Benefits of Procurement: What AP Teams Can Learn

by Angela Sarno

VP Marketing

Benefits of Procurement: What AP Teams Can Learn

What are the benefits of procurement? Before we get into those, we have to acknowledge the elephant in the room.

“Benefits” doesn’t exactly come to mind for many people when they think of procurement teams.

Historically, procurement is seen as the “spend gatekeeper” within organizations. We’re here to change that knee-jerk, pervasive thought.

Like our blog on what procurement can learn from accounts payable, this blog dives into what AP teams can learn from their procurement counterparts.

The Procurement Stereotype

Build and Strengthen Relationships with Suppliers That Support the Organization

Promote Cross-Functional Collaboration

Resources For More Insight into the Benefits of Procurement

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The Stereotype of Procurement

They seem to love to make you jump through seemingly endless hoops to get anything from printer paper to complicated multi-million dollar services agreements, all the while chiding departments who dare to spend outside of procurement’s systems and processes.

It can be maddening. We get it.

But let’s think holistically about the entire source-to-pay process (keyword: pay). Removing silos, and automating and securing parts of the chain can lead to saved time and effort. More importantly, they have one very key end result: risk mitigation. And with 71% of business email compromise attempts targeting account payables and procurement teams, risk mitigation is critical.

We’re feeling the spirit of removing the silos and working together to create something greater than the two parts. Below are the benefits of procurement that AP teams need to know, and how they can enhance those benefits to support their entire organization.

Build and Strengthen Relationships with Suppliers That Support the Organization

For many reasons, the past 18 months have led to procurement professionals taking a long, hard look at how they approach supplier relationships.

Specifically, they’re focusing on how to improve communication with suppliers, work through degree feedback programs, develop diverse suppliers, and make sure everyone gets paid on time.

To be clear, all of this effort is about risk reduction with third parties, the most critical responsibility a procurement team has. Just ask Yakut Akman, 40-year veteran on advising organizations about how to manage third-party risk. She’s also a recent podcast guest. Check out her episode below.

PaymentWorks Presents Risky Business Ep 5: Third Party Mgmt & Risk-A Primer

Procurement is on the hook to get the goods and services people need to where they need to be, and the right time. Additionally, procurement teams also need to make sure that suppliers are paid securely and on time.

In other words, one of the benefits of procurement is that these teams ensure that suppliers are taken care of. When suppliers are taken care of, your business or organization is taken care of.

How AP teams can support this function of procurement

It’s well past the time for accounts payable to see more in a supplier than just an invoice with some net terms. AP teams should ask how and what they can do to take more action to improve supplier relationships.

The supplier is helping your organization to do their work. AP and procurement make that happens–together.

“When you strategically source and you want to onboard that supplier, this is the part where you’re going to want to have information about that supplier that is not just data about them getting paid,” said Pierre Mitchell, Managing Director and Chief Research Officer at Spend Matters.

“This is where a lot of friction occurs because you have this kind of segregation of duties between purchasing and payables. You do that so that there’s no fraud…AP may have historically done some of that kind of risk and compliance work, but that is really becoming more of a broader procurement responsibility to basically own the supplier relationship and all the data in it, even though some of that data will be delegated to groups like AP.”

What does all of that mean? That the responsibility of strengthening relationships with suppliers is shared. And in sharing, those relationships can become better and more favorable to your organization.

Action items for AP teams

Here are a few ways that accounts payable teams can support this benefit of procurement, aka strengthening supplier relationships:

First, meet regularly. Hold check-ins with the procurement team about new suppliers coming on board and any issues with current suppliers you could help address. Regular meetings are also a great time to talk about strategic initiatives that you can both tackle, such as implementing a supplier diversity program.
Second, prioritize mitigating fraud risk. Fighting fraud must be an organization-wide effort. Fraudsters try anything and contact anyone in your organization to gain trust and/or access and scam you out of money. Work with your procurement colleagues to stay vigilant about fraud. Swap real-life examples about fraudsters you’ve spotted and stopped, or even not stopped.
Third, participate in Vendor Management Appreciation Day. We invented this holiday because the vendor desk is in dire need of organization-wide recognition, better pay, and more reasonable workloads. This is a six-month celebration (with free gifts every month!). Join us!

Promote Cross-Functional Collaboration

Another one of the benefits of procurement is that it’s ripe for breaking down silos with other teams, especially AP.

We’re talking about category management and supplier management overall, across the entire vendor lifecycle.

Historically, procurement has been very targeted in its approach to impacting specific source-to-pay processes one at a time. AP, on the other hand, has been more lifecycle-driven in its approach to invoicing from end-to-end.

But, as we have clearly seen over the past 18 months, that separation is not as stark.

Now, both functions need to work together to create systems that are successful and seamless from start to finish. This will benefit both your suppliers and your organization.

“Not all goods and services should be managed the same,” Mitchell said. “Some areas are going to need higher controls than others, because they’re higher spend or they’re really sensitive. Other areas, [procurement] may not focus as much, for instance office supplies. For the processes for how to manage those, AP can take the lead and really tailor.”

To sum up, dividing supplier management responsibilities among procurement and AP is a strategic move to make.

Finding the right cut lines for ownership and process, so you have controls in place, while still leveraging the strengths of each team will create success from the top to the tail on everything your organization spends.

Action items for AP teams

First, look critically at your suppliers. Get together with the procurement team and review your suppliers carefully. Which ones need higher or more specialized controls? Those will stay under the ownership of procurement. Which ones require lower controls? The AP team could begin to manage those suppliers and use their experience to add even more value to those relationships.
Second, help inform the selection of future suppliers. One of the strengths of AP teams is that they can provide data insights on spending patterns, supplier costs, and payment histories. This enables procurement make strategic decisions about supplier selection and contract negotiations. Additionally, leveraging this unique strength of AP builds the cohesiveness that many organizations are missing in their vendor management strategy.
Third, participate in Vendor Management Appreciation Day. This bears repeating. We cannot emphasize enough the critical significance of this holiday. Start here.