This is the first post in a series of posts about making procurement and accounts payable more agile.
In this first article we will just look at the “why”. In later posts we will look at the “how”.
Most companies today want to digitally transform their business and become more agile. IT, product development and marketing are usually high on the agenda, but how about the procure-to-pay process? Should it be agile? You want to have long-term relations with your suppliers and the process should be highly repeatable, so what does it even mean for procurement and accounts payable to be agile?
I strongly believe the procure-to-pay processes should be agile. Now, you would probably expect me to say that as the CEO of a company that helps our customers to digitally transform this process but I wasn’t always in this position.
In the past I worked for a number of large companies. I have set up agile teams within companies that weren’t agile yet, enabling them to move much faster. I therefore have a very personal and first-hand experience of both the challenges and the rewards of making teams more agile.
Agile doesn’t mean constant reinvention. Agile software development teams don’t change their product all the time. What it does mean is that agile teams can make improvements rapidly.
From experience, there is significant improvement potential left in the procure-to-pay process of most companies. This can include consolidating suppliers, reducing invoice processing time, improving process adherence, improving payment terms or using dynamic discounting or supply chain finance. Having an agile process simply means being able to rapidly identify and capture these opportunities and doing so in small incremental steps rather than in big (and slow) change programs.
A second benefit of agile is job satisfaction. A survey by Sapio Research found that 82% of UK finance professionals surveyed said that poor invoice process management was impacting their teams’ ability to perform effectively and leading to low job satisfaction. A study by the University of Calgary showed that agile can lead to a doubling of job satisfaction. In their study they found that over 80% of people in agile teams were “very satisfied” or “somewhat satisfied” with their work compared to 40% in non-agile teams.
That still leave the question whether procure-to-pay can be agile given it should be a highly repeatable process.
Procure-to-pay can be agile exactly because it is a repeatable process. To explain that, let’s look at the place where agile started: software development.
There are many highly repeatable processes in software development: testing software, releasing software, configuring servers on which the software runs etc. Agile software development teams have automated all these processes. This allows them to release new features in hours compared to weeks or months for traditional teams.
Agile software development teams use agile systems to automate their work. These agile systems can easily be updated to keep pace with the team. They are the foundation of every agile team because without them the team would not be able to automate processes while still being able to change the product frequently.
The same applies to procure-to-pay. Because the process is repeatable, it can be automated. Once that automation is in place, the procurement, supply chain and accounts payable teams can spend their time on continuously finding and implementing cost saving opportunities.
To be able to automate procure-to-pay but still be able to continuously implement new cost savings opportunities, the team needs an agile system. The good news is that these agile procure-to-pay systems are now becoming affordable and easy to implement for any size business.
This shift to agile is not easy. It requires changes in systems, people, organisational structures and processes. Where to get started will be the topic of my next post.