Category Archives: Process Transformation

Invoices are still costing you money!

Six Years Ago we pointed out that:

  • You’re probably overpaying your suppliers by 1%
  • There’s a 2 in 3 chance you’re being defrauded of 2% of your revenue
  • Up to 75% of your AP overhead is completely wasted
  • At least 1 in 10 invoices are erroneous
  • One Million Invoices requires at least 100 standard 4-drawer filing cabinets

But things aren’t much better.

  • PRGX and other leading recovery firms still recover 0.3% of total spend on average which means the over-payment average is still the same using the rule of thirds (1/3 not recoverable because contracts expired, 1/3 goes to the audit firm in fee based recover, 1/3 goes to you)
  • PwCs recent Public Procurement:: Costs We Pay for Corruption, average loss to fraud is 3.5%, with a UK average of 4.76% … and while private companies might think they are better off, the cyber crime economy keeps reaching record highs (and is 1.5 Trillion in the US alone) and private fraud losses in the UK almost equal public fraud losses according to a CIPS study
  • Based upon recent data from the 2019 Payables Friction Index, a good portion of your AP overhead is completely wasted
  • The number of erroneous invoices hasn’t decreased

Furthermore, according to the 2019 Payables Friction Index, in collaboration with Corcentric, PYMNTS surveyed 2,570 firms on AP processes and found the following:

  • Paper Still Dominates
    • 81% of firms still use paper checks to pay invoices
    • 45% of firms still use cash
  • e-Cash is still in the minority
    With the exception of ACH, that has finally penetrated more than half at 62%, all other methods (including credit cards / p-cards) are still less than 50%!
  • e-Invoices are increasing
    but up to 34% of invoices are still paper (in organizations under 100M in particular)
  • OCR, on average, is still under 50%
    (as low as 37% in organizations under 10M) and, more importantly,
  • utilization of basic automation, ML, and/or AI is even less
    when modern RPA + ML systems exist that can automate e-Invoice processing through simple rules, m-way checks, bounce backs for correction, completion, and verification, to 98% … and
  • approval times of one or more weeks averaged between 16% and 45% across respondents, depending on the number of approvers needed and organization size … when the majority of invoices should be auto-processed and auto-approved …

In other words,

  • You’re losing money on overhead,
  • You’re losing money on early payment opportunities,
  • You’re losing money on over billings and duplicate billings, and
  • You’re losing money on fraud …
  • … when the majority of this loss is easily preventable!

So why not get a modern e-Invoicing solution, standalone or part of a S2P platform, and stem the bleeding and use that money to hire more A-class talent to identify long-term strategic savings build on a supply resilience strategy?

Driving Procurement Visibility: Why & How


Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in sourcing, and brings some unique insight on the topic.

Nobody ever suffered from too much clarity in their personal lives, and the same is true from an operational standpoint. Procurement teams that run most efficiently typically have a high degree of visibility – they use this view to identify cost cutting opportunities faster, and communicate them more effectively to get the job done quicker. They also don’t suffer the lost opportunity cost of letting maverick and tail spend savings slip through the cracks.

But I’m not telling you anything you don’t already know. For most organizations, the business case is already clear for increased visibility – the challenge is attaining this increase and using it to improve Procurement practices. So, how do we do it?

Keys to Better Visibility

Strategies for improving visibility can be broken down into three groups: Focusing our efforts on People, Process, and Technology will set the stage for the improvements we need.

Are Our People Set for Success?

The first step we must take is ensuring our human resources are up to the task. There are plenty of skillsets your team already has in place that are mission critical – strong negotiating skills, relationship management, and the ability to drive change are our bread and butter. What about data analytics, statistics, or tech-based skills needed to interact with the latest data management and visualization toolsets? These aren’t skills every Procurement team has readily available.

Closing this gap may mean bringing in outside hires. On one hand, we can quickly assimilate the skillsets we need by bringing in data scientist and analyst roles. On the other hand, this can be a tough sell internally, especially if you’re building a brand new data practice. The ROI will certainly be there in the longer term, but it may take some time to get to that point.

Another direction is to grow internally. Review the members of your team and assess their ability to pick up data analytics skillsets. At the same time, work with your IT team to understand what building up this practice will mean, and utilize their expertise to do so.

Do Our Standard Processes Encourage Visibility?

