How do you know if you’re getting enough value from your P2P system?

One of the Best Practice KPI’s that helps answer this question is the amount of Spend going through your system. Using a KPI Dashboard, companies can easily track the dollars being managed by spend category. Best Practice companies typically run over 90% of their “P.O. Spend” through their system.

Unfortunately, many companies have a weak or non-existent P.O. process. As a result they typically have difficulty gaining contract compliance, and are unable to successfully automate the invoice matching process.

Other companies have a decent P.O. process but have difficulty getting receipts processed on a timely basis (if at all). Eventually people stop using the system in this environment. This results in “Under-Managed Spend.”

Good P2P systems can combat these problems by providing automated email reminders to people to process receipts, by enabling two-way matching (vs. three-way matching), or by comparing Non-PO Invoices to existing contracts. These three techniques help increase the usage of P2P systems.

Of course there is no substitute for good management and documented processes. At the end of the day, this is how Best Practice companies increase “Spend Under Management.”

As you begin to streamline the Procurement Process, you can simultaneously begin to improve the non-PO Invoice process. This of course, requires a workflow engine to route the invoices for approval—based on authorization limits. By definition, there are no POs to match these invoices to.

One of the recent innovations companies like SIRVA and NASDAQ have implemented is a technique called Payment Controls. This allows an invoice to automatically be compared to that product or service’s original contract pricing, terms, etc. This provides a quantitative, automated method of ensuring an invoice is accurate and should be paid—even without a purchase order.

As previously mentioned, some suppliers will send invoices electronically and others will continue to send paper. Both scenarios need to be addressed by the P2P system. Prompt payment incentives will help encourage eInvoicing. Those suppliers who continue with paper invoices will need to offer larger discounts for prompt payment. Otherwise they will experience longer payment cycles than those who “go electronic” and submit their invoices through a portal.