Procure to Pay Automation – What it is and Why Do You Need It?

procure to pay automation solutions

Procurement is a vital business function that encompasses a wide range of activities revolving around obtaining goods and services. The main aim of procurement is to obtain competitive prices for supplies, delivering the most value. To derive maximum value out of the procurement function, you need a streamlined procure to pay process. Procure to pay automation streamlines the procure to pay cycle by eliminating redundancies and inefficiencies.

Read on to understand procure to pay process automation in detail, the need for automating procure to pay process, and the benefits of procure-to-pay automation.

Stages of Procure to Pay Cycle

Before we get into the details of procure to pay automation, it is important to understand the stages or steps in the P2P cycle. A detailed understanding of the steps in this process helps decide which step or steps are ripe for automation. The procure to pay cycle can be broadly divided into 3 stages – requisitioning, purchasing, and payment. Let us look into each of these stages in detail.

Requisitioning

The procurement process begins with the procurement department identifying the need for goods or services. The design or fabrication teams usually communicate their need for raw materials through a purchase request. The procurement team considers the requisition and reviews the vendor database to see which vendor supplies the requested items. In case there is a vendor available in the database, the team requests a quote from the vendor. For products or services that do not have a vendor in the database, a new vendor is chosen. 

Purchasing

Once the vendor has been identified and the request for proposal (RFP) has been obtained, the procurement team compares the RFPs to choose the one that gives the most competitive pricing. Once the requisition is approved, the purchase order outlining complete details of the quantity and the agreed pricing (per line item), and the delivery time is prepared. The prepared purchase order is reviewed and approved by the procurement manager or the equivalent authority. The approved purchase order is sent to the vendor. The PO becomes a legally binding contract once the vendor accepts it. 

Order fulfillment

The vendor starts working on the purchase order and delivers the goods/services to the buyer as per the agreed timelines. The customer receives the order and verifies the quantity and quality of the delivered items and prepares the goods receipt. If there is any discrepancy in the order fulfillment, it is duly communicated with the vendor. 

Payment

Once the entire order has been delivered and the customer has received the same, the vendor prepares the invoice for the goods that are delivered. Upon receiving the invoice from the vendor, the customer verified the details against the purchase order. The verification process is made more stringent with the 3-way matching process where the details on the invoice are cross-verified with the PO and the goods received the note. The invoice that is duly verified is then approved for payment. The accounts payable team receives the invoice and processes the payment after getting the necessary approvals. 

In a traditional business setup, all of the above steps are manually carried out by the procurement team and the accounts payable team. Manual procure to pay process is labor intensive and involves a ton of paperwork. Errors and inconsistencies, coupled with delayed approvals and duplication, render manual P2P processes inefficient and redundant. Procure to pay automation can streamline the process by automating repetitive steps and eliminating errors and inconsistencies associated with human intervention. The following sections delve into details on what is P2P automation, and its benefits, and identify the tasks that are suitable for automation. 

What is Procure to Pay Automation?

So, what is p2p automation? Procure to pay automation or procure to pay process automation uses technology to streamline the entire p2p cycle by eliminating redundancies and automating repetitive steps that do not require human intervention. The procurement and accounts payable departments are involved in the procure to pay process. In most businesses, procurement and accounts payable functions operate independently and work in silos. This way of siloed working affects the approvals in the procure to pay process. By automating procure to pay process, smoother collaboration is brought about between these 2 departments. 

P2P automation adopts software solutions to integrate procurement and accounts payable processes so that delays and bottlenecks are minimized. Some examples of procure to pay process automation include – generation of POs, 3-way matching, capturing invoices, updating statuses, and keeping information consistent across multiple processes and departments. P2P automation reduces the number of repetitive tasks, which gives the procurement and accounts payable teams more time to focus on meaningful activities like problem solving, management, and other strategic activities. 

P2P automation software provides a holistic viewpoint of the procure to pay cycle and helps teams focus more on shared goals. Workflow automation solutions can turn time consuming tasks in the P2P cycle into automated workflows, helping organizations realize cost savings, greater efficiencies, and improved employee satisfaction. Procure to pay automation is essential for smooth and seamless procurement transactions and faster invoice approvals. Not just improving process efficiencies, workflow automation can also help processes align with compliance and regulatory requirements. Automating the procure to pay process provides deeper visibility into organizational spend. 

Need for Procure to Pay Automation

So, why do you need to automate the procure to pay cycle? The immediate reason that might crop up in your mind is overcoming the short-comings of manual processes. Here is why you need to digitize the procure to pay cycle –

Managing voluminous procurement data efficiently

The procurement function is a data intensive process that involves the exchange of multiple documents and data with the accounts payable department. Managing such huge volumes of data by manual means is prone to errors and duplication. Moreover, huge chunks of paper documents are difficult to handle and store. Automation does away with all this paper work by digitizing document and data management. All procurement documents like RFIs, RFPs, POs, Invoices, and goods received notes are digitized and stored in a centralized database for anytime, anywhere access. 

