Accounts Payable function is fundamental to the operational and financial success of many organizations across the globe. Yet it continues to be viewed as a cost center.
It was never uncommon to hear of documents buried in paper trails, missed discounts and strained supplier relationships, etc. But recently, the pandemic added to these woes and proved that the ways in which many Accounts Payable teams still operate are not just dated and costly, but may also put the health and safety of employees at risk.
Stuck in the dusty alcoves of the back-office and bogged down by a myriad of time-consuming, manual tasks, an un-optimized AP Function is host to a slew of redundancies, avoidable costs, and frustrating friction areas.
Not recognizing and dealing with these redundancies will become increasingly costlier to businesses – competition is already at an all-time high and teams are being asked to deliver more every year. And in addition, issues like climate change mean that uncertainties and global disruptions will only become more frequent with time. In this backdrop, organizations that still haven’t got on the AP Automation bandwagon need to ‘level up’ to survive.
Fortunately, as per the latest bodies of research, these problems aren’t just easily rectifiable but they’re also ones that are likely to pay the most dividends once solved. Case in point: Gartner’s research found that AP (APIA in specific) is one of the best applications of artificial intelligence in a business, both in terms of business value and in terms of feasibility.
Haggling is not negotiating. I repeat, haggling is not negotiating. You are just “meeting in the middle.”
I remember watching an episode of the BBC’s “The Apprentice” in which the task was to buy a list of items in London. The would-be apprentice, Jim, went to a butcher to buy a steak. It was a classic haggle. The butcher started high and Jim started low. They ultimately met in the middle.
This back and forth is haggling, which is a valid method of resolving a conflict. But other ways to resolve a conflict exist, including negotiation. The difference is that haggling is just about the price, and largely the outcome depends on who starts the highest or lowest. But negotiation is about trading variables and takes more skill, which makes it an art rather than a blunt instrument.
Learning the art of negotiation can be done with a few simple, yet effective tools.
Tool 1: The Up-and-Over
As a child, my family lived in a modest three-bedroom house in Laindon, Essex. It had one of those garages at the front of the house but you couldn’t get to the garage through the house even though it was integrated into the building. You could only get to it through the big up-and-over door.
“Up and over” is also a negotiating tool to use when you want to counter propose, which means to reject an offer and replace it with one that suits you better.
Let’s say you are selling your car. After looking the car up and down and kicking the tires, the buyer says, “Would you take $4,500 instead?” Typically, you’d haggle and say, “No, but I would accept $5,000,” and on the haggle goes until you meet in the middle. In a negotiation, you might say, “If you can buy the other car I am selling too, I could move on the price.” “Another car?” the buyer replies. “I don’t want another car. That’s silly.”
Darren Smith, Founder and Chief Meaning Officer Making Business Matter
SIG University Certified Sourcing Professional (CSP) programstudent Jessica Maki works at Driven Brands. She shares what she’s learned about contract negotiation and how she is implementing newly learned best practices and techniques to score bigger wins and drive more savings for her company.
In the CSP program, students focuson the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Negotiation planning plays a big part in the procurement industry. Procurement is always looking for the best price, best supplier performance and cost savings for the organization. In SIG University’s Certified Sourcing Professional program, I learned several key factors when it comes to negotiating with suppliers including preparation, best practices, and what to do versus what not to do. Throughout my experience as a procurement specialist, I’ve learned to apply these important techniques during the negotiation process, and it has helped me become a more confident negotiator.
As a Director in SC&H Group’s Contract Compliance Audit Services practice, Patrick has a few key professional motivations with all of his clients: increasing third-party transparency, optimizing supplier relationships, and improving governance. He works with Fortune 100 companies to evaluate contract compliance in categories such as marketing and advertising, contingent staffing, facilities management, construction, computer hardware/software, MRO, security, events, and office supplies. Projects under Patrick’s leadership have resulted in client savings of over $150 million in addition to practical control developments, valuable process improvements, enhanced earnings, and proven cost-savings initiatives. He is very passionate about helping to influence the operations and cultures of global enterprises, and one of his greatest professional achievements was being able to hand over a $1 million recovery check to his client.
Edward J. Hansen brings more than 20 years of experience representing clients in technology transactions that involve significant business change. If you’ve attended a SIG Summit, then you are likely familiar with Ed and his work. In addition to being an active speaker at industry conferences, he has authored and presents the “terms and conditions” module of the SIG University certification program, regularly conducts contracting master classes (including for SIG’s Executive Immersion Program), serves on the advisory board of the Shared Services and Outsourcing Network, and is a regular guest lecturer at New York University’s Executive Master of Business Administration program.
You have a lot of experience representing clients in technology transactions. What are some examples of how technology has changed or impacted the way you approach your job?
The technology in place at any given time actually has little impact on how I approach my job. What does impact my job is the fact that the technology landscape when the deal is two years old may not be the same as it was when we went out to RFx.
I started working in the technology space in 1993 and spent almost a decade working with companies who were undertaking reengineering efforts. What I learned, mostly through trial and error, is that the process you go through in procuring and contracting for transformational technology is at least as important as the contract that emerges. Because of the velocity of change, the relationship you form during the process is often what carries the deal, and the contract has to reflect that.
Contracting is one of the most important parts of the sourcing process – this is one of the final steps in the process before (or in parallel with) implementation and it documents all terms and conditions agreed to by both parties throughout the sourcing engagement. While it is one of the most important steps in a sourcing engagement, it can also be one of the most painful with numerous rounds of revisions and reviewing legalese that can extend out a project timeline substantially at times. As a Sourcing professional, I’ve reviewed my share of contracts ranging from one page agreements to lengthy contracts with multiple attachments and exhibits. Each contracting experience is different, some have gone smoothly and are wrapped up in a few days’ time, while others took months to come to agreement on the final language. I will highlight a few recent experiences with contracting and some of the lessons learned that can be applied to others in similar situations.
Don’t skip the contract just because of a low spend figure.
On a recent project, my team was brought in to negotiate with a local hardware store that was used regularly for as needed supplies at a local manufacturing plant. Upon further investigation, we learned that the client had already negotiated a discount structure with this supplier earlier in the year, but there was no formal documentation because the annual spend with the supplier was below the threshold when contracts are required.
With global sports industry revenues over $145Bn and growing at a rate of 3.7% over the past 4 years, it is evident now more than ever, that behind the tackles and buzzer beaters, sports remains a business. Negotiations in business are usually governed by several tangible measurable data points that are indicative of future performance. Given below are a few aspects that are unique to negotiations in the sports industry: