Deriving Value From Procure-To-Pay Beyond Early Payment Discounts

As a department designed around the need to spend company cash, procurement is not always considered a value-added function of the enterprise.

For organizations that are interested in improving procure-to-pay workflows, efforts to digitize and implement new technologies are often motivated by a focus on making processes more efficient and automated. This is beginning to shift, however, as businesses begin to explore an opportunity within procurement to drive overall growth of the enterprise in strategic fashion.

One of the biggest challenges in turning procurement from a cost center to a source of value is in a lack of data, said Jo Seed, chief operating officer of LogicSource. Even as the global pandemic forces organizations to take a closer look at their procurement and spending activity, technologies that are unable to provide deeper insight into the functions may be holding a company back.

“Procurement is generally a very underfunded department and suddenly gets pushed into the spotlight and asked to do twice as much as it was doing before with the same resources,” Seed told PYMNTS in an interview. “Soon, you see the gaps in capability.”

Unlocking Value Through Data

In an effort to understand what was preventing procurement teams from raising the value of their work, LogicSource spoke with enterprise leaders and discovered that the majority either lacked procurement technology or had tools in place that did not operate the way they had wanted.

At the heart of those shortcomings is an inability for procurement technologies to deliver data and actionable insights about how the department operates.

The most obvious value for having that information lies in being able to understand where the money is going — who a business is spending money with — and identifying opportunities for cost reductions. But beyond that, Seed said data is also key to identifying other opportunities to add value, for instance, exploring ways to collaborate with new vendors.

“Procurement’s role in bringing that to the business, and underpinning all of its recommendations with data, is where it’s at in terms of procurement taking the next step up,” he noted.

A Payment Connection

Procurement will inevitably always be a department of capital expenditure. But through data-based decision making, teams can be much wiser about how they spend company funds, be it by capturing early payment discounts, adjusting supply chain partners, exploring new products, or otherwise.

The payment itself is another workflow that stands to deliver hidden value to the organization, according to Seed.

Among the low-hanging fruits in this regard is in adoption of commercial and virtual cards, particularly for the long-tail of indirect spend that, while often made up of lower-value transactions, often involves thousands of different suppliers. Using payment technology to accelerate and streamline those transactions is key to efficiency.

But taking a step deeper, Seed also pointed to the opportunity for the corporate card to spark meaningful discussions between a business and its vendors about how their partnerships can deliver greater value to both sides of a transaction. Encouraging conversations between firms to onboard suppliers to a procurement portal, or to begin accepting cards, can spark broader discussions about how collaborators can more effectively interact.

“The technology experience itself is important for the procurement team to be efficient in their operations, but it can’t be at the expense of suppliers having a bad experience,” Seed stated.

Procure-To-Pay Evolution

Procurement leaders are looking to unlock these opportunities in data and payments tools at a time when B2B eCommerce is surging, driven by organizations’ need for a digital-first buying experience. Procurement is “intrinsic” to B2B eCommerce, said Seed, and that deep relationship has more procurement teams considering how to bring efficiency and an overall greater experience to the procure-to-pay process.

That could involve embracing technology that makes it easier for accounts payable (AP) teams to access all of the necessary documentation and information to pay a supplier, or perhaps driving connectivity across the historically siloed supplier catalogues for a more informed buying experience.

The points along the source-to-pay workflow that present opportunities for cost savings, efficiencies and overall value are numerous, and procurement teams must ensure that the technologies they purchase can support their efforts in identifying those points. It must be data-driven, said Seed, and should support the needs of both the business and its supplier.

Empowering procurement leaders with such tools can place the function in a new light for board members and company leaders.

“There’s a much bigger role for procurement to play in this new world, where it goes into the front office instead of the back office,” Seed said.