All posts by Tyler Chamberlain

Why Requisitioning Must Be Part of ERP Conversations

Requisitioning (or asking for what you need) is a key part of the procurement process. So why is it frequently sidelined in ERP discussions?

ERP Requisitioning

This article was first published on the Coupa Blog.

Having either implemented or worked with some of the major ERP systems on the market, I think I’m on safe ground when I say, nobody chooses to do requisitioning through their ERP system. They settle for it.

ERP systems are largely built for finance and the controllership. End users are often not taken into account. Their requisitioning modules are notoriously difficult to use, which is too bad because requisitioning is how most non-finance users — aka. everyone else in the company — will interact with the ERP system.

In fact, people putting in requisitions to get what they need to do their jobs represent a large segment of non-finance users feeding data into the ERP. If you burden them with a system they won’t use, or that they’ll use in a sloppy way, your ERP will have data quality issues. To avoid having to settle for ERP requisitioning, it’s to everyone’s benefit for procurement to be part of the ERP discussion, as a strong advocate for the end user.

Advocating for Procurement

I’m not saying that will be easy. As I’ve written previously, organisations need to think more broadly about their whole finance system, which comprises multiple interconnected processes, from sourcing to the point where something is paid for and entered into the record.

The ERP system addresses the back end, and it’s designed for finance to be able to do what they need to do regardless of how the data gets in there.

So, the discussion doesn’t usually extend to the front end—sourcing, contracts, approvals, requisitioning—which is where a lot of that data comes from, because the thinking doesn’t extend that far. It’s not easy to break down these silos.

In situations where I’ve been the advocate for the needs of procurement, I’ve had to fight pretty hard to get that perspective considered and I’ve often been the lone dissenter in the room.

  • Get Real

You need to be a realist. There are always resource constraints, and there’s a hierarchy of needs within finance, and user-friendly requisitioning is never going to be at the top of the list. But when requisitioning is ranked seventh out of six fundable implementation projects, the potential for settling becomes very real. Hello, heavy ERP requisitioning module.

  • Map it out

One way to avoid that mistake is to map out the whole process, because it’s not completely linear. Data flows from one process into one, or several, others. A lot of times an ERP decision is made before these processes are mapped out. But, when you map it all out, it becomes obvious that quality and consistency of requisitioning is critical for getting finance all the data they need to make the ERP system a single source of truth. 

  • Learn the language

The main requirement for a better-than-ERP experience is that the requisitioning system be user friendly. You can’t push a heavy ERP requisitioning system on a marketing associate fresh out of college, or on a seasonal retail worker.

But usability is one of those subjective, soft terms that may not always resonate with the finance audience. To advocate effectively, understand the needs of finance and speak their language. For example, if you’re talking to a controller who is a worldwide tax authority, framing it in terms of compliance and data quality is a much better approach.

  • Not Amazon-like

You also need to break down what you mean by user friendly. Every ERP vendor is going to say their requisitioning module is user friendly. If no one is looking out for non-finance users, that box just gets checked.

How user friendly does it need to be? You’re probably expecting me to say, “It should be as easy to use as Amazon.” I would personally love it if it could be so, but there are different requirements for business buying that for consumer buying. But, it can be much easier than most ERP requisitioning modules make it.

A good system approaches requisitioning broadly. It’s not just asking people to fill out purchase orders. It should really be a way for an employee to get anything they need to do their job. In fact, I’d rather they didn’t have to even use the words ‘purchase order’ or ‘requisition.’  We’re simply helping them buy things.

Ideally, they should be able to click a bookmark, get to a portal and then get in through a single sign-in. They land on a homepage where they see relevant buying policies and have visibility into all of their transactions

There should be smart search capabilities, tailored towards a user who is probably somewhat resistant to using the system. They can’t get irrelevant results, or come up empty. They have to be able to quickly find what they want, or find out how to get it.

If it’s a catalogue item, the actual policy pops up, which will guide them how to buy it. If they need a new computer monitor, maybe it comes back and says, “OK, you have to log a ticket for IT because they do provisioning.” Or if nothing is there, it will guide them towards making a free form request. But they don’t even need to know these terms. All they need to know is what they want.

Heavy and Cluttered

In contrast, the requisitioning modules of the major ERP systems are often heavy. The home page may be cluttered with lots of finance information that’s not relevant. The email notifications can be complex and confusing.

There are a lot of fields to fill in so finance can get all the codes and data it needs – provided the would-be requisitioner doesn’t take one look at it, decide it would be faster just to run down to their local Staples store, and expense the darn thing. That’s the kind of thing that happens when you settle.

