Quick Guide To The Procure-To-Pay Process
Procure to pay, historically, has had a bad rap. The blending of procurement and accounts payable is often seen as burdensome, slow, and frustrating for both buyers and suppliers.
However, next-generation procure to pay software has made the procure to payment process more efficient than ever — and sometimes even more efficient than the traditional approach to procurement. Automated tools that can route purchase requests, quickly secure approvals, and capture data along the way are helping organizations of all sizes become more efficient — and improving buyer-supplier relationships in the process.
What is procure to pay?
Procure to pay, sometimes abbreviated as p2p procurement, is the integration of purchasing and accounts payable tools to become more efficient. Procure-to-pay is a subset of the overall procurement process. There are four key stages to the procure to pay process.
In this stage, the organization identifies an internal need. For instance, the procurement team is told that the company needs widgets. The procurement team will learn more about the specifications of widgets — dimensions, quantities, etc. The procurement team will source widgets from an approved list of vendors or issue an RFP.
Compliance and ordering
In this stage, a vendor is selected and the contract is negotiated. The procurement team will create an internal requisition order needed for the purchase to be made. This requisition order will include details of the widgets purchased, the quote provided by the vendor, and delivery details. The buying organization will also issue a purchase order to the supplier.
Receiving and reconciliation
The widgets are received from the supplier and checked against the details of the purchase order. If there are any discrepancies, those are remedied and the receipt is issued. The buyer adds records into their system.
Invoicing and payment
With the receipt of widgets confirmed, the supplier sends an invoice along with a payment deadline. The accounts payable team pays the invoice and the transaction is complete.
This process may seem long and involved, but procure to pay platforms make it seamless. Here’s what the process looks like digitally:
- A team within the buyer’s organization logs into the platform and issues a purchase requisition. This purchase requisition is received and reviewed by the procurement team.
- The procurement team selects a vendor from its database of preapproved suppliers. The procurement team completes a digital purchase order which is routed for approval and sent to the supplier.
- The supplier fulfills the purchase order, sending the goods to the buyer. Then, the supplier sends a digital invoice. The buyer confirms that it received the products and sends a digital receipt accordingly.
- Accounts payable receives the invoice and transmits and e-payment according to the supplier’s requests.
- Invoices and payments are reconciled by both parties through an automated approval workflow; signatures are collected, the transaction is completed.
Clearly, there are a lot of moving parts, but the p2p platform makes it easy for everyone to see the stage to which the procurement request has advanced. Reconciliation at the end of the month is easier with a digital paper trail and automated features that allow AP teams to see cash flow in real-time.
Benefits of the procure to pay process
The procure to pay process can be complex, but with the right software, this approach offers distinct benefits.
First, procure to pay platforms allow companies to streamline the procurement process. Procurement software provides a single source of truth for all stakeholders who are involved in the buying process. Requisitions can be approved faster, POs are tracked, and records reconciled much easier when the AP and procurement functions are not siloed. Overall, procure to pay software provides greater visibility throughout the process.
Buyers are also better able to manage supplier relationships. Greater visibility on the buyer side trickles down to transparency with suppliers; and, suppliers are more likely to be paid on time when buyer parties collaborate. Managing expectations also gives suppliers information needed for better decision-making — inevitably strengthening the buyer-supplier relationship.
And, finally, procure to pay platforms collect data necessary to strengthen overall procurement on the buyer’s side. These platforms can show when a supplier is performing well or delivering late. They can also help accounting teams better manage cash flow and optimize financial decision making
Get started with procure to pay
The p2p process clearly involves many different parties and many different tasks. The key to managing the procure to pay process is having the right tools in place that can automate many of these steps. Learn more about Fairmarkit’s powerful procurement tools that can streamline your procurement process and get advice on Fairmarkit’s blog, The Source.