For cf os, the time to deploy procure to-pay software is now

For CFOs, the
time to deploy
procure-to-pay
software is now
JANUARY 2017
ENTERPRISE APPLICATIONS
HANDBOOK
FOTOLIA

2 FOR CFOS, THE TIME TO DEPLOY PROCURE-TO-PAY SOFTWARE IS NOW
In this handbook:
Editor’s Letter
E-procurement software
uses cloud to its fullest
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Procure-to-pay software
becoming a sophisticated
tool for CFOs
Expert tips for implementing
procure-to-pay software
HANDBOOK
Procurement management software cuts costs,
improves transparency
DAN RING, NEWS WRITER
Procurement is a critical function at any company largely because it can con-
sume a significant part of the annual budget. It’s also a major challenge.
Effectively managing outside suppliers and spending by departments while
keeping costs under control and maintaining open communications with
employees can be difficult. Increasingly, CFOs and business executives are
using cloud-based e-procurement software to streamline and automate B2B
transactions and create more openness. For example, Coca-Cola Bottling,
Agilent Technologies and Hallmark subscribe to Taulia procurement man-
agement software aimed at helping suppliers secure quicker payments. And
Coupa software is noted for preconfigured capabilities across procurement
and expense management.
E-invoicing is often a critical part of e-procurement. While e-procurement
vendors such as Taulia and Coupa are seeing explosive growth, there’s plenty

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of room for expanded use of electronic invoicing alongside the more sophis-
ticated features of procurement management software. Despite lower costs,
better cash management, fewer errors, risk mitigation and transparency with
e-invoicing, only 25% of invoices in the U.S. are electronic, according to a June
2016 report by the Federal Reserve Bank of Minneapolis.
While small organizations struggle to build business cases, large companies
have enough volume to benefit from invoice automation and greater technol-
ogy resources to support implementation. Meanwhile, the federal government
is seeking to increase the efficiency and cost effectiveness of its procure-to-
pay processes by mandating e-invoicing for companies that do business with
federal agencies, the report said. That could spark more change in the private
sector as implementation of e-invoicing to accommodate government suppli-
ers may pave the way for e-invoicing with business suppliers.
This handbook examines the many facets of procurement management
software as it becomes more sophisticated through advanced financing
and analytics features. Businesses need a buying strategy. Without e-invoic-
ing and e-procurement software, executives may be missing cost-saving
opportunities.

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E-procurement software uses cloud to its fullest
abilities
JIMMY LEFEVER, RESEARCH DIRECTOR
Procurement is a process in which an organization requisitions, orders and
purchases goods or services. The typical procurement flow involves defining
a need; seeking approval for a purchase; identifying the most suitable, well-
priced product; and managing the logistics of the order until fulfillment. This
process grows more or less complex depending on an organization’s business
structure, size or industry, but for any company, the ultimate goal is to procure a
product at the greatest value and the best possible price.
In traditional procurement, an organization would handle purchasing with
manual methods, allowing limited control and visibility into the buying pro-
cess or the logistics of the order. However, with the rise of technology and the
increasing focus on cost control in B2B activity, innovative organizations are
now using electronic procurement (e-procurement) software to complete this
process faster and more efficiently. The e-procurement tools available today
allow purchasing departments to better control how items are purchased, to

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build more strategic relationships with suppliers and to have full visibility into
the lifecycle of their orders.
PROCUREMENT PROCESS MADE EFFICIENT BY E-PROCUREMENT
SOFTWARE
Developers designed e-procurement software in the late ‘80s to
accommodate an increasingly globalized business environment, one in which
organizations had greater need for speed and efficiency in order to maintain
competitive advantage. The original intention of the software was to speed
up processes and increase visibility in purchasing. However, after the recent
economic recession, new operating challenges among businesses have
caused e-procurement software to become more versatile and more focused
on cost control. Businesses are increasingly turning to automation software to
control spend and maintain secure, cost-effective supplier relationships.
Leading e-procurement software include features for creating and manag-
ing requisitions, hosted catalogs and punch-out (supplier hosted) catalogs,
purchase order (PO) management, and receiving and reconciliation. E-pro-
curement software enables employees from many different departments to

