When it comes to the intersection of purchase-to-pay (P2P) and financing options, there is no shortage of available techniques to address early payment programs to suppliers. As David Gustin notes in the Trade Financing Matters research paper, Accelerating Early Payment: Techniques and Approaches for Accelerating Cash in the Supply Chain, these techniques can be generally segmented into buy-side and sell-side categories. Buy-side approaches suggested include: p-cards, dynamic discounting, static discounting and reverse factoring, commonly called supply chain finance. Further, “On the buy-side, large and mid-sized corporates want to optimize payment terms and maximize their working capital, while not punishing suppliers by making sure they have options to liquidate their receivables. Buy-side solutions require an approved invoice from the company to release cash.”
Category Archives: Procurement Financials
Supplier collaboration platform Tradeshift hasn't been well known for finance outside of accounts payable. It has offered dynamic discounting, to be sure, but the feature has been used by only a handful of clients. That approach is about to change, however, as explained in a breaking article on Trade Financing Matters. As of Tuesday, Tradeshift will partner with C2FO, giving it access to the financial technology company's working capital market as an internal app. It’s clever on the surface, analyst David Gustin and Xavier Olivera explain, but how will the partnership work in practice?
There’s a tremendous library of technology vendor-sponsored drivel regarding the supposed alignment of A/P and procurement. This nonsense talk often has the people involved in purchasing more closely linking transactional procurement activities to accounts payable automation. Despite the simplistic rhetoric, the unfortunate reality inside the majority of companies is that A/P and procurement are far from being connected, and any tech initiatives to date around A/P automation and e-procurement have largely happened more through happenstance than coordination. This begs the question: What can be done to bring A/P and procurement – and by extension treasury and other aspects of finance teams – closer together when it comes to purchase-to-pay, payables and working capital programs?
Over on Trade Financing Matters, my colleague David Gustin makes a rather astute observation when he notes in his post titled "It's a Fallacy that Procurement Manages ALL Spend", that “in very few organizations does procurement have total control of spend.” David gets his procurement mojo on – especially for a trade finance guy – when he further observes that: “[W]ho is best to understand the compliance issues around a complex bill of materials?…Take this one step further and how do you manage the connected commerce world for direct spend? We know EDI and EDI integrators have been doing it for decades – shout out to companies like GXS/OpenText, Sterling, etc. ..." Read on to see further insight from David and our analysis on this issue.
Spend Matters will hold another Ask the Expert webinar this Friday at 10 a.m. CDT. Ask the Expert: Helping Finance Help Procurement to Help the Business (Part 2) will feature Spend Matters Chief Research Officer Pierre Mitchell taking participants through provisional results of research conducted by Spend Matters and the Institute for Supply Management on the alignment between procurement and finance. This is Part 2 of this webinar series, based on the SM/ISM poll. Register today!
A couple of weeks back, I had the chance to sit through a great presentation from Chris Lynch, CFO of Rio Tinto, in London. Chris spent a good deal of time on his view of procurement and procurement success – and how to make it a success. But more generically, what can finance do to influence procurement? Perhaps the best place to start is where procurement and finance organizations are today. In a recent Spend Matters/ISM snap poll, we asked the question: What is finance’s role related to influencing procurement?
On Friday, May 15, Spend Matters Chief Research Officer Pierre Mitchell will lead an Ask the Expert webinar on the alignment – or lack thereof – between finance and procurement. The webinar is based of provisional results from a study Spend Matters and the Institute for Supply Management conducted on the relationship between finance and procurement in a company. You wont want to miss this! Plus and PRO members are welcome to sign up for this webinar.
What Does The CFO Think Of Procurement? Why Aren’t We Asking About Finance’s Impact on Procurement?!
There’ve been numerous studies that have asked finance executives to rate procurement effectiveness, with a focus on the credibility of the procurement-cited savings and whether the results are dropping to the bottom line (I even led such a study over 5 years ago). Not surprisingly, there are clearly some capability gaps here. But, is this really the right question to be asking finance folks? First of all, you have to consider why these gaps occur at all. We take a look at this issue in this post and also will be conducting a study in partnership with ISM on the topic.
Spend Matters welcomes this guest article by Santosh Reddy of GEP. I was at a conference recently where nearly 500 professionals from the industry gathered to share their thoughts about the challenges and solutions related to sourcing, procurement and technology in their respective companies. One of the speakers in those sessions touched on the topic of a strong relationship with internal audit that created both the opportunity and work for her sourcing team.
I have researched this topic and correlated procurement ROI with procurement savings (a major subset of the “R”) over hundreds of real-life benchmarked firms, and what I found is that the correlation is expectedly very high…to a point. Once you exceed an ROI of about 3, the correlation weakens and then ends. In other words, some procurement organizations get very expensive and inefficient without seeing a commensurate return on that investment. Others, however, spend somewhat more, but do get disproportionately high payback from those investments.
Spend Matters welcomes this guest post from Vroozi. As young companies experience success and begin to grow, they often discover that many of the seemingly smaller facets of the business process have been overlooked due to the minute number of employees involved in the procedure. As these companies begin to scale, these smaller aspects can develop into larger problems. Procurement is a prime example of a process that is too often overlooked and can cause issues within organizations that scale quickly without the proper system in place.
Last week, I attended Taulia’s Annual Customer Conference (Taulia Connect) in downtown San Francisco (see previous coverage from the event at the end of this post). I’m actually saving the best for last in terms of discounting and supplier adoption metrics that Taulia shared – check back next week on Spend Matters PRO for our analysis of enablement and adoption data from more than 3,800 suppliers. But in the interim, I thought it would be worth sharing a few company trends of note that we’ve not covered yet.