Procure-to-Pay: How to prevent value leakage

August 20th, 2020
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New technologies have great potential to boost performance. However, procurement decision-makers are asking which tool they need to bring real added value to their companies. McKinsey helps us distinguish between creating and retaining value.

Creating value or preventing value leakage?

McKinsey distinguishes between two types of technologies:

  • Solutions that help identify and create value by providing better spend visibility and improving sourcing. These include automated expenditure analytics, category analytics and supplier selection solutions, for example.
  • Solutions that help prevent value leakage by boosting the Procure-to-Pay process and improving performance management. These include Procure-to-Pay or supplier performance management tools, claims-management systems and compliance-monitoring systems, for example.

How to optimise the Procure-to-Pay process

Procure-to-Pay solutions

Procure-to-Pay solutions, designed to support purely operational procurement activities, have evolved since the 2000s. Their capabilities have advanced and their scope has been extended.

Procure-to-Pay solutions of the future will be able to utilise vast amounts of data to support buyers in their day-to-day work, for instance by:

  • Creating predictive order configurations for repeat purchases.
  • Reducing order and invoice processing times.
  • Using standardised order templates.
  • Identifying potential suppliers for categories that aren't covered by existing contracts or catalogues.
  • Automatically aligning orders and invoices.
  • And the list goes on.

Automated compliance-management systems

Automated compliance-management tools serve as watchdogs, sifting through every transaction to identify, quantify and resolve value leakages. For example, they can identify purchases made using the wrong channels or when contracts have not been used effectively.

In the future, these systems will be able to automatically extract all of the conditions from contracts and match them against continuous streams of invoices, supplier activity, performance data etc.

Therefore, by optimising the efficiency of the Procure-to-Pay process and by curbing non-compliance, procurement decision-makers will be able to prevent value leakage.

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