Process optimization in
purchase to pay

Digital transformation in the soup

Purchasing automation with the idea that more can be done with less FTE often turns out to be a disappointment. In complex business environments involving many stakeholders, a digital transformation often results in hassle. And that was just not the intention.

Cloudy view of processes and unspoken expectations

The digital transformation of purchase-to-pay processes aims for higher productivity at lower cost and better compliance. But it can actually create more complexity, wait times and errors when it does not properly align with the existing process or stakeholder requirements.

When striving to automate a business process, a natural tension arises between automating what is happening now and a projection of what the various stakeholders would like to see happen in the future.

A close analysis of the existing process often reveals conflicting interpretations of that process, and even bewilderment about how the process really works. Some stakeholders are unaware of certain details and others do not fully understand the process. Sometimes this happens because of successive miscommunications, passed from outgoing to incoming owners of the process, or because certain steps have become redundant.

It is not surprising that automation software for procurement and invoice processing is in use everywhere, but only 1% of invoices are processed fully automatically, as the trend report below shows.

With arts and crafts

A typical response of project teams is to try to redesign or clean up the process. They will try to remove or refine steps that no longer seem to fit, treating the entire process as a simplification measure. And it shouldn't take too long because it needs to be automated. This is not the right approach.

When only a few steps are rebuilt or taken out, it can be detrimental to other steps that should also be addressed. The process is similar to pulling on the loose thread in a sock, which only results in more fraying.

Ton Smeele, eBusiness Product Owner System-to-System at Technische Unie, notes:

"But if you don't discover an error until that invoice, you're actually too late. The process is not central then. Why don't we do it first time right: get everything right from the moment the order is recorded." 

• Read the article on process optimization at the Technical Union 
  

Often these measures take place when the automation project has already begun. The implementation then brings to light the current process. Concessions are made. Not all functionality that was paid for is used. New procedures are set up to deal with new problems. 

Process optimization as an enabler for digital transformation

Defining stakeholder expectations (Define) and measuring current processes (Measure) forms the basis for analyzing the causes for discrepancies with expectations (Analyze) and improving processes (Improve). Improvements are consolidated into procedures (Control). This forms the blueprint for digital transformation.

Define: stakeholder expectations

Following the example of Agile Lean, it is very important to determine who are the end users of the process being targeted for automation. Are they controllers? Procurement? Suppliers? Budget holders? In any case, the board, who have made automation a strategic goal.

• Read more about the importance of overarching KPIs 

Measure & Analyze: The current process

Once the scoping is clear, we can map all the steps taken in different processes. In outline, for example, from receiving an invoice to finally making it payable, but also in detail, such as converting a PDF invoice to a data file. 

The different steps, as well as the transition between steps, must be quantified into relevant values. Relevance is determined by stakeholder expectations.  

Improve: Processes and data

Once we have a clear picture of the current process and where it needs to go, , we can start optimizing the current process in such a way that it becomes suitable for a digital transformation.

Where can gains be made? What steps could be omitted? Are there steps that just need to be added. Think about automatically validating invoices after receipt. Or are there steps that should be adjusted? Should concessions be made for the benefit of the bigger picture?

As we seek to consolidate optimization into automation, the issue of data management also looms and the importance of standardization.  

• Read more, for example On the white-war on standards in invoices 

The optimized process is documented and key changes necessary for digital transformation are implemented.

Control:Digital transformation

The optimized process forms the blueprint for the automation process, perpetuating the optimization, but also accelerating and providing insight.

A choice must be made between different providers of purchase-to-pay solutions. In addition, a plan and business case must be prepared.

Because the preliminary work has been done and the bigger picture is clear, the automation process can begin with a simple process.  

• Read more about the digital transformation of purchase to pay

Below we outline in three excerpts how automation can work for purchase to pay:

Digital transformation as an enabler for process optimization

Digital transformation makes processes and data streams transparent. In doing so, it not only serves compliance, but provides a wealth of information on which process optimization can act.

Insight into quantified processes

Automation and optimization form a strong tandem to achieve operational excellence in purchase to pay. Having visibility into data streams, such as orders and invoices, unlocks where problems occur that can be fixed (lean). But it also allows analyzing data points and, for example, identifying the variability of different KPIs that can be reduced with Six Sigma methodologies.

Instantly watch a previously recorded webinar back where we give examples of this. The importance of process optimization becomes undeniably clear. 

• Watch the webinar directly

What does ICreative do

We are purchase-to-pay partner for organizations, institutions and governments. We feel particularly at home in large and complex administrations, such as the use of multiple ERP systems.

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