Lately you would have heard companies talk proudly of their ‘no PO, no pay’ policy. You can hardly attend a single P2P conference these days, without at least one of the presentation having the bold claim of "Our company has a 'no PO, no pay' stance. Many accounts payable (AP) departments are starting to see the introduction of such a policy as a key deliverable for their future operation. But is it required and does it make sense? How much can be achieved without implementing this bully-boy tactic which could be detrimental to your company’s image?

1. Starting with your systems

The first thing to look at is your existing system you have in place for raising POs. Is the system suitable to support your total spend? Many companies will have no problem with large contract spend or strategy spend, but what happens when your company wants to buy some flowers for £35? Do you raise a PO for such a transaction? Is it worth it? Can it be supported? You should also consider how easy these systems are to access for employees and if they are allowing them to do their job properly. For example if the company is in construction, do ‘the buyers’ have access to a system on site? Is it essential to have internet access to use the system? And if so is broadband religiously available?

The system’s ‘ease of use’ is a critical success factor. What we are looking for here is the “e-Bay experience”, where the system is self-explanatory, and people can find what they’re looking for without any real challenge. I know of a company where it took around 10 minutes to raise a PO. Needless to say their PO penetration was fairly low.

2. Spreading the word

So you’ve ticked off the ‘systems and functionality’ box. Now you need the users to use the technology correctly. We are very good within P2P at developing new processes and systems that will support our goals and strategies, but we do not always create the awareness within the business concerning the importance of ‘proper use’. This seems to be where most organisations trip up. Taking the time to ensure that users actually understand how to use the technology requires equal investment to implementing the system in the first place. It is absolutely critical to your ROI and is routinely given less attention than warranted.

Communication of what the system does, why it does it, how it does it and the consequences of not doing it, is a must. And this leads us neatly into the next area, which is training. Training is regarded as a chore in most organisations when it comes to systems. So selling the benefits of ‘using the system correctly’ is key. In addition to this training is not a one off event, especially if the users aren’t using the system daily. It is a reiterative process consisting of refresher courses and sessions strategically timed to stop the ‘creeping in’ of bad habits.

3. Prepare to be undermined

So you have the system, and you’ve managed a great communication and training programme. Now you’re faced with a tricky one which can be hard to prepare for and difficult to measure. Culture. On a scale of 1 to 10 (10 being fantastic culture where employees embrace change and get on with new business processes) how amenable is your culture to change? Is there a poisonous attitude running somewhere through the organisation saying “you don’t really need to follow this new way; it’s just something finance and procurement request and what’s the worst thing that will happen if we just ignore them?”. You may already have a good view of who the ‘rebels’ might be. They have a strong voice and aren’t scared to use it. So these individuals are worth identifying early and getting on side. People listen to them, so make sure you have an element of control over what they are saying.

Then comes the cornerstone of your PO increase programme – senior level buy-in. Do everything you can to have the ear of your sponsor so their message is your message. Prepare them for the opposition which will come their way, and educate them on their ‘party line response’. If their message fails to be congruent with yours, take a seat and watch your project fall apart. Selling the benefits to the sponsor and meeting up with them regularly is worth your time and attention.

4. The iron-fist approach

So if all these considerations are followed how likely is it that you’ll have to fall back on a 'no PO, no pay' policy? Is it required and is it something you want your company and your business unit customers seen to be doing? It may help the intentions of your shared services centre, but how contributory will it be to butchering relationships between the business and its suppliers? Remaining congruent in intentions across the business is hard to manage, but essential if buy-in on an ongoing basis is sought.

5. The exception

Let’s face it: 100% PO compliancy is very attractive. But hands up all those SSCs that have suppliers who are simply too small and don’t have the system functionality to quote a PO? Do you just dump these kinds of suppliers? Really?

Let’s not forget that even when you have the perfect system, process, training and awareness programme, cultural support, senior level sponsorship and supplier base, you will still bump into situations where POs just don’t make business sense. Some examples are urgent repairs and utilities (which can however be raised based on yearly budgeting).

Another example is when the cost to raise a PO is more than the value of goods. One company I know of raised POs for goods as little at 60 pence, even though they knew the internal cost of raising a PO was well over £6.

You have to question if the aspirations of 100% PO really make sense for your business.

This article was written by Michael Hyltoft, Director STF Consulting who has had extensive shared services experience from several major European companies. If you would like to reach Michael please email susie.west@sharedserviceslink.com who will happily facilitate an introduction.

A Mini Five-Step Guide to The Sense of a 'no PO, no pay' Strategy