Procure-To-Pay Analytics Make It Easy to Be Correct

Blog: Enterprise Decision Management Blog

I recently attended the Society for Collegiate Travel & Expense Management (SCTEM) 2018 Annual Conference. The conference had over 200 professionals who were sharing new ideas and recent successes. One of the benefits of working with universities is their emphasis on collaboration. Sharing ideas and best practices is strongly ingrained in their philosophy.

At the conference, I listened to many challenges as well as successful approaches that improved their outcomes. From these sessions, it was clear to me that the best way to enhance compliance and outcomes is to make the correct procure-to-pay path the one which is easiest to use for both your customers (employees) and suppliers. If you can make following your processes and using your tools the easiest way to accomplish what they need, then compliance will increase, and risk and costs will decrease.

Procure-To-Pay Analytics – Why don’t people follow the rules?

While there is always the possibility of rogue staff who are looking to scam the procurement system, the vast majority of employees want to do the right thing. However, while making purchases or booking travel is not their primary job, it is a necessary part of their job in order to fulfil their mission. People don’t want to have to get three bids, they don’t want to have to complete extensive paperwork, and they sure don’t want to have to wait weeks for either a needed purchase or a reimbursement for that purchase.

Therefore it is only human nature to be frustrated when faced with complex processes, tools which are hard to use and lengthy delays built into a procurement process. Sometimes staff may even forgo a purchase they need in order to do their job. At other times staff may look for shortcuts, even if the shortcut means bypassing the established rules. Most large organizations have also seen individuals split a single purchase into multiple payments so that each one remains below a key threshold that would trigger a more complex procurement process.

Organizations also see individuals buying items from an online website using a P-Card, even though the desired item is available for less money from a pre-negotiated contract vehicle. Why don’t people use the contract vehicle? Typically this occurs when the correct process takes longer, requires more steps, and/or the delivery of the item needed takes longer using the official process.

Procure-To-Pay Analytics – Changing the paradigm

Compliance is an important part of any procure-to-pay process. Policies, procedures, training, reviews and approvals are all put in place to maximize compliance and reduce the risk of waste, fraud, and abuse. However, these compliance steps also can make it more difficult for both your customer and your supplier to do business with you. For your customers, the harder the process is to navigate the more likely they will try to cut corners, or avoid making necessary, legitimate purchases. And not buying a needed item can cost the organization over time.

That is why it is important to utilize strategies that ultimately ease the burden on both customers and suppliers of the procurement department. These strategies can help avoid the following:

When processes become complex and time-consuming, the customer looks for ways to go around the normal procurement process, bypassing controls and potentially making purchases at a higher price.
If the procurement and travel functions are too cumbersome, ultimately employees can move to another university or organization where they don’t have this administrative burden.
When processes become complex for suppliers, they will pass along the cost of compliance in the form of higher prices.

Procure-To-Pay Analytics – Balancing Ease of Use and Compliance

With this in mind, an organization can increase voluntary compliance by striking the right balance between compliance needs with customer service capabilities. Most people have become accustomed to buying items from Amazon, and two days (or even two hours) later, the desired item arrives at your doorstep. For travel, staff are used to travel websites where, within a few minutes, a reservation for their flight, hotel and car rental can be completed.

By providing that level of support and communicating the processes to staff, there will not be an incentive for the customer to use an alternative channel. Most employees only bypass the official process because of the ease of an alternate method.

Customers don’t have a goal of bypassing the official process. They are focused on doing their primary job, which typically has nothing to do with procurement or arranging travel. By making it easy for them to make purchases or travel using the proper channel, they are more likely to follow the approved process, resulting in lower procurement costs and higher compliance. In addition, this streamlined system will also reduce costs for your suppliers, who will in turn pass along lower costs when their contracts come up to bid, saving the organization even more money. By making customers lives easier, your processes will win every time.

Want to learn more? Check out our previous posts on expense compliance:

The post Procure-To-Pay Analytics Make It Easy to Be Correct appeared first on FICO.