You’ve implemented a S2P software solution and now all your procurement worries can be put to rest. From now on it’s smooth-sailing. Hopefully, not many organisations think so. The implementation phase is just a step towards transforming your procurement function into a valuable corporate asset. It is, however, a crucial step which, if not done properly, can jeopardise the whole S2P process.
Organisations that have implemented a S2P software solution need to make sure it is continually improved and delivers on its original business case. In doing this, aftercare is extremely important and can help solve issues with the system before they become problems.
There are ways in which you can evaluate your system’s performance, helping you analyse your production data and identify areas where the system is providing real value and also areas of opportunity for improvements to be made.
XoomTune is just one example of a tool that can help identify issues and ensure benefits are identified and achieved from your S2P solution. You can read more about what it is and how it works here.
From experience, we know that it’s easy to overlook problem areas and therefore make do with a solution that doesn’t deliver at its full capacity. And in the end, it might seem that you didn’t make the right choice with your S2P software solution, or even that this type of solution isn’t a fit for your organisation. It might be the case, but more often than not it isn’t.
There are multiple areas where leveraging the standard functionality would allow a more efficient and optimised system, creating improved supporting processes and behaviours. But companies often don’t have the internal resources or time to optimise their solution.
An in-depth analysis of your system will help highlight opportunities for improvement by identifying the root causes of problems. These causes can range from low contract visibility and control, risk associated to payment terms, not making use of electronic POs and invoices, to not leveraging functionalities from new system releases.
In this 2-part blog series we will be focusing on 2 of these improvement opportunities:
When the purchase order is created after the invoice has been submitted or after rendering the goods or services, the process is referred to as issuing a retrospective purchase order. To put it simply, invoices that do not have backing documents are retrospective. This is a very common practice seen across organisations and there are multiple reasons as to why they appear. Most frequently, retrospective POs are generated due to the company’s policy of “No PO, No Pay” but also to try to “comply” with the audit process.
Retrospective POs are considered a compliancy breach in the handling of invoices. Furthermore, this impacts the efficiency of the Accounts Payable team as the invoices would have to be handled more often.
There could be various reasons why this happens: the requestor may not be aware of the PO creation process he needs to follow or may not understand the benefits of a PO. Also, he may not fully understand the requirements for the acquisition or may not have all the required information about the supplier in order to generate the PO. It may also happen the acquisition is an urgent or unpredictable one and the requestor may not have time to wait for the supplier to provide all the needed information. In most scenarios, the retrospective PO is going to be based on information from the supplier’s invoice.
We already mentioned some of the consequences generated by retrospective POs. In addition to those, companies need to be aware of the potential for savings not achieved due to them. These can be related to not negotiating contract terms and not benefiting from discount payment terms.
However, it all comes down to lack of knowledge and guidance from the organisation, as the requestor may not be aware of the potential for savings.
Another important consequence to keep in mind is loss of compliance within the organisation’s buying process, which can leave the organisation more prone to fraudulent purchases and vulnerable to risk.
First of all, companies should be able to identify these situations as soon as possible so that the appropriate measures can be taken, thus minimising risk exposure. It’s important to understand that having a S2P software solution in place reduces the risk associated to retrospective purchase orders and gives the organisation the necessary tools and data that makes it easier to identify these situations. With a little help from third party tools and an experienced team of consultants, opportunities can be quickly identified and problems can be solved.
Second of all, after you have identified the problems caused by retrospective POs, it’s important to understand the reasons behind them and the solutions that can be implemented:
Stay tuned for part 2 of our blog series as we uncover more opportunities for improvement from running an in-depth analysis of your S2P software solution. Next we plan to tackle low levels of receiving electronic invoices.
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