There are good reasons why requisitioning is not the top priority in the ERP discussion, but neither is it right for it to have no presence or priority. The real impact of user-friendly requisitioning is better data and better compliance.

To make sure your company doesn’t settle, somebody needs to advocate for all the people who aren’t in the room, but are going to have to use the system, and convince finance to give it the proper priority.

The ideal situation is that requisitioners don’t have to think about finance at all—or procurement for that matter. The irony is that to accomplish that, the folks in finance have to get together with procurement and think hard about requisitioning.

For Spend Management Success, Don’t Say the P Words!

Thinking differently about procurement starts with talking differently. If growth companies want to succeed then they need to change their vocabulary, starting by introducing the term ‘Spend Management’.

Spend Management Success

Read Tyler’s thoughts on when to buy your first ERP system here.

When should a growing company start building its procurement infrastructure? When you reach about 100 employees, or when you buy your first ERP system, whichever comes first. Not many companies have the foresight to do this. The common wisdom is that you bring in procurement at about 700-900 people. That’s too late.

In my experience one thing that keeps companies from starting as early as they should are the “P” words: Procurement; Purchasing; Process; Policy. Not only do these words define the function too narrowly, they’ve also become synonyms for bureaucracy and red tape.

People at small, entrepreneurial companies recoil when they hear these words. We need to rethink how procurement is positioned so companies can embrace it early on, and in a positive spirit, well before chaos ensues. That starts with changing the way we talk about it.

Call it Spend Management

Don’t get me wrong. I’m in procurement and I love the field. But this vocabulary is not just off putting, it’s inadequate for what the profession does today. The classical understanding of procurement is contract negotiations – leveraging a company’s size and buying power to get discounts and save money.

That’s not a bad thing to be known for, but it’s understandable why somebody with that classical understanding working at company of a couple hundred people would say, “We don’t need procurement yet.” They can’t yet buy on a massive scale, and at that stage revenue is far more important than savings.

What people outside the profession don’t realise is the extent to which the function has been growing in responsibility and strategic importance over the past few decades. However, we still haven’t communicated clearly about the nature of the role, its importance and how it fits in the organisation.

Procurement should really be joined at the hip with finance, but ask five different finance professionals what encompasses procurement, and you’ll get five different answers. If our closest ally in the organisation doesn’t fully understand the role, we clearly need to do a better job communicating what it is we do.

Procurement today should ideally encompass five or six functions: strategic sourcing, contract negotiation and management, workflows for buying, supplier information management, and the handoff to accounts payable and the ERP system. Continuing to call all of that procurement really doesn’t do it justice. Spend Management is a much better term. 

Think More Broadly

It’s not the sexiest term, but it does imply a broader function that’s squarely aligned with finance. Even employees at a small company will recognise the need to manage spending. Maybe if it’s presented that way, we can start sooner, and with greater focus and intention.

A small company may not be ready to negotiate big contracts, but they do need to buy things and pay bills, so they set up an AP department and processes for paying people. Whether they realise it or not, they’re already laying down the foundation for their Spend Management infrastructure.

At about 100 people, someone needs to start planning how that’s going to scale and start laying the groundwork. If you walk in at 100 people and start using the ‘p’ words, it would actually create a barrier to starting. But if you wait much longer than that, the first job is to jump in and stop a fast moving train.  When that’s a company’s first introduction to procurement, it only serves to reinforce any negative impressions they may already have.

Don’t Wait to Build

Once those impressions get culturally ingrained, it’s an uphill battle to change that perception. Yet that’s what happens all the time. The vocabulary and, by extension, the whole profession has become synonymous with bureaucracy, and no small company wants anything to do with bureaucracy.

This is holding companies back from proactively building out spend management as part of an efficient, effective corporate finance infrastructure. You’re going to build infrastructure around marketing, sales and delivering your product or service.

There’s a one hundred percent chance you’ll also need to build infrastructure to support spending money as the company as it grows. Yet most companies wait until things are really broken and people are complaining, and then the whole thing is really painful. If you start early you have a chance to set up a system that works smoothly from the get go.

Be the Change

Change has to start with those of us in the profession. We can talk more broadly about what we do. We can talk about ‘buying guidelines’ instead of ‘purchasing policies’ and ‘simple steps to getting what you need to do your job’ instead of talking about the ‘procurement process.’ Neutralising these defensive barriers helps people realise, “Oh, okay, these are ways that I can get what I need to do my job in an easier way.”

