Posted by: mattmerritt | October 5, 2009

Best Practices for Procure to Pay Processes

I found this study and write up by David Cramer at Visa and wanted to share it. I think it makes a very good argument for a best practice approach. While focused on credit card transactions, the lessons learned apply to almost any model.

Beyond the use of more efficient payment methods, businesses can realize additional cost savings through optimization of procurement and expense management processes. Visa commissioned Deloitte Consulting to conduct a comprehensive study of procurement and payment best practices for companies based in the United States.

The study focused on three key areas of a companies’ business processes. The first was the company’s procure-to-pay foundation as defined by overall procurement strategy, organization and technology. The second was how the company managed its commercial card program, including purchasing cards, T&E corporate cards, and fleet cards. The third was the procure-to-pay process itself, including sourcing, order placement, payment/settlement, reconciliation, control audit and reporting.

More than 50 large corporate and mid-sized companies considered to have leading procure-to-pay practices participated in the study. They were identified by a process to ensure proper distribution by revenue size, geography, industry type and company culture.

Key Findings for Procure-to-Pay Optimization

Based on the study findings, Visa and Deloitte developed 60 best practices to help companies attain greater work efficiencies and cost savings. These procure-to-pay best practices provide practical ways for companies to achieve an optimized procurement and expense management process by addressing six key areas:

* Proactive, ongoing senior management sponsorship for procure-to-pay initiatives
* Collaboration to ensure communication and enforcement of procure-to-pay policies and procedures
* Progressive migration to automating the entire procure-to-pay information technology platform
* Aggressive strategic sourcing focus to enhance vendor relations
* Comprehensive data aggregation and reporting to support management and enable continuous improvement of procure-to-pay functions
* Commercial card objective alignment with a company’s overall procure-to-pay strategy

Selected Procure-to-Pay Best Practices

Of the 60 best practices developed from the study, some of the most relevant practices for optimizing the procure-to-pay process and generating increased efficiencies are:

* Minimize use of paper purchase orders
* Eliminate manual check payments
* Optimize the number of suppliers
* Utilize e-sourcing tools to find suppliers
* Implement use of purchasing and corporate cards
* Require suppliers to accept commercial cards
* Establish policies for commercial card use
* Incorporate a commercial card training program
* Mandate use of commercial cards for eligible expenditures
* Utilize data for better spending visibility

Because the vast majority of business-to-business payments are still taking place via paper check, there is much to be gained from the migration to electronic payments and the refinement of the entire procure-to-pay process. Best practices that focus on each step of the procure-to-pay process chain are invaluable in helping to identify where companies can make improvements to enhance efficiency and realize cost savings.

Posted by: mattmerritt | October 3, 2009

Top Five ERP Upgrade Tips

When it comes to enterprise software, upgrades are a necessary evil. However, there are some ways to avoid the pain associated with upgrades. Here’s my top five tips.

Planning is key
Upgrades need the same level of planning as the original implementation. Just like a full scale plan, an upgrade plan needs to consider the team, testing, training and support. You’ll need to look towards the future to consider changes in your operations, business model or other issues that need to be addressed in the upgrade. Failure to plan can greatly increase the time needed to implement and ensure that personnel embrace the new functionality.

Don’t bite off too much than you can chew
Upgrades need to be done on a regular schedule. If you wait until you’ve outgrown your system, it’s going to be a painful and expensive journey. The worst case scenario is to start over from scratch and attempt to implement a completely new system all at once. Take the process in stages to limit disruption to your business.

Get the troops ready

One of the most common complaints from companies who reach out to me is that their people simply will not utilize the new features they’ve implemented. The key is training – before, during and after the upgrade. People resist what they do not understand.

Lead from the top

Top management should be visibly involved in the process. This support from the top will significantly improve the chances that employees will embrace the changes. Showing that management understands the challenge, is part of the process (even participating in the training along side subordinates) shows they are committed to change.

Get some help

There is much more to ERP upgrades than I.T. duties. Having a veteran (employee or consultant) with many installs under their belt will considerably speed the process and make for a smooth transition.

The one thing you can count on in business (and software) is that everything will constantly change. How you manage this change can be the difference between expensive fire drills and smooth growth.