The best resources will still get hamstrung if they have to stick out outdated, cumbersome, or bureaucratic SOP. If our processes aren’t built from the ground up with visibility in mind, odds are good that they’ll pose a challenge down the road.

How many steps are there from the time a purchase is requested to a PO being generated to a supplier getting that order? I’ve seen some complicated processes built around this staple of Procurement activity, requiring the input and effort of multiple team members, stakeholders, and ultimate product/service users. Despite the heavy lift, everyone’s actions are siloed, with visibility only to the point of their own sign-off.

We need to rethink SOP – simpler processes requiring the effort of fewer resources (yet open and visible to many) is key. This is especially true any non-critical, easily standardized purchases. Anything we can do to automate these purchases or implement catalogs to support buyers is a win.

Do We Have the Right Tools in Place to Succeed?

Lurking behind both our People and Process goals is the set of technology tools we need in order to function. As with traditional processes, technology platforms and practices built without visibility in mind could become a bottleneck.

Before even considering the tools, themselves, think of the data they are used to marshal. It isn’t uncommon for these data sources to be diverse in terms of physical or logical location, ownership, update frequency, and other key variables. Implementing a master data management (MDM) methodology solves this issue by establishing a centralized “golden record” that serves as a single point of reference. This way, everyone has the exact same view of data, and knows exactly where to go to find it.

As far as important tech tools go, we’ve already covered the business case for a few. Are platforms in place to establish proper Supplier Relationship Management? Do we have an electronic procurement system that supports and promotes the use of PunchOut catalogs? Have we ingrained unified communication platforms into our processes to ensure proper communication at every step? Have we built dashboards that actually act like dashboards (offering an at-a-glance look KPIs instead of cramming a bunch of numbers on a screen)?

The Benefits are Clear

It is far easier to describe the steps above than it is to enact them. The road to improved visibility isn’t short, and requires more than just process change – better visibility requires an organizational mindset change from everyone involved in the Procurement process as well as those that support it or depend on it.

Yet the benefits are clear. Better visibility is critical to strategic sourcing and shines a light on all of the dark spend that our teams would jump to address… if only we knew about it. It also helps to reduce soft costs by streamlining our process, cutting out wasted time and energy to maintain manual, opaque practices.

Laying the groundwork today will ensure that our teams move into 2020 in the best position possible to impact our organizations.

Thanks, Brian!

Dear Procurement: You Aren’t Nearly As Advanced As You Think You Are

One of the best presentations at Ivalua Now Paris last week (which the doctor summarized in a post over on Spend Matters UK on how the conference was A Huge Success and a Testament to their growth) was Duncan Jones’ presentation on Successful Procurement Transformation that summarized a recent survey on enabling smarter procurement that clearly proved what the doctor and other leading analysts already know: most Procurement organizations believe they are considerably more advanced than they are.

The survey asked Procurement departments to rate themselves as beginner, intermediate, or advanced. The results, which, unfortunately were not unexpected, indicated that:

  • 65% of respondents said they were advanced,
  • 31% said they were intermediate, and
  • 4% said they were beginner

When the reality is that, according to Forrester

  • 16% of respondents are advanced
  • 24% of respondents are intermediate
  • 60% of respondents are beginne

On the Forrester scale which, by the way, is not as arduous as the scale used by the doctor (but we’ll get to that in another post). In other words, four times as many organizations said they were advanced as were actually at that level. So if you think you are advanced, there is at most a 1/4 chance you are advanced and at most a 2/3 chance you are intermediate or better.

This means that you as a Procurement organization need to take a step back, get a third party evaluation, and understand the reality of where you are. It’s totally okay if you’re not as advanced as you think you are because neither are your competitors. And, in fact, if you are willing to get an honest third party assessment and use it as the foundation for improvement, you are way ahead of your competition which still has their heads in the sand like an ostrich. Because, thanks to modern platforms and well understood best practices that can be efficiently experienced by efficient consultants who have been doing it for a decade, you can master intermediate levels of performance quite quickly, and that puts you in the top 40% in a very short time-frame. And it often doesn’t take a lot of improvement to see significant savings, process improvements, or value generation. (With many more tangible improvements to come as you embark on that first 3 to 5 year transformation journey.)

