Why use SAP MDG for the Procure to pay Process ?

What is procure to pay ?

Procure to pay is designed to provide organizations with control and visibility over the purchase process. It provides insights in the initial decision to make the purchase, automate and accelerate the process of selecting the goods and the transaction made to pay the goods purchased.

But even in this process it is possible to make mistakes: use faulty vendor, pricing, material data, which is inefficient and can cost a lot. Think on missing discounts because the payment terms were not available in your vendor master data. Or the example of a company merge with similar materials and vendors, which can cause duplicates and corrupt or inaccurate records.

In the next article, we would like to show you the benefits of using SAP MDG in your financial department.

What does research say ?

We quote 2 of the top 6 advices from "P2P SAP Best Practices: Perspectives from Suppliers and Subject Matter Experts" (a whitepaper by Rob Handfield, Bank of America University Distinguished Professor) :

  • Improve master data robustness and integrity. Whether this involves ensuring proper audits of external vendor catalogs, or internal content management, clean master data is a mundane but critical element to supply management and P2P best practices. Minimize opportunities in the P2P process for keystroke and free text errors to occur, by error proofing the system and mapping the process to identify where errors are occurring.
  • Be sure to update master data and pricing rates on an on-going basis. In particular, attention should be paid to units of measure, appropriate industry-standard nomenclature, updating of labor rates based on market conditions, and on-going clarification of requirements against existing contracts

Conclusion 2 from this article : "The Biggest Challenges with Procure-2-Pay (P2P) Implementations – Supplier Master Data

"Lack of data governance – Even if ownership is clear, which normally starts off with Finance, there is no governance around data and the purpose and use of data is not communicated therefore the data which is maintained is not fit for how the organization would like to use the data – for example to load it into a P2P solution or in a spend analysis tool or a contract management system"

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Key benefits

At Avelon we know that SAP Master Data Governance will increase efficiency in the Procure to Pay process. Master Data Governance helps to prevent missing data, duplicates, manual errors, etc. It will provide a single, trusted view of your data, increases data accuracy and reduces costs.

The key benefits of SAP Master Data Governance are:

  • It supports all your master data domains in one single application that can be implemented on premise, in the cloud or in hybrid environment. 
  • You can use prebuilt data models, rules, workflows and user interfaces to quickly deploy tasks such as financial consolidation, customer service and supplier onboarding. This accelerates the deployment of business activities.
  • It can consolidate and manage master data across the business, whether information is exchanged and accessed in SAP or non-SAP solutions on premise or in the cloud. It drives data consistency across your enterprise.

Impact SAP MDG on procure to pay process

By standardizing the data setup and maintenance processes of your master data with SAP MDG, you will be able to check for duplicates upfront when entering and creating new entries. By setting standard rules, employees will know which field is mandatory and which format is necessary to create new materials or vendor records. It will reduce manual work and provide transparency for who is changing what, when and why.

You can ensure high quality material- and vendor data in order to save costs with assigning the best source of supply and within your multi-system environment you can establish a single source of truth for the vendor master data.

This will allow the Procure to Pay process to go smoother:

  • The creation of purchase requisitions and purchase orders will have the correct material and vendor information like payment terms, unit of measure, etc.
  • During the release procedure, the controller has a correct overview to decide if a purchase may proceed;
  • It will be easier to identify the materials at the goods receipt, because of correct data in the materials. Receptions will go smoother, which saves time and money;
  • At the invoice verification, there will be less differences and you can maximize financial benefits (Discounts, conditions, etc).

A final conclusion

A study by the Aberdeen Group in 2014, shows the impact of the introduction of Master Data Management. In the graph you can see that investing in Master Data can improve the visibility and accuracy of business data, it improves the accuracy of making business decisions and moreover it also provides an competitive advantage.

 
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            “Data is useful. High-quality, well-understood, auditable data is priceless”                                                                        Ted Friedman, Gartner 

With the quotation of Ted Friedman we understand the importance of getting AND keeping your data clean with the highest quality.

At Avelon, we see the value of Master Data Governance in the Procure To Pay process. Let us convince you and have a talk with us.

For questions or additional information on this subject, please contact Wouter Van Peteghem.

Thanks to Maarten for writing this article.