Procure to Pay in the Networked Economy: Part 1

In this first of three posts, James McDonald, director of procurement operations, ING U.S., discusses procure to pay transformation and the positive impact of aligning procurement and accounts payable. James will discuss the topic in more detail in his session, Aligning Procure with Pay: Bringing Procurement and Finance Together for Real Results, at the PayStream Advisors Innovate 2013 Conference, Sept. 16-18, in Charlotte, N.C.

ING U.S. is an early adopter of procure to pay automation

Why did ING make the move so early on, and what were key elements of the business case?

ING is the result of many acquisitions, and the firm had no managed procurement function or centralized accounts payable group. In the early 2000s, ING saw this as an opportunity to eliminate redundancies, consolidate spend, and gain new leverage from these acquisitions by bringing procurement and accounts payable in alignment and introducing automation across the procure-to-pay function. The opportunity to implement an integrated procure-pay solution suite that could link back to sourcing while enforcing compliance to purchasing policies, provide visibility into spend across all business units, and automate the invoice process were key components of the business case.

PO invoicing is important to ING

What steps have you taken to drive higher volumes of PO invoicing?

About 60 percent of our spend – essentially any controllable expense where we can assign a general ledger and commodity code – requires a purchase order. We also have catalogs for certain commodities, and when buyers order off a catalog, this really streamlines the approval flow. Plus we know that the goods and service being purchased are from the right supplier at the right price, and this will automatically be applied to the invoice coming into AP. This drives a touchless process end-to-end, from procure to pay.

In addition, we have strict rules governing our PO policy, with training for all employees on how to follow the process, so support across the company is very high. Whenever a PO invoice comes into accounts payable without the PO, it’s flagged as an exception, and the requester must create a PO after the fact. This serves to discourage people from not following the policy. The same holds true for our suppliers. They know that PO numbers must appear on their invoices, and when they don’t follow our policy, their payment is delayed. That’s quite an incentive for them to go along with it.

What advice would you have for organizations that have low PO usage?

Begin by identifying the types of expenses, categories, and commodities where you need increased control. Then, define a clear procure to pay policy and promote it broadly. Have consequences when people don’t follow the process. And it’s very important is to have senior leadership support. They must know the value of invoicing against POs and other aspects of compliance, and commit to supporting the policy.

Next week: Part 2 of my Q&A with James McDonald.

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