Procure-to-pay, which is sometimes called P2P or Purchase to Pay, describes a company's purchasing process. This process is part of a larger group of high-level processes. Other examples include Issue to Complete, Hire to Retire, Marketing to Lead, Record to Report, and Opportunity to Order. These terms describe different important workflows within businesses, and the P2P process specifically covers the procurement process. Learn more and see how tracking this process can help give you better insight, compliance, and visibility.
What is procure-to-pay?
Procure-to-pay specifically describes a type of procurement process within a business. Many companies already have detailed procurement plans to help them cut back on costs and efficiently keep necessary goods stocked. The procure-to-pay process is an intersection between an accounts payable (AP) department in a company and their purchasing department. The process starts when the need for a service or good is identified and ends once the providing vendor is paid. A handful of stages need to be closely followed to have consistent policy compliance and to upkeep positive supplier relationships. It involves many facets, such as the accounts payable system, the finance team, and suppliers. Unless all of these parts work in unison, the process can easily fall apart, leading to supply issues or expensive mistakes.
What is the procure-to-pay process?
The cycle of procure-to-pay is pretty simple, especially when you want a streamlined procurement process. This process usually begins with the recognition that something is needed by supply management or a buyer, which begins a requisition order or purchase requisitions process. Once this requisition order has been approved, someone will create a purchase order (PO) or spot buy. The document will be approved, the procurement team will pick the best supplier, and goods or services will be received from them. The invoice for the transaction is then approved, and the payable department pays the vendor. Alternatively, this process can be kicked off automatically when a certain inventory threshold is hit. By streamlining these processes, you can cut back on double ordering, overfilled storage spaces, and costly purchasing mistakes.
While these are the basic steps, some workflows will require additional pieces within their procure-to-pay process. For example, you may need extra approval may be needed depending on the purchase or type of company. A company may add things such as requests for quotation or quality assurance checks depending on the organization's preference. Regardless, these still fit within the procure-to-pay process and should be adhered to like any other step.
How does procure-to-pay work?
How this process works will look different depending on a company's architecture. Sometimes this is all handled manually to provide greater control, but this can negatively affect an entire organization. There are many benefits of procure-to-pay, and many of those are lost if it dramatically slows the purchasing process. The best practices of P2P are to make sure that it improves supplier relationship management, is clearly and consistently tracked, and software or tools are implemented to streamline the processes correctly.
These processes sometimes are handled through an ERP pay solution or with automation to reduce human error and the time of manual processing for the payable departments within a company. Many of these types of solutions use scan-and-capture services to better track things like electronic invoicing (e-invoicing) and supply chain management. There are also services that provide a supplier portal, electronic payments, invoice matching (three-way matching), and automated approval workflow capabilities. Overall, these processes are being adopted by more and more companies to help not only streamline this process but also help prevent manual entry errors or late invoices. They often also allow for reporting and tracking that is not easily possible manually, empowering the company to have an accurate overview anytime it is necessary.
What is best for your company will depend on its size, the amount of procure-to-pay process usage, and what works best within your organization. Keeping stringent protocols and tracking will be vital to ensuring best practices within the procure-to-pay process.