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order the items they need using a centralized, controlled system; this includes
configurable approval workflows to ensure that non-procurement staff are still
purchasing according to company guidelines and budgets.
Users can build and optimize catalogs with competitively priced items, both
through hosted catalogs that are maintained in the buyer’s systems, and
punch-out catalogs that integrate with suppliers’ external product lists. When
orders are placed, the e-procurement system will allow a user to monitor the
PO throughout its lifecycle. When shipments are received, the system will
facilitate automatic goods receipt creation, order reconciliation, and match
invoices to POs and receipts to ensure items and payments are correct and in
sync.
WHAT E-PROCUREMENT IS
Procurement is a core function of the purchase-to-pay (P2P) process. There-
fore, e-procurement is a vital element of P2P automation software suites,
which include tools for purchase order management, supplier information
management, accounts payable, payments and spend analysis. Some provid-
ers offer a holistic P2P platform that streamlines the transition between each

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of these processes, while others focus on individual functions. In the latter
case, the standalone systems will be designed to easily integrate with other
P2P tools.
AND WHAT E-PROCUREMENT ISN’T
It is important to draw a distinction between e-procurement and another type
of purchasing software, electronic sourcing (e-sourcing). An e-sourcing tool
offers functionality for creating RFx (request for information, proposal or
quote) to distribute to suppliers, as well as for hosting reverse auctions that
award an RFx event to the supplier with the most competitive price. While
e-sourcing helps identify suppliers for projects and contracts, or for coopera-
tion in e-procurement catalogs, e-procurement software facilitates intelligent
and controlled purchasing from these suppliers.
THE EVOLUTION OF E-PROCUREMENT SOFTWARE
The changing economy and the rise of technology in the workplace have
changed the way e-procurement software is designed and packaged. For

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example, the first e-procurement tools were primarily on-premises systems
that were maintained by internal parties, and they were mostly only realistic
for the budgets of large enterprises. Now, cloud-based software is available
at more reasonable prices and is more accessible to the middle market. Cloud
technology is also a much better option for organizations with many locations
and decentralized processes, and the solutions require very little internal IT
involvement. In addition, punch-out catalogs give users real-time access to
suppliers’ inventories of goods, allowing them to get more accurate prices and
order information than was available with on-premises, hosted catalogs.
Another aspect of e-procurement software that has changed in the last
decade is the software’s emulation of modern e-commerce platforms, and its
use of big data to enable more strategic purchases. For example, many hosted,
punch-out and hybrid catalogs offered with today’s solutions are designed
to look and function very much like an Amazon-type online marketplace. An
e-procurement system will also draw from clients’ internal purchasing data to
optimize procurement with item suggestions and specialized searches, such
as suggesting a complementary or similar item to one that a user frequently
orders.

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In all, e-procurement can be seen as the wave of the future in back-office effi-
ciency. E-procurement software has the ability to allow organizations to save
millions in costs, having a direct impact on business revenue. It also enables a
company to transform their purchasing department from merely a cost center
into a strategic powerhouse.
Editor’s note: This is part one of a four-part series covering e-procurement software. Stay tuned for
part two, which will present use cases for e-procurement software; part three, which will show you
important features to look for in e-procurement tools; and part four, which will help you select the right
e-procurement software for your organization.
Procure-to-pay software becoming a
sophisticated tool for CFOs
LINDA ROSENCRANCE, CONTRIBUTOR
Put simply, procure to pay is the process by which companies buy and pay for
goods and services, from the initial decision to make a purchase to processing
and paying the supplier invoice.

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Procure-to-pay software aims to automate this process, enabling organiza-
tions to operate more efficiently, save money and reduce risk by providing
more financial controls.
But there are other, more sophisticated ways CFOs can take advantage of pro-
cure-to-pay software to realize additional benefits, including improving cash
flow, building up working capital, extending and managing credit, and perform-
ing analytics on spending.
“The most interesting thing to me is the link between analytics on spend and
machine learning and artificial intelligence to validate transactions,” said Dun-
can Jones, vice president and principal analyst at Forrester Research, based
in Cambridge, Mass. “Either to validate procurement transactions before they
happen or to validate invoices and invoice discrepancies.”
A basic use of procure-to-pay software would only replicate a manual pro-
cure-to-pay process, including approving invoices, Jones said. In contrast, an
advanced procure-to-pay (P2P) system would learn from what people do and
do not approve, either formally with business rules -- e.g., if certain conditions
are met, the invoice will be approved -- or informally just by “learning” what
people approve, according to Jones.

