Decentralized operations within Accounts Payable (AP), procurement, and account settlement can create a unique set of challenges and inefficiencies. While some organizations find value in decentralization, understanding its implications and managing its complexities is crucial. Here, we explore what decentralized operations look like across various functions and provide strategies to drive centralization and efficiency.

The Reality of Decentralized Operations

Procurement: In a decentralized setup, procurement responsibilities are often shared with AP. This can lead to low adoption of centralized systems like Workday for procurement tasks. The result is a fragmented approach where procurement processes lack consistency and efficiency.

Accounts Payable (AP): When AP shares responsibilities with procurement, it can lead to high invoice cycle times and reliance on tribal knowledge for supplier relationships and invoice coding. This knowledge is often not documented, making it challenging to maintain continuity when key personnel leave.

Settlement: Settlement operations in a decentralized environment are typically hectic, with disjointed payment run schedules. This disorganization can cause delays and errors, impacting overall financial health.

The Hidden Costs of Decentralization

High Invoice Cycle Times: The back-and-forth between various business units and AP can lead to prolonged invoice processing times, causing missed discounts and Service Level Agreements (SLAs).
Inefficiency in Workday Utilization: Companies may not fully leverage their Workday investment due to post-go-live issues, such as unsynced workflows and implementation errors.
Fraud and Duplicate Payments: The lack of a centralized system increases the risk of fraud and duplicate payments, as multiple teams handle payments without consistent oversight.
Operational Challenges: Decentralization leads to inconsistent vendor relationships, fragmented reporting, and settlement runs. Additionally, turnover in teams exacerbates these issues, causing further inefficiencies and knowledge gaps.
Unprepared for Mergers and Acquisitions (M&A): Rapid growth through M&A can leave companies struggling to integrate IT infrastructures and maintain consistent operational standards, increasing costs and complexity.

Strategies for Driving AP Centralization:

Negotiate Better Terms:

Ask for discounts based on volume and better payment terms from suppliers.

Improve Invoice Coding:

Request better invoice coding, including Purchase Order (PO) numbers and clearly labeled “Bill To” addresses.

Consolidate Invoice Ingestion:

Implement a consolidated email ingestion process for invoices.

Standardize Punchout Processes:

Streamline the procurement process by implementing a consolidated punchout catalog.

Manage Master Data:

Standardize master data management across the organization.

Organize Settlement Schedules:

Publish and adhere to standardized settlement run schedules.

Create Training Materials:

Develop and maintain onboarding and cross-training materials to ensure consistency in processes and knowledge transfer.

Enablement Materials:

Ensure enablement materials are regularly updated to reflect changes and improvements in processes.

The Complexity of Compliance and Global Operations

Global companies often face additional challenges in centralizing AP due to statutory reporting requirements, time zone differences, and diverse operational practices. For these organizations, fully integrating acquired companies and standardizing processes can be particularly daunting.

Practical Steps Towards Centralization

Standardize Processes and Training:

Implement standardized processes and training programs to ensure uniformity across all teams. Daily standups can help build camaraderie and ensure everyone is aligned.

Analyze Exception Handling:

Determine which team should handle specific issues by analyzing exception-handling processes. This will streamline troubleshooting and improve efficiency.

Start with What You Can Control:

Even if full centralization isn’t immediately possible, begin by standardizing processes and training within your control.

Conclusion

Decentralized operations present significant challenges, from high invoice cycle times to inefficiencies and increased risks of fraud. By understanding these challenges and implementing strategic steps towards centralization, organizations can improve efficiency, reduce costs, and better prepare for future growth. While centralization may not always be possible due to compliance and operational complexities, focusing on standardization and process improvement can lead to significant benefits.

In a rapidly evolving business landscape, adaptability and strategic planning are key. Embrace change management, leverage technology, and foster collaboration to navigate the complexities of decentralized payables successfully.

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