To successfully run any business, whether traditional or digital or a combination of both, you should be familiar with the process of procure-to-pay and the automated systems can help to streamline it.
You should be able to monitor the status of a transaction at any point from the time a product or service is ordered to the time an invoice is paid.
We’re going to take a deep dive into the Procure to Pay (P2P) Process in this article. We will also explain what P2P means, its process, how it can be streamlined and more.
Procure to pay is the process of integrating accounts payable and purchasing systems and streamlining functions like purchase, requisition, invoicing, payment and receival, etc. P2P process covers the entire process right from raising an order to making the payment.
The implementation of a procure-to-pay (P2P) system is important for businesses because:
Streamlining procurement: By using procurement software, requisitions and approvals can be processed faster. Appropriate suppliers can be found based on data, and POs can be generated and sent to suppliers. All of this can be tracked easily and electronically.
Improved visibility: It helps improve visibility across the supply chain, allowing both the buyers and supplies to track the status of invoices in real-time.
Reduced invoice processing costs: With paperless operations, companies save time and money, allowing employees to work on strategic initiatives instead of repetitive tasks.
Better exceptions management: Since most invoices are processed right away, exceptions can be addressed and handled quickly.
Improved relationships with suppliers: The supplier portal makes it possible for suppliers to know when they will be paid, so they can make better decisions. It also fosters goodwill and gives buyers greater visibility by resolving invoice exceptions and disputes as soon as possible.
Make better decisions: With robust P2P solutions, businesses can generate reports on demand. Catalogue management enables an organization to easily retrieve historical information from a supplier. With historical and real-time data provided, businesses can gain a better understanding of working capital and cash flow.
P2P Cycle consists of 9 steps, which are listed below:
Determine the needs: Defining and determining the requirements of your business is the first step of the P2P process. After identifying a valid need, procurement teams can create a detailed specification for goods or services.
Prepare requisitions: Once all necessary administrative requirements are met, the requester submits the completed purchase requisition form.
Approval of the purchase requisition: Procurement officers or department heads review the submitted purchase requests. Once an approver has analyzed the need, verified the budget, and validated the purchase requisition form, he may approve or reject it.
Make a purchase order or place a spot order: Spot buy is made if the requested goods have characteristics like low-value commodities, one-time unique purchases or unmanaged category buys. Otherwise, purchase orders are generated.
Approval of purchase orders: All purchase orders require approval to ensure that specifications are legitimate and accurate. Those that are approved go to vendors.
Receipt of goods: Upon receiving the goods or services, the purchaser inspects items to ensure they are in accordance with the contract.
Performance of suppliers: A supplier’s performance is evaluated on various factors like on-time delivery, quality, service, responsiveness, contract compliance and TCO (Total Cost of Ownership).
Approval of the invoice: A three-way match is performed between the vendor invoice, the purchase order, and the goods receipt once the goods receipt is approved. Invoices are approved, and payment disbursements are sent to the finance team if there are no discrepancy.
Payment to the vendor: After an approved invoice is received, the finance team processes the payment as per the terms of contract.
Procure-to-pay solutions offer a multitude of benefits, including transparency, money and time savings, efficiency, but they also pose a number of procurement challenges. These are some common challenges companies may encounter with procure-to-pay:
Manually entering, processing, and signing off invoices slows down the P2P process, resulting in longer invoice approval time, penalties for late payments, and compromised supplier relationships. Additionally, a paper-based system requiring human intervention is prone to error. Correcting the error results in higher invoice costs and lower productivity.
During P2P processes, it becomes difficult to regulate and manage numerous purchasing channels. Often, the spending pre-approval is seen as unnecessary bureaucracy, which leads to improvised purchases and non-contracted spending.
There are differences in the processes and tools used by different departments within an organization, which makes it more difficult to get a complete picture of the spend. The procurement process no longer remains transparent when there is no visibility of who spends on what.
A challenging aspect of procurement is supplier management. Lack of information can make supplier shortlisting difficult in a human-led onboarding. By not responding to suppliers’ payment queries promptly, many organizations damage their relationship with them.
There’s no doubt that the procure to pay process can be complicated. By following these best practices, errors can be reduced and the process can be streamlined.
P2P systems lack transparency, leaving suppliers or vendors in the dark, resulting in confusion and excessive communication between buyers and vendors. Ideally, vendors should be able to check the status of their invoices at any time with the procure-to-pay solution that provides a self-service portal.
It is important for a company to maintain good relationship with vendors that meet their specific needs. Making payments on time or early and giving easy access to dedicated portals are some great ways to keep vendors satisfied and motivated to keep doing business with you.
