Managing indirect spend is difficult and tedious for many reasons. Do you manage to the line level, or do your systems limit you mostly to header data? Are you managing aggregated spend within acceptable deviations? Do you simply rely on your managed service provider to get it right (or mostly right) and let it ride because you simply have bigger fish to fry? The list goes on and it is long and it has been that way for a long time. While there have been significant advances in P2P automation, there is still the slippery slope of the invoice-to-pay decision. How do you make a decision about something that is essentially beyond your domain?
Procurement and finance professionals are forward thinking when it comes to creative ways to curb spend. Their operational counterparts – whom they rely on to help rationalize that spend – are also crucial in implementing cost reductions. We’d like to explore some of the disconnects and see if we can all start thinking in a slightly different way in this arena. The primary disconnect is usually a simple communication gap between the finance side of the house and the responsible operator. Generally, the operator gives the approval piece. They let the AP department know what’s okay to pay and not pay. Yeah – simple stuff here. Nothing earth shattering. So let’s go deeper.
YOU’RE NOT A SUBJECT MATTER EXPERT, AND THAT’S OKAY
The business faces a fundamental issue in consistently determining the best decision. How does the subject matter expert of X fully understand the invoice from the subject matter expert of Z? Further complicating things is the design of the invoice itself. The invoice is designed in such a way that only the creator of the invoice truly knows how it “operates.” Especially at line level and most crucially, how the lines are interdependent. Do you think we’re over-complicating this? Stepping over dollars to pick up dimes? Think it doesn’t matter? Go look at your cell phone, electricity and office coffee service invoices. Do you think they’re confusing on accident? Do you know what kinds of dollars you can’t see on them?
A uniform rental invoice is a prime example of how poor (intentionally poor?) invoice design and complex line-level dependencies present a one-two punch of sub-optimal cost avoidance. Now, you could spend years trying to figure out how uniform rental invoices work. Maybe you’ve even figured out some of the quirks yourself. But you will never be able to catch all the problems. That’s why we call it sub-optimized. The traditional invoice-to-pay process inherently has an upper limit by virtue of the domain expertise gap. It is not worth your time to try and figure it out, because by the time you do the goal posts will have moved by the designer of the invoice.
YOU CAN’T KNOW EVERYTHING BECAUSE IT’S DESIGNED THAT WAY
Where does this leave you with your decision-making process? In the same place. Which, again, is okay – you’ve done a great job optimizing P2P. It’s now time to take the next step. And, as they say, the first step in making progress is to accept your limitations. Invoice-to-pay processes for indirect spend are limited because they rely on someone that doesn’t have access to the best decision. Let’s focus on what we CAN do to solve that. It’s easy. Find the best decision. In fact, why not get the best decision delivered to you as a service?
When your car starts acting funny, maybe you’ll do a little trouble-shooting, but it’s likely you’ll take it to someone who knows cars really well. If your roof has a recurring leak, you could probably keep reapplying caulk to sorta fix it. But you’d probably call someone who knows exactly how a roof works. When you review an agreement from a supplier, you’d probably want to know how those agreements work in the domain before signing it based only on your knowledge. What if the best decisions on some of your invoice-to-pay problems came from outside your business?
ACCEPT WHAT YOU DON’T KNOW AND FOCUS ELSEWHERE
We think the future of invoice-to-pay revolves around these concepts. We look forward to empowering organizations with the best decisions where it makes sense. Some decisions have to be made internally, obviously, and that is the core of your business. Non-core activities don’t grow your business, unless they are fully optimized. Indirect spend offers organizations the opportunity to turn P2P into a profit center by finding a way to get truly optimized decisions. Do you agree?