Procure-to-Pay in Higher Education

BY STEVEN LUTZER ON JUNE 16, 2016 — Published in Supply and Demand Chain Executive

The financial leadership at universities and colleges is increasingly rethinking the ways they view procurement and payment. They no longer see procurement and disbursements as two independent and separate processes. They now view procurement and payment as a continuous process.

In reality, procurement and payment are integrally linked. Many issues that occur during the payment process are ultimately connected to an issue with a supplier that can be traced back to the contracting process.

Reducing the Costs of Transactions

Historically, financial leadership sought to save money primarily by reducing the costs of goods and services. A robust electronic procure-to-pay (P2P) system can rapidly transform an expensive paper-driven system to an electronic one in which the costs of each transaction can be reduced dramatically. An efficient P2P system also can improve the procurement experience of the internal customer, increase transparency and often turbocharge the strategic sourcing process.

Laying the Groundwork for P2P

A successful P2P implementation requires that an institution redesign its process prior to going live with a new electronic system. A university or college that attempts to automate an existing system without redesign is likely to end up with a clunky and cumbersome electronic system with a great deal of inefficiency.

Each step in the requisitioning and payment approval process should be scrutinized closely. Does the person signing off actually impact the financial control? Does a specific event or task serve a specific purpose, or is it being done solely for historical reasons? Stakeholders with various departments may not need the same level of departmental control if the new system provides greater visibility.

Change management is an important tool for any institution about to embark on P2P. The implementation of an electronic P2P system is a complex task due to an environment of a large number of users in a very decentralized arena. It is important for internal users to understand the logic and departmental benefit to adopting a new system with a significant learning curve. The financial administration needs to educate internal customers when the following question arises: Why are we doing this?

If an institution develops a strategic vision of what the ideal P2P system would look like it, then that university or college is more likely to select the specific P2P tool that best fits its needs.

Implementation of a System

An incremental implementation with a few specific schools within a university gives the organization the capability to test out the P2P system and make corrections before the system is in place across the entire university.

There are also a number of factors that the institution should consider during implementation:

• How good is the user interface? Is the system user-friendly and intuitive?
• Do users get good search results when they use the system?
• Does the system allow different departments to allocate the cost of goods or services across multiple payers (sources of funds)? This can be particularly important in the case of research spend.
• Is there sufficient flexibility for the needs of different departments? The biology department may operate with internal controls different than those of the engineering school. The medical school may have different types of administrative staff entering an order than the law school.
• There needs to be enough content loaded within the system for it to have value to a diverse set of stakeholders. If there is not enough applicable content, then internal customers may perceive a low value to using the system.
• The content does not need to be limited to catalogs furnished by vendors. A university can augment the content by detailing the capabilities of specific vendors across an array of services.
• Can staff be reassigned to more valuable work based on a more streamlined and transparent P2P system?
• Does the system take into account the opt-in culture of higher education?

In summary, a successful electronic P2P implementation can be achieved only if there is prior process redesign and proper change management. There also has to be an overall benefit to internal stakeholders in terms of ease of use, applicability, financial reporting and transparency throughout the P2P process.

Steven Lutzer is the president of Lutzer Global Inc., an executive search firm that specializes in managerial talent in the field of procurement, strategic sourcing, supply chain management and finance. Lutzer had over a 20-year career in supply chain management and global sourcing before founding Lutzer Global. For more information, please contact us.