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“We replace the [basic use] with automated validations and analytics that
look for patterns after the fact, and then identify problems that need to be
addressed,” he said.
For example, managers can’t determine if an employee is overspending by
looking at one requisition at a time. They can only spot that overspending
by using procure-to-pay software to uncover the pattern of the employee’s
spending.
“It really needs a mindset change from finance. Some [Forrester] clients say
the goal they’re trying to get from procure to pay is compliance with policy,”
he said. “But I say that shouldn’t be the goal because the policy is not written
in stone. It’s your way to try and control spending to avoid waste. The goal is
avoiding waste. [Compliance] was the best you could do when you had manual
systems. Now that you have software, you can be much smarter.”
Coupa Software Inc.’s Donna Wilczek agreed that CFOs should be using pro-
cure-to-pay software to track this rogue spending.
“A lot of [the] time, people are expensing things that should have been on a
contract or purchased via purchase order,” said Wilczek, vice president of

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strategy and product marketing at Coupa, a cloud spend-management soft-
ware vendor based in San Mateo, Calif.
She told the story of a Coupa client whose administrative assistants were buy-
ing bottled water from Costco and expensing it. “Then the company imple-
mented Coupa and realized there was a contract available for bottled water
and they saved over $100,000 annually on bottled water for one location.”
CASH FLOW, WORKING CAPITAL BENEFITS CAN BE SIGNIFICANT
The power of procure-to-pay software lies not just in the information it can
provide about how organizations spend money, but in helping them leverage
that information to make better decisions, said Brian Rosenberg, CEO of The
Rosenberg Group, based in Las Vegas.
Procure-to-pay software can also help CFOs gain more control over cash flow,
according to these experts. “You can more globally be able to make adjust-
ments in your cash flow to pay vendors faster if there are financial incentives to
do so,” Rosenberg said.

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The cloud-based supplier financing system offered by Taulia Inc. helps buyers
and suppliers unlock that functionality by automating vendor discounts.
Taulia allows suppliers to get paid faster in exchange for giving buyers early
payment discounts, which can improve productivity, lower costs and automate
outdated business practices, said Markus Ament, co-founder and chief strat-
egy officer at San Francisco-based Taulia.
CFOs can ensure that that their supply chains have cash on hand when they
need it so they can remain competitive and profitable, he said. Companies
using Taulia’s software include Coca-Cola, PayPal, Hallmark, Salesforce and
Warner Bros. Entertainment.
Here’s how it works: A supplier for Taulia’s customers can request that an
invoice be paid sooner than the set term if it agrees to give the buyer a discount
on the invoice. The size of the discount varies according to when the supplier
wants to get paid. That’s called dynamic discounting, Ament said.
CFOs can also use tools that come with procure-to-pay software for treasury
functions, such as forecasting days payable outstanding and working capital,
said Jimmy LeFever, director of research and consulting at PayStream Advi-
sors, based in in Charlotte, N.C.

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In addition, CFOs can use the reporting and analytics capabilities of advanced
procure-to-pay software to help manage spend, according to LeFever.
“If I want to know how much my northwest regional sales team spent on pen-
cils the first week of October in 2015, I can drill down to that in a matter of sec-
onds,” he said. “In older, less advanced solutions, that would be a report that
would have to be generated and it would take a while. The more advanced solu-
tions allow you do that in six to seven clicks.”
Global Health Exchange’s most sophisticated customers -- suppliers as well
as buyers -- are starting to deploy analytics on top of their requisition-to-order
platforms, said Chris Luoma, vice president of product management at GHX,
based in Louisville, Colo., which offers procurement software for the health-
care industry.
Customers are also looking for other opportunities, whether it’s consolidation
of suppliers or strategic relationships with particular suppliers, he said. Health
systems that grow through acquisition, for example, find themselves having to
manage new supplier relationships at the departmental level.

