Compliance Matters: Analyzing the Future of Procure-to-Pay (Part 2)

In the first post in this series, I looked at a couple of Andrew Bartolini's predictions about the future areas of P2P enhancements around specific compliance areas. In this post, I'll continue the discussion; digging first into the area that Andrew calls "Contract/Price" compliance, but that I often label execution compliance. In other words, how do you make sure that the price presented to you in either a P2P environment for supplier-specified items, a VMS/services procurement solution for services procurement, or an ERP purchasing screen for highly specified materials is the correct price -- not to mention the actual price that is invoiced and that you eventually pay.

Andrew is mostly correct in his assumption that the main compliance issue regarding payment is not "in the duplicate or over-payments made by AP, but rather with issues between the contract pricing and the PO pricing" but what he labels the checking, matching and requisitioning process that collectively tie back to an underlying contract. In the future, Andrew suggests that eProcurement systems will be able to directly link with contract management systems to stop "mispriced requisitions" from becoming POs. I have personally interviewed a number of procurement technology leads at companies that have tied together different third-party tools to enable this level of contract compliance today, yet I agree that it's not yet standard across the board. Incidentally, the innovation here often comes from the contracts side rather than the P2P side, but that's another story.

More important, the problem is not just one of contract management look-ups and real-time calls. It's also one of control over the requisitioning process, even in a punch-out situation (e.g., that an add-on SKU or service such as a warranty, which is additional, is not added onto a requisition for a given SKU). Moreover, it's making sure that new SKUs or services not necessarily represented in a previous contract or MSA are priced correctly. A standard bait and switch trick in the eProcurement world is to replace one an item (that "no longer exists," as a supplier might tell you after the fact) with an identical one or near identical one with a new SKU that miraculously comes in at a higher price.

The bigger compliance challenge here is one of checks, balances, visibility, transparency and real-time integration that cross supplier self-service tools for catalog management, punch-out capabilities/visibility and yes, contract management integration.

Jason Busch

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