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8 Ways to Align Procurement and AP

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Sarah Fane
May 17, 2020

 Procurement and AP don’t always see eye to eye, and this potential conflict can disrupt operations. Given shared services’ overwhelming focus on driving P2P efficiency, organizations need Procurement and AP to come on board as a unit.

Bridging the silos can transform a P2P operation, so here are 8 ways that you can do it.

1. Get to the root of misalignment. It might sound obvious, but you must know exactly what needs fixing before you get your toolbox out. Evaluate your situation, bearing in mind that AP and Procurement can be misaligned for a number of reasons:

  • They have differing and potentially conflicting priorities
  • Their success is measured with different criteria
  • They aren’t properly integrated into an end-to-end P2P process
  • They work on disparate systems

Once you’ve identified the problem, you can begin to plan the actions to take.

2. Engage the key stakeholders. Whatever actions you put in place, you need to secure buy-in from your key stakeholders from the beginning. Identify who they are and strategize your communications to ensure that the benefits of alignment are tailored to appeal to the priorities of each stakeholder, from the C-suite to the FTEs in the functions (this will likely include IT).

3. Establish a single lead. If the functions report into separate heads of department, this increases the likelihood of siloed-thinking and can breed conflicting priorities. A single lead can ensure strategic alignment and help reduce conflict, while driving continuous improvement and opportunities for more value-adding activities.

4. Ensure systems are compatible. It’s hard to encourage communication between the functions if the procurement and payment aspects of the process are performed on unintegrated systems. Top performers move away from systems that focus on each specific function in favour of P2P technology that adds value to the process as a whole. This helps:

  • Integrate AP and Procurement, ensuring POs and invoices flow between the two departments without getting lost
  • Increase visibility of where a transaction stands in the process, allowing for more intelligent decision making

5. Agree payment terms. One major disagreement can be the result of AP’s desire to extend DPO clashing with Procurement’s prerogative to protect its supplier relationships. Establish a strong and visible payment strategy to ensure working capital priorities are aligned.

6. Establish an early payment discount program. This can help work Procurement and AP towards a common goal. Procurement sets up the discount with the supplier, while AP ensures that the invoice gets paid early enough to capture the discount. This requires teamwork between the two functions, and when discounts are captured it reflects well on both:

  • AP proves its value by adding to the company’s bottom line
  • Happy suppliers with increased access to cash strengthens Procurement’s relationships with its supply base

7. Align KPIs. Measuring AP and Procurement performance with the same criteria helps align priorities, ensuring that the functions work towards the same P2P goals. KPIs could include % of discounts captured, % of on time payments, and first time match rate.

8. Encourage cross-functional awareness. Misalignment can be due to a lack of understanding of the challenges the other function faces. You can educate staff by introducing shadow training, or exposing them to case studies/webinars that demonstrate not only the struggles the other department tries to overcome, but the role they play in making P2P efficient and value-adding.

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