With corporate spending on services and other indirect expenses now making up 20 – 40% of overall budgets at many of the Fortune 1000, compliance rigor continues to be a challenge for many companies. For larger companies who need to be able to easily audit services for proof of execution, this has become an area of increased scrutiny in the last few years.
In the past, service supplier contracts often had a clause to allow for an audit to confirm proof of performance (POP) or proof of execution (POE) prior to payment. Many also required suppliers to store proof of performance for up to ten years. But, a lot of the areas where spend has dramatically increased, had never been deeply audited for this until recently.
Today, corporations are bringing that documentation and storage requirement into their data stores. They are proactively requiring the delivery of POE from suppliers like digital consulting firms, marketing agencies, and many other service providers before payment is released.
After poor POE compliance, corporations look to deliver more unified experiences that make compliance easy
Departments like sales and marketing are now being required to change their behavior because too many corporations have performed poorly or failed compliance audits in recent years because of the difficulty tracking down this POE requirement from suppliers after the fact. Suppliers often want to be paid for the time to look up and deliver the POE after a year or more may have passed since the payment took place.
Auditors need an easy way to audit purchase orders and obtain proof of performance to certify compliance with anti-bribery and anti-corruption policies and legal requirements.
Procurement teams have traditionally struggled to successfully drive compliance, especially across parts of the organization that have received the largest increase in these digital deliverables, namely marketing and sales.
The experts in marketing and sales departments have been inundated by requests to change behavior along with the rollout of many fragmented tools coming from finance and procurement. Now, there is one more requirement, and many POE systems were not built for recording digital services.
Experts want to do great work, not feel like paper pushers
The reality is that these service experts just want to deliver great work. They want to do the right thing for the company. But, their jobs are starting to feel like they are corporate paper pushers. This feeling is a huge human capital risk for companies, especially with today’s job market.
While many companies have documentation on what constitutes a POE record, this standard is not always written for delivery of digital goods and services. Many experts do not know what documentation is required of their suppliers. And, this new drive to add POE also requires the experts to review and approve the POE before payment is released.
What has occurred is that the initial efforts to support more POE compliance across service areas may not have been supported well, leading to inappropriate POE documentation being uploaded and approved. Experts wanted to pay the suppliers for the work they had done, and they had to upload the POE. So, they just uploaded a single screengrab of whatever they had on hand. Upon audit, some of these continued to have poor compliance performance as a result.
If your POE have not been audited yet for digital and services recently, now is your chance to learn from the mistakes others have made. No C-Suite wants to see underperformance in the anti-bribery and anti-corruption audit areas.
CPOs need a system that lets them say “Look how easy it has become to be compliant.“
The winners will be the companies who deliver more unified experiences with internal systems. POP is just the latest in a plethora of areas bringing this issue to a head for businesses who drive the indirect procurement spend, especially for service driven areas like marketing and sales.
To do that, companies need to support transformation for these services areas. It is both a challenge of finding the right unifying digital experience while also supporting a robust change management effort.
Six tips to deliver a great POE system:
- Find a system that unifies existing source to pay efforts for both your suppliers and your experts, including Proof of Execution / Proof of Performance (POE / POP)
- Make sure both suppliers and your experts understand what are appropriate POE for their service areas
- Make sure the suppliers can upload POE easily *Warning: Do not put the burden on your experts
- Make it easy for your experts to review and approve the POE and then do a goods receipt (GR) to pay the supplier
- Deliver a change management process and market the new overarching system in a way to helps company experts realize the time savings and get excited about it
- Ensure that audit teams can easily get the POE they need by purchase order number without involving anyone else
People need to know that this new unifying system isn’t just one more thing to take up their time, but one system that they can now use to handle all of their day to day compliance from sourcing, contracting, engaging, purchase requests, proof of performance documentation, and payment.
At the end of the day, the C-Suite, and Chief Procurement Officer in particular, needs a system that can support the statement, “Look how easy it has become to be compliant for services and indirect spend. We are excited to help you get back to doing the work you love as an expert.”