Evolution of P2P Process

Find out interesting insights with Anthony Dias, VP Finance Delcath

Moderated by Emily ,Digital Transformation Consultant at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Emily: All right. Hi everyone. This is Emily, and I am a digital transformation consultant at Hyperbots. For today’s discussion on the evolution of the Procure-to-Pay process, I’m very glad to have Tony on the call with me. Anthony is the VP of Finance at Delcath. Anthony, would you mind telling us a little more about yourself before we get started?

Anthony Dias: Sure. I’ve over 30 years of experience. I started my career in public accounting many years ago and then moved into the private sector. I’ve worked in small to medium-sized companies, most of my career in companies that are probably in the startup phase that needed more experience to kick into the next level through public stages or acquisition phases of the company or growth phases. I’ve had an opportunity to work for a very large organization that got sold for five billion dollars as well. So, I have a good understanding of good processes, good business practices in both small and medium-sized companies. The industries I’ve been in are mostly manufacturing, high-tech manufacturing, and for the last 10 or so years, the bio-pharma space where we have manufactured both devices and drugs. Most of my experience has been at the senior level of finance, both as CFO and VP of Finance, in both public and private companies, including private equity and VC-backed companies. So that’s a high-level background.

Emily: That’s amazing and really glad to have you here on this forum today. Along with the many organizations that you have worked in, you have also been associated with all the processes of finances as well. Would you like to share what kind of Procure-to-Pay initiatives you’ve been a part of in the various organizations?

Anthony Dias: Yeah, I would say when I first started, the Procure-to-Pay part of the organizations I’ve worked at was really manual. As I mentioned, most of the companies I worked with were startups looking for the next phase. As a startup, your biggest priority is making sure you’re paying your vendors and employees. But as you grow, you need to look at other facets of growth, and bringing on additional accounts payable folks may not be the most ideal use of your resources and cash. So, looking at systems and more efficient processes around procure-to-pay becomes crucial for supporting the growth of the business. This includes having proper controls in place and better processes from the purchasing side, ensuring proper approvals, processing invoices, paying the right vendors, and controlling payments.

Emily: Got it. Tony, for the sake of the audience, would you like to break up the overall Procure-to-Pay process into sub-processes?

Anthony Dias: Yeah, I would say the front end of the process is primarily the procurement process, where you may have a requisition process for purchasing a service or product. This involves ensuring the person is authorized and getting the best price by putting a bid out, working with legitimate vendors, and having the proper approval to spend the money. Then there’s the purchasing process, where a purchasing department might vet the vendor, negotiate the best price, and handle contracts. Once the decision is made, they issue a purchase order committing the organization to the purchase. The next phase is in the finance realm, ensuring receipt of goods or services, verifying the pricing and quantities, and making timely payments based on contractual terms.

Emily: And how do you see the evolution of these processes over the last decade or so?

Anthony Dias: There’s been a lot of evolution in the last 10 years. My career started 30 years ago, and for the first 20 years, a lot of it was very manual. In small finance groups, the focus was on paying vendors and employees. As companies grow, they tend to invest in other areas like sales and marketing, often overlooking the accounts payable and Procure-to-Pay processes. The accounts payable group grows but without additional resources, leading to inefficiencies. OCR technology has been helpful, where invoices are scanned and processed electronically, reducing errors and lost mail. Electronic invoicing and payments through ACHs or wire transfers have also become common, making the process more efficient and reducing the risk of errors and delays.

Emily: So, apart from OCR or digital adoption, what other tools and technologies are used in different aspects of the Procure-to-Pay process?

Anthony Dias: In the requisition process, technologies have been adopted by larger ERP systems, making everything more electronic and web-based, which is crucial as businesses become more global and remote. Mid-sized and smaller ERP systems might not invest as much in these areas. Technologies include electronic requisitions, purchase orders, and vendor price comparisons. In the accounts payable process, the adoption of electronic payments, capturing invoices through OCR, and other technologies have minimized manual errors and improved efficiency.

Emily: After the adoption of such tools and technologies, are there still challenges that exist on the procurement side?

Anthony Dias: The biggest challenge is time. Getting a requisition approved by a manager who gets many emails can be slow. The purchasing department also needs time to find the best price. For someone needing a product or service quickly, this process can be frustrating. Speeding up approvals and negotiations can help. There’s also the issue of adherence to processes and the perception that controls and procedures slow things down. Improving the speed and efficiency of these processes is crucial.

Emily: Why do you see many organizations still having significant elements of purchases without a rigorous PO-driven process?

Anthony Dias: It often comes down to the hesitation of non-finance folks to follow the process, preferring the ease of direct purchases as they do in their personal lives. The mindset in organizations is still not there for some. They might feel that going through the approval process is unnecessary when they can quickly purchase items online. But organizational purchases need to comply with standard practices, regulations, and ensure consistency. The process also ensures the company is not at risk and is getting the best terms.

Emily: Apart from the timing, what other challenges have you seen in the procurement process in general?

Anthony Dias: The three-way match process matching purchase orders, receiving goods, and invoices can be time-consuming. Discrepancies in quantities, prices, or quality of goods received versus what was ordered can cause delays and require back-and-forth communication with vendors. Resolving these issues takes time and can affect payment timeliness, leading to potential leverage issues with vendors.

Emily: What are the best practices in streamlining the procurement process to have better financial control?

Anthony Dias: Best practices include a robust requisition process with manager approvals aligned with budgets, a purchasing group vetting vendors and ensuring the best prices, timely receipt and verification of goods, and accurate and timely payment of invoices. Good communication between procurement and finance is crucial, ensuring everyone is aligned on budgets and vendor payments.

Emily: What kind of collaboration would you suggest between the finance and procurement teams to achieve the company’s common business objectives?

Anthony Dias: Procurement and finance should have a strong partnership. Purchasing should understand budgets and approval limits, consult finance when needed, and ensure proper vendor documentation flows to the accounts payable team. Collaboration in budgeting and forecasting is also important, ensuring purchases align with the company’s financial plans.

Emily: Can you share the inefficiencies that still exist in the procurement process despite best-in-class ERP implementations?

Anthony Dias: Some inefficiencies still exist due to resistance to change, manual data entry, and writing checks. People are often slow to adopt new technologies due to risk aversion and a lack of understanding of how these technologies can minimize risk and improve efficiency. Educating staff on new technologies, demonstrating their benefits, and investing in these areas can help address these inefficiencies.

Emily: Apart from the mindset, what else do you think is needed to improve these processes?

Anthony Dias: Investing in these areas is crucial. As companies grow, they need to re-evaluate and invest in their accounts payable and procurement processes to avoid inefficiencies and risks. Continuous education and training for staff on new technologies and best practices, attending conferences, webinars, and networking with other professionals in the field can also help improve these processes and keep them up-to-date with industry standards.

Emily: One last question: what do you think could be done to address these inefficiencies better?

Anthony Dias: Education is key. Accounts payable clerks, CFOs, and controllers need to stay informed about new technologies and industry best practices. Networking with peers, attending conferences and webinars, and bringing in experienced people can help. Investing in technology and processes will help organizations grow efficiently and keep employees motivated and engaged by reducing manual work and improving job satisfaction.