Machinery manufacturer Buhler used to struggle through the procurement cycle, thanks to difficult multilingual expenses. Switching to a dedicated platform enabled the company to automatically extract the data it needed, no matter which currency or language was used. This decreased the expenses section of their p2p cycle by a whopping 58%. Pairing this with tackling the more common p2p challenges can only lead to exponential efficiency. Learn how to master the procure-to-pay cycle and use Trustpair’s ongoing monitoring to prevent fraud and mistakes. Request a demo to learn more!
Top five procurement cycle challenges
Here are the five top procure-to-pay process challenges that we’ve identified for 2024:
- Separated software systems
- Vendor due diligence
- Inaccessible data
- Policy non-compliance
- Payment Security
1. Separated systems
The p2p cycle is one of the most lengthy processes in business, involving a huge number of steps like:
- identifying needs (orders)
- negotiating contracts and cost
- purchase requisition forms
- purchase order forms
- managing invoices and payments, including three-way matching
- managing inventory, accounting, receipts, and more
For enterprise-level companies in particular, these steps could drag out vendor onboarding by up to a year. When companies opt for specialized systems at every stage, it takes 6-8 different procurement platforms to manage end-to-end performance. This stretches customer resources and wastes time since employees are left to manually transfer data from one to another.
So here’s the fix: opting for a system that fully integrates each process. This way, your procurement team can focus on the value-adding tasks, like making each purchase order, decreasing their manual workload and the chance of error. Choose procurement software with flexible integration capabilities for more security and efficiency: that way you’ll always be sure your data is reliable and hasn’t been modified by fraudsters.
Integrating procurement platforms
The solution is all about undergoing a digital transformation. It means packing in all the separated systems and replacing them with a solution. Employees should be able to input a step at one end, and the platforms can do the rest. Integrated p2p systems effectively handle end-to-end steps, from searching for vendors and onboarding them, all the way to receiving and paying the invoice.
When considering full-service procurement management platforms, organizations should consider the following factors:
- User interface: is it user-friendly (approval service in particular) so that the procurement team can navigate without issue?
- Data integration: does all of the information flow between different stages, processing automatically? There should be as little human intervention as possible: processes are much more secure when automated. If different team members intervene at each stage of the procurement cycle, it increases the risk of mistakes or fraud.
- Features: can this platform perform all of the processes you require? After all, the point of an all-in-one is so that you don’t have to switch between platforms. It’s all about specific business needs: the chosen system should fit the needs and expectations of the company. It should be adapted to its’ size, structure, and processes.
- Pricing: does the platform match your realistic budgetary needs? Keep in mind that it’s better to invest in premium software that will offer extensive features and capabilities than implement cheaper solutions that won’t cut it in the long run.
- Embedding capabilities: enterprise businesses usually work with many different solutions and systems (ERPs, TMS, etc), sometimes even different from one business unit to another. It’s important to make sure your procurement portal can integrate easily within your technical ecosystem.
2. Vendor due diligence
While shopping around for new vendors, it’s important to verify the information they are giving you. Due diligence is all about validating the company’s existence, location, beneficial owners, and even goods quality before you enter into a partnership. It’s also about checking this new supplier complies with your internal purchasing requirements: this could be company size, structure, annual turnover, years of activity, etc. Each business sets the bar at a certain level for new suppliers.
If companies fail to perform supplier due diligence properly, they could be at risk of invoice fraud attempts. Alongside company security though, partnering with a third party that has misrepresented their profits, work conditions or products can cause significant reputational damage.
For example, the UK government partnered with a Malaysian glove manufacturer for a PPE contract. But it came under fire when it was discovered that this manufacturer had previously been accused of using slave labor to make its products. This directly contradicts the government’s claim of condemning modern slavery – resulting in poor reputational backlash.
Automated vendor due diligence
Asking for the right information is at the heart of proper vendor due diligence since most companies won’t just hand over the keys to their systems. Collecting basic company and financial spending records is important here.
But companies should also attempt to assess the risk levels associated with potential partnerships – including political and reputational risks. To do this, check international business blacklists, politically exposed persons (PEP) lists, and lawsuit history. Moreover, social media and company review sites will help gauge whether the third party is working to fulfill their orders and obligations.
Trustpair is a fraud prevention software focused on payment due diligence. While the average account validation takes approximately 30 minutes, Trustpair does it instantly. We ensure that your supplier data stays healthy throughout the entire payment cycle and that your payments are processed to the right supplier, without any risk of fraud or mistake.
