Friday Rant: Should We Take a Surgical Strike to A/P rather than Blowing it Up?

I recently posted another Friday Rant that suggested we should truly consider blowing up the A/P function and starting from scratch. The piece engendered a bit of controversy, although I must admit, I was hoping for more debate. The good news in this regard is that Pete Loughlin finally took the bait, penning a response and rebuttal of A/Ps rule in most companies. In the post in question, Peter notes that he feels a need to "defend AP" because "much of the criticism is unfair, and especially when it comes from purchasing." Peter qualitatively frames his argument and then backs it up with some interesting data.

Specifically, "In a recent review of late payments by a company that shall remain nameless, the following root causes were identified: invoice errors (incorrect P.O. number quoted or mismatch in price for example) 40%, receipting errors (receipt of goods not confirmed properly) 40%, A/P error 20%." Peter goes on to suggest that this case example suggests that 80% of A/P related issues fall outside of A/P's control. Moreover "when purchasing bleat about the incompetence of A/P because a supplier has put them on hold, more often than not, its because the receipting process is broken or the supplier A/R department has a hair trigger on the hold button and doesn't respond to A/P invoice queries."

Even though it seems that Peter would rather take a carrot to A/P in contrast to the plastic explosive I suggest to improve things, I do agree with him that "late payments is symptomatic of poor purchase to pay processes" in general and that "the only way to tackle this is to recognize P2P as an important strategic function that has the teeth to be able police process properly." I suppose (despite the Atlantic Ocean separating us) that Peter and I can both agree to disagree when it comes to the approach to remedying the A/P situation. Yet I still contend that A/P is a function better handled by a system than a team and that when automation nearly completely replaces Dilbert, the benefits that accrue will transcend far beyond labor cost savings.

Over to you, sir...

Jason Busch

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