However, as with any relationship, this relationship is a two-way street. Companies shouldn’t just evaluate how well they meet their vendor’s needs and expectations, but also how well their vendors treat those relationships. Does the vendor deliver on time? Does the vendor send invoice on time? Is the invoice accurate? Your organization can improve its P2P process by evaluating these factors.
For the procure-to-pay process to run smoothly, all relevant data should be stored in an easily accessible location. You can eliminate data silos by integrating P2P processes with an enterprise resource planning (ERP) system, ensuring that everyone has easy access to all relevant documents and data.
Streamline your employees’ tasks by eliminating tedium. Automating tasks such as invoice routing, authorization and processing, as well as 3-way matching, simplifies everyone’s job. It is more likely for your team to adhere to workflows if you remove complications from them.
An effective procure to pay software reduces errors as well as delays, streamlines communication, reduces costs, and improves visibility for both suppliers and buyers.
To facilitate process improvement, the best P2P software should provide various tools for invoice processing, approval and routing, ERP integration, vendor portals, and more. As a result, these solutions increase efficiency by reducing the time spent on manual entry and management.
By integrating electronic matching capabilities and centralized visibility into your P2P (procure to pay) process, you can streamline purchase by ensuring better exception management and prevent the risk of duplicate invoices and overpayments.
By choosing the best procure to pay software, you can streamline purchasing in the following ways:
TYASuite Software is a cloud-based procurement solution to automate and streamline your procure to pay cycles. Irrespective of the size and nature of your business, TYASuite Procurement to Pay Software suite can help streamline your entire procure to pay process by:
Raise purchase requisitions in bulk with Excel imports. It further helps optimize purchase requisition on the factors like lead time and safety stocks.
Automated purchase order requisitions with automated recurring orders and on-the-go approvals.
You can generate invoice in any format and perform GST calculation automatically across various locations for multiple products.
It allows you to make multiple payments simultaneously and also process partial payments. You can use the partner payment option to immediately process payments for vendors.
Provides in-depth reports to evaluate performance and productivity and make smarter decisions.
Ensures hassle-free vendor onboarding through approvals, documents, and contract management.
Conclusion
P2P (procure-to-pay) processes are becoming increasingly necessary. Through automated and efficient purchasing, the organizations will be able to capture more value, enhancing employee and supplier experiences, enhancing purchasing and accounts payable efficiency, and much more.
FAQs
In order to purchase goods or services from an external vendor, we need to use TYASuite Procure to Pay. It includes all aspects of a business transaction, starting with a purchase request (PR) and ending when the vendor is paid.
As the name suggests, procure to pay software is a fully integrated system designed to facilitate an end-to-end procurement cycle starting with requisitioning goods or services and ending with ready-to-pay files ready to be uploaded to accounts payable.
P2P or procure to pay process flow is a cycle of events and actions taken by a business when purchasing goods and services from an outside vendor. The P2P process flow includes the following steps:
1. Determine needs
2. Create requisitions
3. Approval of purchase requisitions
4. Spot buy or make a purchase order
5. Approval of Purchase Order
6. Review the receipt of goods
7. Supplier evaluation
8. Approval of invoices
9. Payment release to the vendor
A P2P cycle step involves procuring goods and services from suppliers for producing the goods or providing the service that the company offers to its clients. Here are the steps involved:
1. Purchase Requisition
2. Purchase Order
3. Order Confirmation
4. Delivery Notification
5. Invoice Payment
Procure to pay mainly consists of three main processes or components in the procurement lifecycle that are requisition, purchase, and payment.
The procure to pay process involves integrating the purchasing system with the accounts payable system in order to improve efficiency. As part of procurement management, it includes four key steps: the selection of goods or services; ensuring compliance and ordering; receiving and reconciling; and billing and payment.
Procure to-pay works by streamlining and standardizing procurement, receipts, and A/P documents and workflows throughout the P2P process. The procure to pay cycle includes purchase requests, purchase orders, reports receiving as well as vendor invoices.
Here are the 5 stages of procure to pay automation:
1. Requisition
2. Capture of invoices
3. Matching of invoices
4. Approval of invoices
5. ERP Integration
In order to improve the efficiency and effectiveness of their procure-to-pay processes, organizations should implement the following five best practices:
1. Make your information more accessible
2. Identify processes that are inefficient
3. Develop a standard procurement policy
4. Create an effective feedback system
5. Streamline the selection of suppliers/sources
Accounting payable is only one aspect of the procure-to-pay (P2P) process. In short, it includes all aspects of the procurement, invoice and payment processes. During the accounts payable process, the supplier invoices are paid within the agreed payment terms and the transactions are accounted for accordingly.
Related Categories: Procurement Management Software | Purchasing Software | Vendor Management Software | Auction Software
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