Small companies may not be ready for concepts like category management and contract negotiations, but they need help buying things, designing workflows and finding automated tools. They may be able to do some simple sourcing for volume discounts, and there are usually all sorts of unmet needs. It’s at that point you need to bring someone in to address them with an eye to the bigger picture of building a scalable spend management program that’s integrated into the corporate finance system.

There are lots of ways to approach it, and lots of conversations we could be having, if we don’t let the ‘P’ words get in the way.

Coupa are one of the sponsors of the Big Ideas Summit, to be held in London on April 21st. If you’re interested in finding out more, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.

The Smart Way to Buy Your First ERP System

You might not realise it, but you could be making a common mistake when buying your first ERP system.

ERP System

When should a growing company start thinking about a formal, automated spend management program? At the same time you get your first ERP system. The two go hand in hand, but most companies put an ERP system in place and then, when they get to about 800 or so employees, they start thinking about automating spend management, starting with e-procurement and e-invoicing.

A little further down the road, they start thinking about systems for budgeting, travel, employee stock administration and maybe analytics.

The problem with thinking about all these systems separately and sequentially is that instead of thinking about the optimal way to handle each function, you’re thinking about how to solve each problem within the constraints of the systems you already have.

It’s like building a house without a set of plans, one room at a time. It’s an inefficient way to build, and you’re going to end up with a pretty funky floor plan.

You can save time and money, and gain a competitive advantage, by thinking about your finance system as a whole, and drawing up a set of plans for building it from the foundation up, starting with ERP and spend management.

It all starts with invoicing

Your finance system really starts when you start paying invoices. What most growth companies do is buy QuickBooks or some other inexpensive entry-level software to do that, and then shift their focus back to sales and revenue.

As the company grows, it becomes evident that this entry-level system is no longer meeting the company’s needs so they start thinking about an ERP system. These days that doesn’t have to be a multi-million dollar undertaking. Cloud ERPs such as NetSuite can work for businesses as small as 40-50 people, and they can scale up to work for as many as 100,000 people.

So, the CFO or Controller spearheads an effort to get an entry-level ERP system to address core financials, and then, once again, they shift focus back to sales and revenue.

The ‘flip the switch’ myth

Spend management – most notably, e-procurement and e-invoicing – are what people typically tackle next, but most postpone thinking about them until they get there. Or they think, “the ERP system has some requisitioning and invoicing functionality. We’ve got the license and we’ll just flip the switch on those when we need them.”

If only it were that easy.

Yes, many ERP systems do some basic requisitioning and e-invoicing. But their functionality will not come close to satisfying requirements for effectively managing spend, and there’s too much they don’t do, such as sourcing and contracts.

Flipping the switch will only expose those decisions you didn’t make at the outset. Don’t fall into the “flip the switch” trap. Nobody intentionally uses the requisitioning in their ERP to manage spend – they settle for it.

Or, they figure out they need more functionality than the ERP provides and launch an entirely new initiative to vet spend management solutions. But it could have all been figured out at the point where you went from QuickBooks to NetSuite, without taking too much more time, money and resources.

ERP and those first pieces of spend management should be done all at once, so bring procurement and AP to the table for that discussion. Not only will you make a better buying decision, but you’ll have an opportunity to streamline the implementation process.

It will only take fractionally longer to implement both at once, but if you do your ERP implementation and then come back later to implement spend management, you’ll end up doing a lot of the same work over.

A Biggish Bang

There might be reasons to do it that way, but those have to be weighed against the fact that when it comes to your financial management system, it’s not “if” but “when.” It makes more sense to implement ERP and spend management solutions together in a biggish bang because like peanut butter and chocolate, they’re even better together.

Spend management is a low impact, high return insertion that will make your ERP implementation better. The procurement piece can create all the purchase orders that get pushed into the ERP, where you’ve already got the right categories and accounting codes.

Why wouldn’t you want to feed your ERP good, clean data to begin with, in an easy way that people can use and understand? With the cloud, it doesn’t matter if you only have twenty people buying things, or if you’re only doing a few hundred invoices a month.

You probably won’t automate your whole financial system right out of the gate, but you should still think it through and draw a set of plans with the end goal in mind. So, think thrice before you buy that ERP system. Think about the next imminent piece, which is spend management. Think about how you build out from there. You’ll be way ahead of the competition that’s doing it the way we’ve always done it.

You’re not going to have a lot of messes to clean up because you set it up right from the outset, and you’ll be paying a lot less for transactional processing than the competition.