Explaining SaaS Procure-to-Pay to Finance: The Return of the Sub-ledger

An emerging best-practice as solutions for Procurement have evolved is that transactional procurement (requisitioning, order management and receiving) should be tied closer to accounts payable processes (invoice reconciliation, remittance scheduling and payments). As a result, we've seen a number of solutions around the P2P (Procure-to-Pay) über-process come into being over the past few years. But despite the reality of very real capabilities (and case examples) out there in the market, promoting and explaining the concept to both groups collectively is not always as easy as it should be.

In a past life, I was tasked with trying to explain the need for companies to consider P2P as one process and not as several distinct, loosely integrated processes. It was a tall order, given that most companies have approached the space by using applications from ERP and/or niche vendors for each individual process noted above, and then stitching them together with substantial manual activities. To complicate things further, each constituency within the organization has grown to see the P2P space through their own set of subjective assumptions.

One way I used to approach Finance was with my slightly sardonic, "Return of the sub-Ledger" story:

A long time ago and far, far away (Venice during the Renaissance, I think), double entry accounting came into general use when enterprises balanced their books using ledgers. Simple enterprises could use one ledger but the more complex ones would capture detail in sub-ledgers and then roll-up the balances periodically to a G/L (general ledger). A couple decades ago, accounting software and computers made it possible for the G/L to take on greater detail and complexity (largely displacing sub-ledgers).

This made sense for processes existing fully within the company but tended to treat processes on the edge of the enterprise like so many stovepipes jutting out of the G/L. Procure-to-Pay (P2P) processes are a good example of the latter. What's occurred lately is the "Return of the sub-Ledger" in the form of P2P methodologies that capture the interaction and detail of P2P in one place and balance with the G/L only upon conclusion of the transactional process.

Beyond Star Wars references, the story provides a handy way to introduce P2P to a Finance audience. It's a big change, no doubt, but so was the explosion in complexity of the G/L and Charts of Accounts. The best-practice that needs to be sold throughout the organization is to solve the challenges of P2P as a system and not a daisy chain of individual processes. The sub-ledger concept helps make the case with Finance (and, peripherally, with their henchmen in IT).

Paul Noël

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