The key to advancement and tremendous success in Procurement is simple:

  • understand where you are
  • accept where you are
  • put a realistic plan in place for mid-term transformation (3-5 years) with well defined milestones along the way
  • commit to change
  • monitor, measure, and stay on track

Now that the best S2P suite providers can roll out enterprise implementations in a quarter, you can enable processes that lead to significant ROI in 6 to 12 months, and take it step wise from there. But it all starts with accepting the reality and committing to change. The system, the process, and your hard work will take care of the rest.

And a big thank you to Duncan to proving the reality!

Get With the Program!


Sourcing only identifies value. But value is not realized until it is captured. Capturing value requires each purchase to go through the system and be realized as a perfect order — the right product at the right place at the right time for the right person at the right price using the right delivery method, and so on. In order to make this happen, an organization has to do more than source — it also has to execute, track, report, and correct. Otherwise, it will fail to realize 30% to 40% of negotiated value (which is a statistic that has been well known for almost a decade).

However, the only way an organization can properly source, execute, track, report, and correct procurement operations is through proper program management, which is much more than just executing an event, negotiating a contract, and filing it away in the contract management system. It’s taking that e-paper and making an e-process out of it, preferably in an integrated Source-to-Pay platform that can insure each step of the program is followed.

This requires a program-management based platform, something which the average Procurement organization does not have as most first, and even second, generation sourcing platforms did not have any real program management built in.

And when one thinks about what is involved when one tries to consolidate the messy and muddled functionalities scattered across the ERP, analytics, invoice processing, contract management, supplier management, and other supply management platforms across the organization, supply program management can be a difficult and complicated task. The solution of which is an effective program management strategy, backed up by an appropriate platform-based solution.

To find out how to get started, download the doctor‘s latest white paper on The Importance of Program Management For Savings and Value Realization”, sponsored by SynerTrade. The read will be worth your time.

Process Transformation: How Do You Get it Right? Part VI

Two weeks ago, we talked about how to drive technological advances, because it’s one of the critical three T’s of Supply Management success (with the other two being talent and transition to better processes). But technological advancement is not enough if your processes, to be blunt, outright suck harder than a Hoover. That’s why, as the Big C’s say, you will need to achieve some “process transformation” if you ever want to become best in class (and why each of these Big C’s claim to have the best advice [for a price] to help you along your journey).

However, as we outlined in detail in our first post last week, it’s very difficult to tell if any of the Big C’s have WHAT you need when, for example, the difference between the four-step framework promoted by one of these C’s (PwC, although SI could have picked any of them … and we do seriously mean any one of them) and four of the first eight random mission statements generated by the mission statement generator at cmorse.org (which is almost as good as the now defunct Dilbert mission statement generator) is pretty hard to discern!

Then, as outlined in our second post, we made it clear that what you really need is a simple process that starts with understanding where you are now, moves on to figuring out where you want to be, creates a plan to get there, and, finally, executes the plan. Then we began our series in earnest by outlining what is involved in understanding where you are now (which is more involved than you might think), which often doesn’t require a team of 10K-a-day consultants, continued on by specifying how you go about figuring out where you want to be (which is often more difficult than one may think), discussed how you how you put together the plan, and then, finally, in our last post focussed on execution — which is always harder than you think.

So where does this leave us? Frankly, with a focus on Adoption, Adoption, Adoption, Adoption. Just like Ballmer used to go hysterical for developers (even though anyone familiar with Brooks’ work on software engineering and The Mythical Man-Month knows that sometimes less is more, especially when you have top talent), you need to get hystical about adoption. If the software is only used by 25% of the people, and even these people aren’t using it all the time, it’s not worth whatever deal you got on it.

And adoption needs to start day one. The users who need to use it everyday need to be involved in the plan from inception through execution. From day one, the cross-functional team needs to include a representative of every user group who will make sure key processes are supported, usability is high, and concerns are met — and if necessary, ensure you sacrifice the few “power features” that only a few will use in favour of the “adoption features” that will ensure a mass roll-out. (Remember, for highly specialized needs, there’s always a point-based best-of-breed solution out there you can get for the power users. And sometimes the ROI from getting two solutions [even at twice the cost] outweighs the ROI from a single solution. Remember, ROI is only X/4 with a 25% adoption rate. With 100% adoption, it’s X, so even if you have to pay 2X for 2 solutions … you still get twice the return.)

So focus on adoption during your process transformation efforts and you will truly achieve process transformation and the results you desire. Otherwise …