Procure-to-pay has come a long way in the past 10 years. Artificial intelligence and machine learning continue to be implemented at a rapid pace in organizations looking to get a competitive edge. The impact these technologies have on purchasing is significant, and we’re only starting to scratch the surface. From neural networks used in sourcing to RPA in payables, procurement teams continue to improve their efficiency and accuracy. That being said, we want to explore a key issue we see as an elephant in the room: willful blindness during the invoice approval process.
Invoice approval is what it is because of where businesses have come from. Namely, paper driven environments that rely on workflow to move that paper in this or that direction. To state the obvious, approvals are based on a person signing some piece of paper. While most organizations now use electronic approvals and signatures and move electronic versions of paper through workflow, the fundamental act of the approval hasn’t really evolved. Nor has it become efficient in the sense of optimizing cost reduction.
THE BEST LAID PLANS CONVERGE ON INVOICE EVALUATION
Invoice approval is generally the least rigorous part of P2P. Disagree? Massive attention to detail occurs during sourcing and contracting. You want the right thing at the right price. You’ll search and negotiate for weeks or months to get the deal you want. But once you start getting the invoices, the level of scrutiny drops, and diminishes over time. Let’s be clear, we’re NOT implying that you just suddenly start dropping balls. We know you look at invoices. But how closely? With what level of consistency? With what level of category expertise?
We want your organization to reduce procurement spend as much as possible. So we should acknowledge the elephant in the room. You know, the one that says, “well, we probably approve too many invoices without really scrutinizing them.” Or, “sometimes we just approve them because they need to get paid and we’re behind.” Even, “we pay the invoices because we trust that the vendor is correct.” The whole gamut. You’ve heard them all and you’ve probably said many of them – even out loud. And it’s all perfectly okay. Because that’s just how it is. Right?
WHEN YOU PAY AN INVOICE, YOU AGREE THAT IT’S CORRECT
That is how it is. But it can be better. Simply acknowledge that the approval process is fundamentally flawed in two difficult to change ways. One, the volume of approvals makes it difficult for any analyst or manager to cost effectively detect problems in any given time frame. Two, even the most extraordinary category manager or AP analyst has a limit to what they can detect because they lack the domain expertise.
Let’s put a finer point on the latter one – the person approving the invoice does not know how the vendor has designed the invoice, nor do they know the intricate relationships that exist among the invoice lines, and the attributes of your business. That’s a lot to chew on, but you know the best way to eat an elephant…
PROGRESS OCCURS WHEN WE STOP MAKING REPETITIVE MISTAKES
Our research indicates that CFOs know there are limitations in the payables process, but accept those confines due to zero alternatives. After all, someone has to approve those invoices, right? And, yes, there are many applications that provide procurement analytics, but those tools are subject to the same constraints mentioned above. As much as data and workflow automation has improved P2P, it still masks some fundamental challenges. We think now is the time to admit to the flawed nature of invoice approvals, stop making the same mistakes and move on to making things better. Will you join us?