Don’t drop the baton between your processes
I have to confess, I am excited about the Olympics which start tonight, especially as I have tickets for the Athletics including the Sprint Relays. There’s something exciting about the skill and drama of exchanging the baton at top speed, and many top class sprint teams have crashed out of major championships by failing to execute a successful baton exchange. Even when you have Usain Bolt in your team, if you miss an exchange you are out.
But relay races are not the only place where a poor handover can lead to failure. In the world of procurement we are running the second leg of a four lap relay. Procurement must optimize its handover from sourcing activities, and without breaking stride, hand back over to Finance for Invoice Reconciliation, with Payment running the anchor leg. Just like both of the US Relay squads at the Olympics in Beijing, one misplaced handover and disaster ensues. In the world of Business Processes, this inability to execute a smooth handover is indicative of “silo-thinking”.
Handover 1 : Sourcing to Buying
Its surprising how many organisations see mis-steps here, because their two process do not use the same system. Look at that gap between Source and Buy. There are two ways this handover can go awry: you are either sourcing and not buying from your nice new contracts (which is a waste of time), or you have automated the buying of items which haven’t been sourced properly (which is a waste of money)
Handover 2 : Buying to Invoicing
To make sure this exchange goes well you need to make sure that all invoices have something to reconcile against. This may be a Purchase Order, so some companies attempt to implement a “no PO no Pay” policy. But this has limited effect for types of spend where the requester doesn’t know all of the information up front, and invoices need to be created which can be reconciled against a Scheduling Agreement, a Service Sheet, a Milestone or a Travel Authorisation.
Handover 3 : Invoicing to Pay
We sometimes call this Buy Right Pay Right. This handover can go wrong if the payment terms on the invoice are wrong, or the banking information from the supplier is incorrect. A poor process here may lead to a supplier not getting remitted funds correctly, which could put them in financial difficulties. Also, depending on the size of the supplier, different payment strategies might be needed: Supply Chain Financing for your largest trading partners, a Dynamic Discounting capability for mid-size companies and a PCard for one-off purchases.
So how can you make sure you can move the baton successfully round the track, all the way from Source to Pay to get that medal? Sprint champions like the Jamaicans focus on individual excellence, but also work hard on their handovers. Procurement professionals need to choose the optimal cloud solution for each of their processes, but also a technology that allows information to flow cleanly from one to the other.