Outsourcing procure to pay in 2024 has gotten easier. This is generally the case because running procurement internally has gotten exponentially more complex.
Just 30 years ago, things were a lot simpler. If you wanted ten reams of paper, you picked up the Yellow Pages, dialed up a few local numbers, finalized one supplier, and the paper would be at your doorstep within that week.
That’s it. That was your supply chain.
Today, supply chains have become so complex that, according to a 2024 study, only 26% of companies have complete visibility into their supply chain,
and
43% of procurement professionals report difficulty managing suppliers effectively.
Things quickly start getting a bit uncomfortable as the business starts picking up pace and employees start growing from 5 to 50 to 100 to 1,000.
Juggling 30 contracts at once and answering a dozen “Where’s my stuff?” emails a day become your new reality.
(Working on weekends, anyone?)
In this blog, we will:
- Debunk the latest myths about P2P outsourcing
- Understand the worst five mistakes finance managers make before signing a P2P outsourcing contract
- Learn how to maintain control while outsourcing
- List out 21 practical tips for a smooth transition
Latest Myths About Outsourcing Procure to Pay (and the Truth Behind Them)
Myth 1: Outsourcing P2P is only a temporary solution
Debunked: Businesses often view outsourcing as a stop-gap measure rather than a long-term strategy. However, many companies find that outsourcing becomes a crucial component of their ongoing business strategy. It allows for continuous improvement, scalability, and access to the latest technologies and practices. Long-term partnerships with providers can drive sustained efficiency and innovation in the P2P outsourcing services process.
Myth 2: In-house teams are always better than outsourced services
Debunked: While in-house teams bring a deep understanding of the company’s culture and processes, they might lack the specialized skills and technology that outsourcing partners provide. Outsourcing partners bring a wealth of experience, industry knowledge, and advanced tools to the table. This expertise can complement your in-house team, providing a balanced approach that leverages both internal and external strengths to achieve optimal results.
Myth 3: P2P outsourcing limits customization
Debunked: Some believe that outsourcing leads to a one-size-fits-all solution, limiting customization. On the contrary, reputable outsourcing providers offer tailored solutions that align with your specific business needs. Exela FAO offers customization in service offerings as well as pricing. We take into account your unique requirements and work to create a customized outsourcing strategy. This ensures that your P2P process is optimized to support your business goals and operational preferences + you pay only for what you use.
Myth 4: Transitioning to outsourced P2P is disruptive
Debunked: Many businesses worry that transitioning to an outsourced P2P process will disrupt their operations. However, experienced outsourcing partners have structured transition plans to ensure minimal disruption. They work closely with your team to understand existing workflows and gradually implement the new processes. This phased approach ensures a smooth transition, maintaining business continuity and allowing your team to adapt seamlessly.
Myth 5: Outsourcing P2P leads to a decline in quality
Debunked: There is a fear that outsourcing will compromise the quality of the P2P process. However, reputable outsourcing partners are experts in their field. They utilize advanced technologies, standardized processes, and best practices to ensure high-quality outcomes. In many cases, outsourcing can actually improve the quality of the P2P process by reducing errors, boosting accuracy, and ensuring compliance with industry standards and regulations.
Myth 6: Outsourcing P2P is only for large corporations
Debunked: While large companies often lead the way in outsourcing, P2P outsourcing is not exclusive to them. Small and medium-sized enterprises (SMEs) also benefit significantly from outsourcing. It allows them to access advanced technology and expertise without the need for heavy investments. In fact, outsourcing can be particularly beneficial for SMEs looking to scale efficiently and compete with larger companies by leveraging specialized skills and resources that might otherwise be out of reach.
Myth 7: Outsourcing P2P means losing control over the process
Debunked: A common misconception is that outsourcing P2P leads to a loss of control over critical financial operations. In reality, outsourcing partners work closely with your team to ensure transparency and control. You can set up governance frameworks, performance metrics, and regular reviews to maintain oversight. Modern outsourcing agreements often include collaborative management models that keep you in the driver’s seat, ensuring you retain full control over strategic decisions and key processes.
Tell our sales team you want to see how P2P outsourcing works live.
5 Mistakes Finance Managers Make Before Signing a P2P Outsourcing Contract
Mistake 1: Focusing solely on cost reduction
While cost savings are a primary driver for outsourcing, focusing exclusively on cutting costs can be a significant mistake.
Companies often overlook the importance of value-added services that an outsourcing partner can provide. When choosing a P2P services outsourcing provider, it’s crucial to evaluate the overall value proposition, including process improvement, technological capabilities, and the potential for long-term partnership.
A narrow focus on cost can lead to selecting a partner who may not fully align with your strategic goals, resulting in suboptimal outcomes.
Mistake 2: Inadequate due diligence on the provider
Rushing into a contract without thoroughly vetting the outsourcing partner is a common and costly mistake.
Businesses may fail to conduct sufficient due diligence, such as checking references, assessing the provider’s track record, or understanding their industry expertise. This can lead to mismatches in expectations, quality issues, or even contractual disputes.
Before signing a contract, it’s essential to rigorously assess the provider’s capabilities, financial stability, compliance with industry standards, and cultural fit with your organization.