Posted by: mattmerritt | September 29, 2009

Why Focus on Process

Every problem that arises in business can be tracked back to a process. Either the process is broken, people aren’t following the process, the process conflicts with other processes or a process is missing.

So often companies attack the symptom of a broken process and fail to consider the underlying cause of the problem. This is why having documented processes are critical to achieving and sustaining growth.

It seems simple enough – and many business processes are a simple series of actions. However, things get more “interesting” when many processes intertwine and run simultaneously. And when processes conflict, it gets expensive. Here’s why focusing on process is critical to a profitable company.

Having formal processes allows for refinement and monitoring. For example, many ERP installs go awry not because the teams involved don’t have the necessary skill set, but because the process for selection or implementation (or both) were not clearly defined ahead of time. It is simply more expedient to have a clear roadmap for all involved.

A sound process is scalable. When people, process and technology are aligned, growth is faster and less costly. Only by documenting and refining processes, from financial to supply chain and beyond, can a company effectively scale its operations.

Documented processes can be refined and improved. When things go wrong, having documented processes allows for fast identification of problems. Often, tweaks in process can lead to significant changes in organizational performance.

Processes are documented to allow for understanding – not only within departmental units but across the organization. Without consistency in the process there is no way for teams to understand what can be done to meet a defined goal.

Communication and Training
If no one understands the process or is able to understand it then it cannot be successful. It is critical to communicate correctly and to train those involved to not only follow or implement the process but to be able to identify areas of improvement.

Case in point: Hersheys
The technical team at Hershey had been working hard to implement ERP solutions for more than three years. They had chosen to implement SAP ERP. This process went on during the peak periods when business was expected to do its best. The company had chosen to implement ERP by using a popular method whereby the whole process was brought into action at once. The implementation and the business process which followed it proved to be a major setback for the company. There was a heavy loss in profits and sales.

There were a number of problems that caused this debacle and all of them came down to process. For example, they tried to do too much at one time. Perhaps a better process would have been to stage the implementation according to the business’s needs and during a slower time in the market. Of course it is easy to look back in hindsight.

Clearly understanding the processes behind the operations of a business is critical to success whether you are simply updating the functionality of an accounting system or overhauling a complex procure to pay system. Processes are the building blocks that create successful outcomes.

Posted by: mattmerritt | June 10, 2009

Planning in Recessionary times

By: K. Srinivas from the Supply Chain Management Blog | Permalink

According to different economic studies, recession is here to stay at least for the next one year. Discretionary spendings is expected to be the most affected since people are now scrambling to meet basic requirements. Businesses across the world are remodeling themselves, trying to be as lean, tightly controlling their expenditure and keeping their focus on existing markets. Investment budgets too are the most affected which earlier used to be one of the most important tools at the hands of CXOs to improve productivity in their organization.

While the objectives of most businesses is going through a transformation, one of the most crucial pieces is planning – be it corporate planning, financial planning, human resources planning, asset planning and of course supply chain planning. By its very nature – plans can be optimistic, moderate or pessimistic. Each of the scenarios has a certain probability of occurance, and companies should ideally have scenario-specific plans. Economic conditions sometimes change very rapidly and hence a changeover plan is a must for an organization.

Some of the things that supply chain planners can do are:
1. Customer Collaboration: With Institutional or large customers, offer them incentives to give a future view of orders. Conversion of Forecasts into order (also known as order materialization) should be closely tracked and linked to the pricing model. Organizations with direct connect to end-customer should adopt demand-shaping methodologies to goad customers towards meeting sales objectives.
2. Vendor Collaboration: The times are the best to renegotiate terms and conditions with vendors. However, it would be essential to negotiate for flexibility, reactivity and adaptability instead of negotiating capacity and quantity. Procurement should revisit the terms and conditions to make this happen.
3. Make vs Buy: Companies with some investment propensity, should actually evaluate possibility of captive capacity or at least portions of it. This would actually reap benefits when the economy starts looking up.
4. Consumer Behavior: Economic data such as wage inflation and price inflation should be leveraged in econometric forecast models particularly for CPG, Hi-Tech and Automobile sectors. It is even more crucial to understand the relative importance a consumer attaches to your product, whether it is a component of discretionary or non-discretionary spend and also track the statistical correlation between sales and the different economic metrics.
5.Leverage the virtual channel: Connecting with your supply chain partners is even more crucial and keeping a democratic process of information dissemination is the call of the day. In such a situation the virtual channel would play a very important role.

