Best Practices in Procure to Pay Cycle: Secure Top Management Support – Part 9

Having a champion in senior management to send the signal that compliance to the redesigned P2P process is critical. Ideally, a policy of “zero tolerance” should be established, with consequences for those who do not pay attention to the guidelines. This will buttress the argument, and ensure that people are committed to the change. Re-organization of some departments to establish lines of authority and responsibility, including merging purchasing and accounts payable, is another form of change that would require senior management support to drive change.

Some of the comments in this category included the following:

Purchasing and AP are also probably fighting and pointing fingers. You should consider merging AP people handling these issues into the purchasing department. Then you have shared goals and objectives. The goal is no longer to throw the invoices over to purchasing but to establish a common objective to solve the problem. We moved people responsible for MRO invoices and put them into purchasing to have shared goals and objectives, then evaluated them on how well they did to solve the problem. The finger pointing goes away because it becomes OUR problem that we have to fix. In the past, they could push a button and it became purchasings’ problem! One needs to consider culturally how are they set up and what is their coordination. One way to stop it from becoming an individual department problem, and then it becomes a company problem.

One of the first things we did – is establish the case for action! Why is it important, and who is driving it? My boss was the CFO and sat on the exec committee – and he was able to get stakeholders to agree that it was their problem – not finances’ problem – and that they owned it. We made sure we got it at the right level and got clarity around what the exec committee wanted! Who is paying the bill on this? The executive committee footed the $40M bill for SAP and we emphasized the need for clarity and matching of the system to different functional responsibilities. We emphasized that it was important to have the right resource to work this…and they supported us from the beginning. We took a pragmatic view. Let’s not solve world hunger, but address key pain points and address what practical solutions can we come up with to help this along. The executive committee came out with a statement that said “We WILL fix this and we WILL be successful! They understood that is not going to happen if you don’t have the right type of people owning it. When we came up with the solutions around the training, website, proper use of procurement cards, etc., top management was there to support us in deployment.

The last piece that is the most important is that the only people at our company that have authority on payment terms is purchasing. Invoices are “due on receipt – we go do it, and abide by their terms and conditions in the contract. If you go outside of this system, you have no authority and you will be sacked. ONLY purchasing is responsible for terms of payment – NOT AP! We control it, based on a check date. Once the receipt hits the system the clock starts ticking. We are a $XXB business – and every transaction requires settlement in two business days due to the nature of the business! If we don’t pay suppliers, our credit rating is hurt, and this precludes us from working in this business. Cash flow is king.