Mistake 3: Neglecting to define clear performance metrics
Entering a P2P outsourcing agreement without establishing clear and measurable performance metrics can lead to misaligned expectations and underperformance.
Many companies fail to set specific Key Performance Indicators (KPIs) that align with their business objectives. Without these benchmarks, it becomes difficult to measure success or hold the outsourcing partner accountable.
Clearly defined KPIs, such as invoice processing time, error rates, and payment accuracy, are critical for ensuring the partnership delivers the desired outcomes.
Mistake 4: Overlooking the importance of transition planning
Transitioning from an in-house P2P process to an outsourced model is complex and requires careful planning.
A common mistake is underestimating the time, resources, and coordination needed for a smooth transition. Businesses may neglect to develop a detailed transition plan, which can lead to disruptions, data migration issues, and staff resistance.
A well-structured transition plan, including timelines, responsibilities, and contingency plans, is essential to avoid operational hiccups and ensure a seamless handover.
Mistake 5: Ignoring change management and internal communication
Outsourcing P2P processes can significantly impact your internal team, yet many businesses fail to manage this change effectively.
Ignoring the need for change management and clear communication can result in resistance from employees, confusion, and a decline in morale. It’s important to involve key stakeholders early in the process, communicate the reasons for outsourcing, and provide training to ensure that the internal team is on board and prepared for the changes.
A strong change management strategy can help smooth the transition and maximize the benefits of outsourcing.
Maintaining Control After Outsourcing Procure to Pay (P2P)
Tesla cars have full self-driving capabilities today. They can transport anyone from point A to point B while taking zero inputs from the person sitting in the driver’s seat.
Even when this is the case, Tesla cars force the driver to keep their hands on the steering wheel at all times. If the car does not detect a hand on the steering wheel, it automatically pulls over to the side of the road and comes to a stop. This functionality is hardcoded by design in every Tesla car.
Maintaining control in an outsourcing arrangement should be understood similarly.
Many companies worry that outsourcing means giving up control, but this doesn’t have to be the case. In fact, with the right strategies, you can maintain a firm grip on the process while benefiting from the expertise and efficiency that outsourcing offers.
One key strategy is setting up a strong governance framework.
This framework should include clear roles and responsibilities, regular performance reviews, and a detailed reporting structure. By defining how decisions are made and who is accountable, you can keep the process aligned with your company’s objectives. Regular reviews and reports give you visibility into the outsourced operations, allowing you to spot issues early and make necessary adjustments.
Another important aspect is establishing KPIs that align with your business goals.
These KPIs should be agreed upon with your outsourcing partner from the start. Monitoring these metrics regularly ensures that the outsourced P2P process delivers the expected results. If KPIs aren’t being met, you have a clear basis for addressing the issues with your partner.
Communication is also vital.
Maintaining open lines of communication with your outsourcing partner helps build a strong working relationship. Schedule regular meetings to discuss progress, address concerns, and stay updated on any changes. This ongoing dialogue ensures that you’re always in the loop and can make informed decisions.
Lastly, technology plays a big role in maintaining control.
Many outsourcing providers offer real-time dashboards and analytics tools that give you instant access to performance data. This technology empowers you to monitor the process in real-time, ensuring that everything is on track.
These approaches allow you to reap the benefits of outsourcing without sacrificing oversight or quality. It’s the best of both worlds, giving you efficiency and control simultaneously.
21 Practical Tips for a Smooth Transition
- Start with a detailed audit. Understand your current P2P process before outsourcing.
- Choose the right partner. Select a provider with industry experience and strong references.
- Define clear objectives. Know what you want to achieve with outsourcing.
- Develop a phased transition plan. Avoid switching everything at once to minimize risk.
- Involve key stakeholders early. Get buy-in from leadership and finance teams.
- Communicate the change. Keep your team informed about the transition process.
- Set up a governance framework. Define roles, responsibilities, and decision-making processes.
- Establish KPIs. Align performance metrics with your business goals.
- Create a detailed timeline. Plan milestones and deadlines for each phase.
- Test systems before full implementation. Run pilots to catch issues early.
- Document existing processes. Provide your outsourcing partner with a clear starting point.
- Ensure data security. Verify that your partner has strong data protection measures in place.
- Assign a dedicated project manager. Keep the transition on track with clear oversight.
- Provide training to internal staff. Ensure your team understands the new processes.
- Schedule regular progress reviews. Stay on top of the transition and address issues quickly.
- Monitor early results closely. Make adjustments as needed during the initial stages.
- Plan for contingencies. Have backup plans in case of unexpected challenges.
- Maintain open communication channels. Keep ongoing dialogue with your outsourcing partner.
- Align technology platforms. Ensure that your systems integrate well with the provider’s tools. Did you know Exela FAO offers custom integration with all your existing systems?
- Set realistic expectations. Understand that some adjustments may take time.
- Celebrate small wins. Acknowledge progress to keep the team motivated.
Tell us about your business and get a personalized demo, or request a full audit report of all your existing P2P technology and practices. Contact us today.
DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.