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As the healthcare supply chain matures, CFOs are using technology to drive
great efficiencies for their organizations, according to Luoma.
“I need analytics tools to understand where I can go in and start to consolidate
basic services such as laundry, linens and electricity, all the way up through
more complicated arrangements where I’m going to a single supplier for both
my trauma and my orthopedics supplies,” he said.
With the analytics tools, the CFO can understand how the combination of
those lines of services allow the supplier to be more efficient and, as a result,
offer greater benefit to the healthcare provider, Luoma said.
However, it’s not just the analytics capabilities -- it’s also about the content.
“While our most sophisticated customers understand where they want to get
in terms of spend analysis and category management, they struggle with the
underlying data,” he said. “So, they come to GHX for content solutions that
allow them … to understand what they’re buying and who they’re buying it from
to consolidate that down.”

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REDUCING THE ‘FRICTION’ IN SUPPLY CHAINS
Extending and managing credit is important in P2P and business networks
because the “expense of credit comes at the point of friction and lack of
information in the traditional processes,” said Drew Hofler, senior director of
financial solutions at SAP Ariba, a procure-to-pay software and networked
marketplace provider based in Sunnyvale, Calif.
For example, when a supplier “factors” an invoice (sells it to a third party at a dis-
count) or goes for a line of credit, the credit provider will want assurances that
the supplier will be paid for the invoices it submitted to the buyer, Hofler said.
That information is often hard to come by in paper-based and non-networked
processes, he said.
“But inside of networks, we have years of data on the relationship between
that buyer and supplier that shows, particularly when that payment is being
executed through us … exactly how long it took a buyer to pay a supplier, how
often they miss that date [and] if there’s a long-term relationship between that
buyer and seller,” Hofler said. “All those pieces of information directly go into a
calculation of risk.”

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When buyers and suppliers have visibility into such data, “friction” and costs go
down in the overall system, he said.
That means when companies are on a P2P platform, especially one that is tied
into a business network, and have all this information, “they’re able to remove
artificial barriers and let liquidity flow where it needs to with as low a cost as
possible,” Hofler said.
“Maybe that money comes from their buyer who happens to have a lot of cash
on hand, or maybe it comes from a third-party funder providing liquidity to pur-
chase the invoice from a supplier,” he added.
In this case, neither the supplier nor the buyer is incurring any debt. Rather, it
is a flow of funds that is able to retire receivables and extend payables without
creating balance-sheet debt or the need for external credit, Hofler said.

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Expert tips for implementing procure-to-pay
software
LINDA ROSENCRANCE, CONTRIBUTOR
The goal of a procure-to-pay software system is to enable companies to auto-
mate the process of requisitioning and paying for goods and services.
Increasingly, organizations are recognizing the value of using procure-to-pay
(P2P) software to streamline all their purchasing and payment activities in one
integrated, end-to-end process.
However, statistics indicate “pretty low levels of implementation of actual
transactional-level automation,” said Amy Fong, purchase-to-pay practice
leader at The Hackett Group Inc., a Miami-based consultancy.
For instance, although many companies have implemented e-invoicing sys-
tems, the average company only has about 20% of its invoices coming in
electronically.

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“It’s not that people haven’t been spending money [in this space] -- it’s that they
haven’t necessarily made it all the way to the goal post in successfully getting
the value out of their purchases,” Fong said. “This is something that CFOs need
to think about.”
Before investing in a P2P system, CFOs should carefully consider their tech-
nology options and overall strategy, she said.
“Do we want a combination of best of breed that lets us pick and choose indi-
vidual solutions based on what our requirements are?” she said. “Or, are we
looking for one platform that goes across source-to-pay?”
Chet Taff, managing director of operations and service line lead at DayBlink
Consulting, based in McLean, Va., said one CFO might want to ensure that all
the transactions are electronic, including payables, while another might look
for a system that simplifies the supplier adoption process.
“You have to be clear about what your No. 1 priority is and not look at [P2P] soft-
ware as a panacea to do everything,” Taff said.

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Some vendors offer single, integrated platforms that cover the P2P process
end-to-end, while systems from niche providers may only handle a particular
step in the process, although those vendors are considered the best at what
they do, Fong said.
“Unless you’ve already purchased something, I would say stay open to both,”
she said. “It’s just [a matter of] understanding the infrastructure strategy that
you have for the process.”
WHO WILL USE THE PROCURE-TO-PAY SOFTWARE?
Before making a final decision, Fong also recommended getting user input
from employees involved in the requisitioning, purchasing and accounts pay-
able processes as well as from suppliers.
“This is a type of software that touches your internal and your supplier custom-
ers. Most of these solutions now offer some kind of supplier portal, so you may
have suppliers and employees also using it,” she said. “You might have to think
about it a little differently than other pieces of finance software that are purely
back office.”

