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.”

P2P Nirvana is right around the corner!

As an end-user/manager of your P2P process, you’ve been told this many times … wait for the next version of our ERP System. Wait for the “new and improved” SaaS P2P System. Wait, Wait, Wait.

Why, Why, Why?

You feel a responsibility to you and your company to improve the P2P process, manage spend, and cut costs. So why wait?

IBM and later Microsoft made an “art form” out of convincing their users to wait. Now Ariba and SAP are taking a page out of their playbook by trying to “force” customers to upgrade to the latest release of their software after waiting for GA. Jason Busch blogged about this in the Spend Matters October 15th posting, “So you’ve evaluated SAP SRM and you’re not sold.”

Debbie Wilson from Gartner addressed this very subject on October 19th in her blog posting, “Answering Ariba’s 9r1 Upgrade Call.” Of course, there are several problems with waiting. First, it is difficult to increase spend under management when you know you’ll be changing to a new version of the software…the user interface will be different, end-users will have to be re-trained, etc.

Rather than upgrading to the new version, consider switching to another vendor with a proven platform, solid customer references, and a lower cost. Spend Matters (Jason Busch) and Gartner (Debbie Wilson) suggested this as a viable alternative.

If you’re still not sure, consider a subscription or term license where you can gain access to your data at the end of the term.

It may sound risky, but when compared to waiting for a new, unproven platform it can start to look like a very good alternative … and it can save you money!

Also, what’s to say the new version you’ve been waiting for will really address your issues. As Mac said to PC in the latest Apple TV commercial …“I’ve heard that before!”

As we like to say: “Progressive Improvement beats the hell out of Postponed Perfection.”

By Tim McEneny, President & CEO, PurchasingNet, Inc.

In this economic climate, employees and managers must be able to demonstrate that they are increasing their company’s top line (revenue) or decreasing costs. Most procurement professionals cannot increase revenues, so that leaves decreasing or controlling costs.

Here are 10 actions that can be taken in a relatively short time horizon to survive a down economy:

1. Prepare a “Descending Dollar” listing of your suppliers based on their latest 12-month spend. If you don’t have a good eProcurement system to give you this data, talk to your buddies in AP.
2. Classify each of your suppliers as an A, B, or C supplier. A’s are the high-dollar suppliers and C’s are low-dollar suppliers. This will help you attack the high-dollar opportunities first. Naturally, you’ll want to start with the A’s.
3. Consolidate as much spend as possible with one supplier. Reduce your supplier base where appropriate. For example, if your company is buying office products from a dozen different companies, you have a tremendous cost reduction opportunity staring you in the face.
4. For each “spend category,” use the uncertain times as a way to renegotiate pricing, terms, etc. If you can aggregate your spend in a given category, you will be surprised how willing suppliers will be to offer more favorable pricing in return for increased business.
5. Use “Demand Management Techniques” for indirect spend to reduce the number of items that employees can requisition or request. There really is no need to offer your end-users thousands of choices when there’s money to be saved by offering comparable lower cost items.
6. Determine which Key Performance Indicators (KPI’s) are important to your company’s success. Our Best Practices KPI Library has over 50 KPI’s which are in use today.
7. Begin measuring actual performance vs. Best Practice KPI Benchmarks. These results can be published on a monthly basis. Remember the old saying…“you cannot control what you do not measure.”
8. Start matching invoices programmatically (automatically) to Purchase Orders so you don’t need an army of people in AP to perform manual matching. This will dramatically reduce overhead and reduce errors.
9. Start tracking and reporting the number of “After-the-Fact PO’s” to ensure your current process is being followed. Issuing a PO after an invoice is received indicates poor process compliance.
10. Avoid maverick buying by monitoring all purchases and invoices to ensure they are going through a central Procurement system or Purchasing Department. This can be implemented with the right system and a little top management support.

One of our clients, a Regional Bank with 2,500 employees, recently accomplished each of these steps in an 8-month period.

The result?

They experienced a 49% cost reduction in their largest spend category.

You can do it too! Now is the perfect time to take action and survive the poor economy. Even if you can’t accomplish each of these 10 steps, you will show your managers that you have “a plan” and are on your way to executing it.

Visit www.PurchasingNet.com for more survival tips.

-Tim