With the economic situation becoming lot more volatile and unpredictable, organizations of today would need to straighten out their enterprise reporting systems making sure that the right metrics are getting measured the right way to help make right decisions. For example forecast model is not about how accurate you are in measuring forecast vis a vis historical sales. Rather it is about how much explainables and unexplainables you see in the order data. The better we understand the data, the better off we are in projecting the future.

Darwin’s theory of survival - only the fittest survive has very interesting parallels with the corporate world. The species that negotiates the vagaries of nature, also plans well in terms of when it should hibernate, migrate to greener pastures or even collaborate to survive. The days that we see today will probably filter out the best of the lot who can take on next generation of challenges.

Posted by: mattmerritt | September 19, 2008

Practical Implementation Questions- Operational Simplicity

You hear it all the time when companies embark on enhancing their Information Systems platform. The exacerbated Executive…


”We thought we understood what we were getting into, but X months after we were schedule to go-live, we are still a long way from being done. We are not even sure it is worth it anymore!”


Underlying this statement is probably a blown budget. More importantly, there is probably a team of your companies best and brightest (subject matter experts) who have all the intangibles that made your company successful who are now frustrated, stressed-out, over-worked, demoralized and looking for a way out.


These scenarios could be avoided with proper planning and guidance. You see, most companies fail to ask themselves a few deceivingly simple questions that often times have very difficult answers. The answers to these questions, if answered completely and objectively, will ensure that your company is prepared for the daunting tasks ahead.


  1. How do you know that you have a problem?
  2. How do you know that you have the right people in place to solve the problem?
  3. How do you know that you have the right application to solve the problem?
  4. How good is your business process workflow?
  5. How good are your existing Performance Measures?
  6. Are you relying on the Application Vendors to answer these questions for you?

Over the next several posts, I will expand on each of these questions and provide some practical guidance. Thank you


Posted by: mattmerritt | August 10, 2008

Operations Planning Simplified

I was reminded this week, once again, that your operating strategy does not have to be complicated to be excellent.

A good friend of mine is the CFO of an extremely successful professional property management company. While spending the day with him, we looked back on the past five years and what where the real reasons they were successful. How were they able to position themselves so well?

The answers were not surprising. In fact, they were the textbook answers. (My Strategic Management Professor would be so impressed) “Start with the Vision and then move down the path to the Mission, Objectives and Goals.” Wow! What a break through! And the reality was this is exactly what they had done.

So what was the difference?

The difference was the conviction with which this team of executives went about defining both themselves and these three tasks:

  1. Have a Tangilble Vision and Believe in the Vision.
  2. Stay Focused
  3. Build the Infrastructure to Support the Vision.

It is that simple and that complicated at the same time! Here is what I mean by that.

How many corporate “Visioning Sessions” have you been a part of? Early in my career, I was included in a number of these sessions and I can only describe them as paint-by-numbers sessions. Sure, all of the colors, numbers and painting areas were clearly defined, but our pictures never turned out like the front of the box. It was only through years of experience that I figured out the missing ingredient: conviction. Even if you have all of the required supplies, it still takes cnviction on your part to develop a Tangible Vision. My advice, have a few of those “paint-by-numbers” sessions and I am sure that the last vision  you paint, will look better than the first.

Once you have the vision… STAY FOCUSED! It is easy to get distracted in business today. I work with clients all the time that have great ideas that could spawn whole new business ventures. This is where a Tangible Vision is so important. When the great ideas spring up, I notice that my clients that have a strong vision, refer back to it often in deciding how to proceed. If it does not fit the vision, then you need to seriously consider moving it to the “parking lot” and save it for another time.

Finally, plan for success. Build your people, processes, technology and metrics to support your vision. If you have executed on points 1 and 2, then do not be surprised wen you are successful. And don’t let your mid and back-offices be your failure points. Build the infrastructure to scale and support that success. Are you limping along with Microsoft Outlook and Excel as your ERP package or are you running an integrated, scalable infrastructure that can handle 5x or 10x the current volume?

Three fairly simple things that make the difference. Spending the day with my friend was a great reminder of what it takes to be successful- Conviction.



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