Does the Procurement Team Care About Payments?

My answer to the above question is, “They should.” Yet, more than one person has recently told me that the procurement team limits their focus to supplier selection and negotiating low prices. They view payments as something accounts payable handles. Such thinking is narrow minded since payments begin with the terms and conditions in supplier contracts and purchase orders. Perhaps an interest in payments only surfaces when the procurement department manages the card program. However, whether they like it or not, “purchase” and “pay” go together. Following are things both management and procurement should do to contribute to organization success.

What Management Should Do

Regardless of which department administers the card program, management should demonstrate leadership by doing the following.

  • Clearly identify the roles and responsibilities of procurement and AP related to internal purchase-to-pay (P2P) processes.

  • Communicate their expectations for how the two departments should work together to effectively execute the organization’s P2P preferences.

  • Hold employees accountable.

  • Establish quantifiable goals for reducing check payments through increased card usage.

  • Support continuing education in the P2P space, directing employees to pursue topics that could help the organization more quickly achieve its goals.

What Procurement Should Do

Speaking from my experience as a former procurement person, the following actions help raise the profile of the department in a positive way.

  • Actively work toward exceeding management’s expectations. This could include proactively expanding the team’s knowledge about electronic payments, particularly Commercial Cards. Invite the card program manager to deliver related training to procurement staff.

  • Make it a standard operating procedure to address card acceptance in competitive bids and contracts.

  • Meet with each internal “buying department” on a regular basis to: discuss that department’s suppliers and the applicable P2P process, inquire about competitive bids that need to be done, and educate them about the organization’s card program.

  • Monitor adherence to contract terms concerning payments. If there is a problem, respectfully work with the buying department, AP, and/or the supplier to get things back on track.

Final Thoughts

Even if management does not take the initiative to unite procurement and AP, these two departments should take it upon themselves to work together on P2P processes. Driving organization success means department and employee success.

Related Content

Does procurement care about payments? The answer should be a firm “Yes.” If not, take the appropriate steps to get them on board.

Does procurement care about payments? The answer should be a firm “Yes.” If not, take the appropriate steps to get them on board.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

The Payments Iceberg: Innovation and Realities

In the 1970s, anthropologist Edward Hall developed the iceberg model of culture to express how visible aspects like fine arts are dwarfed by what is hidden below the surface (e.g., relationships, attitudes, approaches). The concept could be applied to the payments industry as well. This month, while at the Cards and Payments on Campus Conference by PDG, I attended sessions about emerging technology that dazzle the mind and represent the tip of the iceberg. There are lots of great things happening. Yet, I also encountered—as I do every time I am at an event—challenges that have plagued end-user organizations for decades. It’s the reality that sits solidly under water. As a result, I have formed three conclusions, as outlined below. Take a look and see what you think. I welcome comments and always enjoy hearing different perspectives.

Three Conclusions

  1. Innovation has multiple personalities.  
  2. Gaps between different entities keep getting bigger.
  3. Payments do not always make the priority list. 

The Multiple Personalities of Innovation

At the conference, Matt Dill of Visa addressed the future of payments. Some advancements, like Amazon Go (“a new kind of store with no checkout required”), perfectly illustrate how innovation can be baffling, appealing, and necessary all at once. We may not always understand how something works, but we think it is cool. The practical, necessary side of innovation include factors like payment convenience and security. Payments have to seamlessly mesh with our ever-expanding, technology-driven world. Innovation will continue. It’s exciting.

Widening Gaps

I heard attendees ooh and aah over what Matt showed. Then, during Q&A at the end, some questions pertained to longstanding struggles end-user organizations have (e.g., trying to pay remotely for the hotel stay of a traveling employee and hotels requiring a copy/photo of the card). Throughout the conference, end-users shared the same types of challenges that I heard 15 years ago.

On one hand, technology is soaring. On the other hand, some organizations have not changed anything about their payment strategy in decades. Providers have solutions for common challenges, but some organizations are not pursuing them. The gaps are widening, which leads to the last point.

Payments Do Not Always Make the Priority List

In many cases, executives within end-user organizations have too many initiatives to manage and sales goals to meet. No one has time to address something if it is not absolutely broken, so B2B checks remain. Checks are costly and inefficient, but, as some execs would argue, they get the job done. 

Real, across-the-board change will not occur within the end-user community until there is an overhaul of decision makers. We need more leaders who: 1) embrace payments innovation at a consumer level, and 2) see the value in similarly aligning B2B payments. Finally, the decision makers need to be at industry conferences to see what is possible. 

See more about payment strategies.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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Staff members are a wildcard.

When we talk about expanding electronic payments, things like technology and work flow often surface, but are we forgetting the people aspect? The employees who manage or support purchase-to-pay processes—namely, procurement and AP—often wield just as much power as senior management in the success or failure of a new payment strategy. Organization leaders who are ready to modernize payment operations need to address two aspects of the staff members responsible for executing their plan: attitude and skills.

In case you missed it... Staff members are not the only culprit in a laggard payments environment. The previous blog post shares an example highlighting how internal culture driven by management can plague B2B payments.


Attitude

People are unpredictable. Even employees who are generally flexible might resist a change in payment methods, processes, and/or technology. I have heard of organizations who avoid such conflict by holding off on implementing something new until “so-and-so” retires. It does not make business sense to sacrifice quantifiable benefits of a modern payments strategy to appease one or more employees. 

Resistance often stems from fear. Senior management should be planning appropriate communications to ease employees’ fears about the unknown. This includes explaining:

  • the reasons for making a change and

  • the anticipated impact on jobs

Some organizations go a step further by offering incentives if/when staff achieves certain goals related to adopting a new initiative. This could range from monetary rewards to something basic like a celebratory lunch. Those who do not display the right attitude could be subject to a change in job position or status.

The other dilemma management could encounter is employees who have the right attitude but lack the necessary skills to accommodate a change. 

Skills

Key questions for management to explore include:

  • What skills do employees need to help the organization succeed with the new plan?

  • Are the right skills attainable? Conversely, are employees simply not suited for what lies ahead, regardless of possible training?

An organization should decide how much it is willing to invest in employee development in order to fulfill a vision. 

Which employees are ready to support improvements to the organization’s payments plan? Ensure they possess the skills to meet new job demands.

Which employees are ready to support improvements to the organization’s payments plan? Ensure they possess the skills to meet new job demands.

Conclusion

If management is committed to payment improvements, they should do the following as early as possible in the process:

  1. Assess the impacted staff members to identify potential roadblocks related to attitude and/or a shortage of skills

  2. Determine how they will address the identified potential issues (e.g., training, employee restructuring, incentives, etc.)

Finally, once the dust settles, policies and procedures, as well as job descriptions for procurement and AP personnel, likely need to be refreshed to reflect the organization’s new path.

See more on payment strategy from Recharged Education.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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