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The P2P process involves cross-functional interaction throughout the com-
pany, Fong said. That means if a company has a team working on analytics and
finance, that team needs to partner with the sourcing analytics team.
“You should understand their needs and test out the capabilities to meet their
needs with each vendor that you’re considering,” Fong said. “And if you are
able to do any kind of predictive analytics, like looking at forward-looking pric-
ing that can help you model costs in advance, sourcing is the [team] to partner
with. But there may be other people in the finance side, as well as IT, [who] can
help with that.”
CFOs who think about their business processes from the perspectives of their
internal and external customers -- the people who are going to be affected by
using procure-to-pay software -- will be the most successful, said Henry Ijams,
vice president of product management at AvidXchange Inc., a provider of auto-
mated bill payment and invoice services in Charlotte, N.C.
“Think about who your customers are,” said Ijams, who is also managing direc-
tor of PayStream Advisors, a Charlotte-based research firm. “Are they your
department managers, suppliers, central purchasing? You have to support all
of them is what we’ve learned from the most innovative companies.”

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In payments, that means optimizing the strategy to fit the value of the supplier
and the purchasing organization, he said.
Taff concurred with this strategy. In fact, he said companies that select and
implement P2P without the input of their internal customers will most likely fail.
“The companies that do it great, they’ll get the admins across their company --
typically, the ones who are doing the ordering -- to go out and tell them what’s
important, as opposed to them telling the admins what they’re going to get,” he
said.
In that example, the procurement department will also seek the input of other
adjacent processes, including accounts payable, according to Taff.
“They’ll find out what the clerks do” he said. “The accounts payable functions
aren’t always aligned with procurement. And their goals aren’t always aligned
with what procurement’s goals are.”

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SKETCHING OUT A P2P SYSTEM
Before implementing procure-to-pay software, the CFO should ensure that the
business process is solidified, said Amit Patel, managing director of the enter-
prise solutions practice at Huron Consulting Group Inc. in Chicago.
“Then put on paper what pieces of that are going to be standard processes
supported by the software, what pieces will be automated and what pieces will
remain manual until they stabilize on the system,” Patel said. “Modern-day soft-
ware should allow you to take what you do on paper and transition it to a digital
organization.”
Most of Huron’s clients also want to have better internal controls, mainly for
segregation of duties and ensuring that the right individuals are procuring and
the right individuals are paying, he said. Next-gen procure-to-pay software
should also let CFOs address that issue.
Patel said another key element Huron recommends as part of the implementa-
tion cycle is for companies to consider either the source of the data or the kind
of data they’re going to put in the system.

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“You want to make sure it’s clean,” he said. “If it’s not clean, we recommend you
manually clean it up or get some tools to clean it.”
For Nagi Prabhu, chief product officer at Icertis, a provider of contract manage-
ment software based in Bellevue, Wash., a procure-to-pay system is only as
good as the contracting system that is associated with it.
“If the contract solution is not robust enough, the procure-to-pay solution just
becomes a process organizer and doesn’t really provide a lot of benefits,” he
said.
Therefore, CFOs should look for procure-to-pay software that can help them
manage risks because every procure-to-pay workflow has a risk associated
with it, according to Prabhu.
For example, a contracting system underneath a procure-to-pay system could
help a company eliminate the risk that a vendor will be noncompliant, he said.
“We have an integration with DB and Thomson Reuters where we constantly
check, as part of the contracting and post-contracting risk mitigation process
[for a customer], that the vendors are compliant,” Prabhu said. “We also check

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that they don’t have any legal issues where [our customer] should stop inter-
acting with certain vendors, or maybe find a way to eliminate the risks [they]
may incur because of the vendors’ noncompliance.”
Finally, Fong noted that procure-to-pay software has evolved over the years
and now includes many advanced features and functions. Because of that, she
advised CFOs to look carefully at those enhanced features.
“You should dig a couple layers deep, talk to other customers, talk to people
like Hackett or other analysts or advisors,” she said. “Understand what is really
valid and what is vaporware.”

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