Data is beyond critical to Procurement Operations. It’s everything, and the burden falls on procurement leaders to capture pertinent data to build good teams, track performance and show value. Now with Digital Transformation as a mandate, Procurement officers must also find ways to measure their digital progress. Here’s a look at some of the Procure-to-Pay metrics procurement leaders should watch in order to better understand their digital progress. Use these tips and tools to identify, capture and convert relevant measurements into digital transformation. We’ll be covering these and more in an upcoming webinar.
#1 Use automation for touchless processing – “Touchless” means data is electronic, transactions match the first time and need no human intervention. This metric closely aligns with digital transformation progress. Fully automated, touchless processes lead to better PO compliance, electronic and invoice-less processing, high first-time-match rates and more payments-on-time. This metric also impacts others like speed, visibility, and cost savings.
#2 Supplier count – How many suppliers you have for different spend categories reflects your overall procurement health. Too many suppliers in one category may mean it’s time to simplify or negotiate better pricing with fewer vendors. On the other hand, relying on a limited number of suppliers introduces risk. Digital sourcing tools can help make this a more manageable metric.
#3 Look at on-time payment – Paying invoices on time is another indicator of a healthy P2P operation that’s aligned with finance. The ability to pay on time suggests procurement has negotiated good terms for the business and that finance runs its part of the payment process effectively. It could also indicate your digital workflow is functioning as it should. Success in this metric also contributes to long-term vendor relationship management.
#4 Take note of first-time-match rate – If invoices match with POs as they’re supposed to, all signs point to a compliant, efficient operation. A high first-time match rate requires that internal buyers and external suppliers follow your process requirements, so measure how many invoices go straight through the P2P system on the first pass, without delay or manual intervention. Digital processes and tools can help ensure solid first-time match rates.
#5 Ensure data visibility – Electronic data is critical to have the meaningful information for business decisions. Without a full view to spend and supplier, at the line item level, sourcing organizations limit their reach and impact. Much of the spend data needed for upstream activities comes from P2P transactions so make sure your process is capturing the right information in a usable format.
#6 Watch number of days to approve an invoice – If an invoice isn’t approved on schedule, you may miss out on discounts, so this is an important metric. Invoices that are pre-approved with POs save time, but if your PO compliance is under 50%, you must depend on your organization’s speed to approve an invoice, pay early and take a discount. A rules-based digital workflow helps improve this metric and accelerate process and capture discounts.
Procurement metrics don’t have to be overwhelming, and neither does P2P digital transformation. Join experts from The Hackett Group and Ivalua at this webinar as they break down P2P best practices and metrics. You’ll learn more about how to improve P2P visibility and access to data.