3. Inaccessible data
Another key challenge for the P2P cycle happens when organizations struggle to access their data. It causes poor visibility, meaning that decision-makers don’t have all the facts. In the short term, this could mean partnering with a fake vendor, over-ordering products, or letting the inventory department run dry.
But this can also have long-term effects, as consistently inaccessible data could lead to weak strategic decisions.
Making data available with the right tool
Every company wants to make sure that their data is working for them. But ensuring the information that you need is widely accessible could be easier said than done.
One thing that you should look at is opting for services based on automatically analyzing patterns and trends in the information you’re collecting. This way, you don’t have to rely on team members who may not know how to get the most out of your data. Instead, it’s automatically presented in the most friendly and compliant way.
One example of a company that optimized its data is Johnson & Johnson. In 2023, they transformed their data routine by creating a global template to suit the distributed nature of their teams. This information systems overhaul enabled the procurement team to analyze customers and suppliers in different jurisdictions with ease.
4. Policy non-compliance
“Non-compliance” is a term usually reserved for regulated companies. However, policy non-compliance refers to the internal standard operating procedures that every company holds, regulated or not.
Some of these p2p policies include the likes of:
- Contract negotiations before signing a new supplier
- Maximum price per unit policies
- Filling out a purchase requisition before external orders
- Minimum order quantities
- Delivery timelines (and what to do when shipments are late)
- Missing inventory procedures
- Invoice payment policies
Thus, whether you work in a regulated industry or not, every company has its internal protocols to contend with. Non-compliance can cause knock-on issues across the board, such as messy documentation. For contract and pricing negotiations in particular, straying from the internal policy could see your firm paying more than it needs to.
One severe example of policy non-compliance happened at Human Aid, the charity. In 2017, they were investigated after a significant number of financial records were either found to be incomplete, or non-existent. They were also deemed to have failed to adequately complete satisfactory due diligence reporting, a form of external non-compliance.
Establishing internal controls
Enforcing internal controls begins with buy-in from the top level of management. Leadership sets the tone on whether team members respect or ignore internal policies, and company culture needs to show that the rules apply to them, as well as everyone else. Internal control is about having specific rules to ensure security and transparency but also having procedures in case these processes aren’t followed. It’s also about having frequent audits to make sure policies are respected.
Moreover, establishing automated controls can help team members follow the rules set forth. For example, colleagues could be prompted to request beneficial ownership information with an automated notification after they begin a new vendor entry. When the vendors add this information to your form, it’s automatically integrated into the supplier database and accounts payables software for future management.
5. Payment security
Another key challenge that we’ve identified in the p2p cycle for 2024 is around the purchasing stage. This covers the security of the transaction itself.
Payment security in p2p represents a dangerous challenge: the threat of cyber attackers. Payment fraud can threaten businesses from all angles, from customer chargebacks to employees faking their expenses. For procurement teams though, the main issue is ensuring they’re paying into a valid bank account (instead of one corrupted by fraudsters).
In 2023, 96% of US businesses were targeted by at least one fraud attempt. The entire payment cycle and supplier lifecycle is susceptible to being infiltrated by fraudsters, especially now that fraudsters use cutting-edge software to commit cyber-fraud. They can easily sweep in undetected and change supplier data without anyone noticing: businesses then send payments to fraudsters instead of suppliers.
Get all the numbers in our latest Fraud Report!
Validate payment details
Ever had a change of payment request? This can happen when fraudsters discover who your suppliers are, impersonate them, and attempt to collect their payments. It’s therefore imperative to check vendor information for every single payment, even if you’ve paid them before.
But attempting to do this manually, and with thousands of vendors, is virtually impossible. Rely on the Trustpair solution to automate your supplier account verification, and ensure you’re protected against paying into the accounts of fraudsters. Our software provides services like account validation automation, detailed visibility on risk analytics, and extensive customer support. We bring efficiency and security to finance and procurement teams.
Let’s recap the p2p cycle challenges
The top five challenges for p2p processes in 2024 are segregated systems, organization due diligence, inaccessible data, policy non-compliance, and secure, fast payments. To prevent these issues from affecting your business, invest in integrated platforms that make your data available, and automate the validation of accounts you’re paying into, with Trustpair. For more insights in P2P best practices, read this article!