The digital rocket heading for enterprise procure-to-pay

SUMMARY:

After a week thinking about how enterprise procure-to-pay operates I’ve realized these processes are in desperate need of radical digital transformation

Explosion coming out of laptop screen © lassedesignen – FotoliaI have often been critical of the extent to which the HR function is mired in outdated paper-based processes. Having just spent a week immersed in the procure-to-pay world I have realized that HR is a paragon of modernity compared to what goes on in the buying and accounts receivable departments of most organizations.

Nestled deep in the back-office of the enterprise, the procure-to-pay process has remained largely immune to the scrutiny of digital transformation that other areas of activity have been exposed to. Engagement has become the watchword of customer-facing and employee-facing activities, leading organizations to invest in more responsive, agile and real-time systems of engagement to automate and digitalize these functions.

All too often, though, organizations fail to realize the full potential of digital transformation. They automate existing paper-based processes without stopping to think through the actual business result they’re trying to achieve. As I once wrote:

Digitizing the paper as a self-service web form isn’t progress, not even on an iPad; it’s stagnation dressed up in a pretty outfit.

Paper used to be the way an enterprise recorded and transmitted information. But a digital enterprise doesn’t need paper-based forms, nor anything that resembles them on a screen. A connected digital device already has all of the context — all it needs is the user’s interaction to confirm or deny the transaction.

Yet in the B2B world, all this digital streamlining of the front-office interface grinds to a clunking halt as soon as it meets the customer’s back-office buying and payment processes.

Costly back-office bureaucracies

As the finance officer of a small business that deals with large, global organizations, I have personally experienced the enormity of this disconnect. To become a supplier means drawing up Statements of Work for legal to review, submitting tax forms, filling out supplier information forms and all kinds of byzantine CYA paperwork. Some global corporations insist on having invoices physically mailed in the post. When it comes to payment, heaven forbid there should be a problem because then it means chasing down reclusive AP operatives working out of anonymous BPO facilities in the mid-West, Philippines or India.

The cost of maintaining such huge back-office bureaucracies must surely be enormous, with little or nothing to show for it in savings. These unnecessary departmental silos are merely exercises in shuffling paper around redundant processes, executed mindlessly by employees without an iota of engagement.

All of this came into focus for me as I mingled with procurement professionals and spend management experts at last week’s Coupa Inspire conference. At least HR teams have had a decade of talent management vendors coming in and showing new digital approaches that allow an enterprise to get strategic about its people. Even though online buying has been around since the earliest days of the Web, procurement and payment teams are only now being exposed to the kind of digital thinking that can truly transform how they work.

Put a rocket under this mess

And frankly, they need a rocket putting underneath them. The entire sector is a mess, with hundreds of specialist vendors each chipping away at automating small islands of activity, many of which shouldn’t even exist as separate functions within a fully digitalized supply chain.

Over the next decade, spend and sourcing is going to be radically transformed by connected digital processes. Woe betide any organization that cannot buy all its needed resources on-demand in a properly managed, automated, end-to-end process all the way from selection to payment. Anything less will not be competitive in a digital economy. But getting there will mean tearing down many of the walls and boundaries that today artificially and wastefully divide and separate the activities of sourcing, buying, supplier management and payment.

Disclosure: Coupa is a diginomica partner and paid my travel expenses to attend the Inspire conference.

Image credits: Explosion coming out of laptop screen © lassedesignen – Fotolia.