departments is increasing.
The young guard of finance managers knows the benefits of digitization in procurement for their own area
The relationship of finance departments to digitization initiatives in procurement was often rather distant and the proverbial „departmental fences“ were clearly noticeable. Our market observation is that with a young guard of executives, an overarching end-to-end process understanding is also taking hold. The benefits of optimizing purchasing processes on the efficiency of the finance department no longer need to be explained – the buy-in of finance managers is hardly in question.
In the recent past, it was rather the case that the idea and commissioning of corresponding customer projects sometimes came directly from the finance department.
Unstructured processes in purchasing limit the efficiency of the finance department
The background to this was and is that inadequate processes within the sphere of influence of purchasing limit the efficiency of the finance department.
For example, a lack of release workflows for purchase orders in Purchasing regularly causes enormous review and clarification efforts for invoices on the part of the finance department. In these cases, it is not apparent to the finance department who is incurring the costs, who placed the order, and who can release the invoice.
If the release strategy is based on the receipt of the invoice as outlined, there is also an enormous compliance risk. The check or release of the expenditure only takes place after the fact, and the „damage“ may already have occurred.
Furthermore, there is often a long delay between the order and the receipt of the invoice – on average 3 months (period between the order and the first invoice). If orders and data are not recorded systematically and reliably, this results in a considerable control deficit. For budget-oriented organizations, this means that cost center managers – as well as the finance department – have to fly blind with regard to available resources during these three months. In these cases, reliable budget information cannot be provided until invoices are received.
Automation in the P2P process as the key to success
The mentioned problems can all be solved through targeted digitization of the requisition and/or purchase order as well as the associated release procedures.
Ideally, there should be an ordering system that already knows the relevant data (customer, cost center, cost type, etc.) when the order is created and adds it. On the other hand, it also allows an individual release workflow. Thus, when the invoice is received, all that remains to be done is to check whether the invoice value matches that of the purchase order – and that of the delivery/service.
And if the ordering system has been smartly selected, it comes with the corresponding digital functions. As a result, our goal is to establish „no-touch invoice management“ for large and, above all, process-cost-intensive areas of our customers‘ spend. Of course, this is not always successful – but enormous efficiency potentials can always be realized.
And that’s what Heads of Finance are all about: high process efficiency!
Market overview of around 300 providers of digitization solutions for purchasing and supply chain
In this context, Adconia has extensive implementation experience and a comprehensive vendor database for corresponding digitization solutions. It contains around 200 providers that are evaluated on the basis of numerous functional criteria (coverage of interface processes, innovative technologies, added values).
The Value Manager Digitization also provides a systematic, standardized tool for evaluating the added value of process digitization, including a corresponding market overview.
Independent of solution providers, it combines the aspects of inventory, optimization approaches and necessary investment decisions. Based on our wealth of experience, we can quickly create a digitization roadmap that is individually tailored to the goals and requirements of our customers.
ADCONIA – beyond the ordinary
As Adconia GmbH, we advise our customers with the experience of more than 250 projects from more than 17 years – in questions around purchasing, supply chain and the digitalization of processes. Our goal is always to increase the profit contribution of purchasing through cost reduction, process automation or the qualification of our customers‘ purchasing teams.
With a correspondingly broad wealth of experience, precise knowledge of everyday purchasing and a high level of professionalism, our consultants carry out training measures at eye level. We do this – depending on the requirements – both as a sparring partner for specialists and managers with many years of experience and as a trainer for seasoned purchasing professionals and young professionals.