Mitigating the risk of duplication and fraud

In a data-sensitive business function like procurement, there is no scope for manual errors or oversight. Misplaced or lost orders can spell disaster for the procurement team. Automating the procure to pay cycle ensures that procurement information is secure and safe, enabling teams to run the procurement function with zero risks and liabilities. 

Eliminating delays and bottlenecks

Delays in approvals can cost the business dearly. When procurement orders are not approved on time, internal processes are affected, on the other hand when invoice approvals are delayed, vendor relationships are strained. Manual procurement processes lack the visibility into the status of requests, as a result POs, RFPs or invoices fall through the cracks. When the procure to pay process is automated, the software issues alerts and notifications to the concerned approval authority of pending approvals or upcoming approval deadlines. This way delays in approvals are avoided. 

Adhering to compliance and regulatory requirements

In manual systems that are predominantly run by human resources, adhering to compliance and regulatory requirements is challenging. Automation brings about standardization in the procure to pay process, which makes it easy to align with regulatory and compliance requirements. 

What to Automate in Procure to Pay Cycle?

Not all processes are suitable for automation, tasks that are repetitive and do not require human intervention are suitable for automation. Here is a list of processes that automation is best suited – 

Purchase requisition management – Procurement software helps streamline the creation, submission, and approval of purchase requisitions. It eliminates the need for 

How to Automate the Procure to Pay Process?

For successful implementation of procure to pay automation, a solid P2P automation strategy is required. The plan must outline how your organization will manage the procurement process from start to finish. All the procure to pay steps – from identifying and sourcing goods/services to processing vendor payment, must be included in the plan. A clearly defined P2P cycle automation strategy must help your business achieve the following – 

Reliance on manual processes

The main aim of automation is to do away with manual, repetitive tasks. Repetitive, mundane tasks like PO approval, invoice approval, or data entry can be easily and quickly done by software. With these tasks taken over by automation, the procurement and accounts teams can focus on important strategic activities. 

Substantial cost and time savings

A robust procure to pay strategy can bring about substantial cost savings for the organization. An optimized procure to pay cycle enables procurement teams to negotiate better cash discounts, identify suppliers that are a value addition, and leverage economies of scale. Moreover, when the entire procure to pay process is streamlined organizations can improve cash flow management and identify potential bottlenecks, thereby, improving overall financial health. 

Timely payments

By implementing intelligent automation solutions, stakeholders can be intimated on pending payments or upcoming approval deadlines. The overall operational efficiency of the process is greatly improved when processes are completed on time. When invoices are approved and processed on time, vendor relationships are significantly strengthened.  

Compliance

One of the drawbacks of the manual procure to pay process is the lack of compliance with regulatory requirements. Whether it is onboarding a new vendor or creating a purchase order, or receiving an RFP, there are certain regulatory requirements that businesses need to adhere to. Manually ensuring compliance is a cumbersome process, especially when business operations expand. Automation helps ensure 100% compliance at all times even as business operations scale up. 

Supplier management

Maintaining strong supplier relationships is essential for business success. Automation helps maintain and strengthen supplier relationships by ensuring that invoices are paid out on time. Updating and maintaining the vendor database can be effectively done through an automated system. This helps you track discounts and leverage them for cost savings. 

Implementing no code workflow automation solutions like Cflow can significantly enhance the effectiveness of the procure to pay process. Once you have a solid procure to pay automation strategy in place, you can plan out the implementation easily. Here are the steps to implementing a procure to pay automation solution

Identifying the need for automation

This step is mainly concerned with the identification of tasks in the procure to pay process that are apt for automation. To arrive at the right decision, you need to gather input from stakeholders, evaluate the task and its dependencies, and also account for the changes that need to be implemented. 

Apprise the stakeholders

Procurement and accounts payable team members need to be informed about the changes that automation would bring. Informing the stakeholders and getting them on the same page is a critical factor for the success of automation.

Implementing the automation solution

The best way to implement automation of the procure to pay process is to do it in phases, or task by task. Phased implementation allows the team to monitor the effectiveness and performance of the automation solution. 

Feedback and KPIs

Gather feedback from the stakeholders about the automation software and make changes wherever required. Also establishing key performance metrics is a good idea to quantify the effectiveness of procure to pay automation.

Key Benefits of Procure to Pay Automation

The latest statistic reveals that automating the procure to pay process reduces invoice processing costs by up to 80%. Let us look at the key benefits of automating the procure to pay process – 

Deeper visibility – Automation provides deep insights into the procure to pay process by digitizing and centralizing procurement data and information. Deeper visibility enables better and informed decision making.

Improved supplier relationships – Procure to pay automation also plays an important role in improving and strengthening supplier relationships. Timely payments to vendors are made possible by automation. 

Improved data capture – By leveraging advanced technologies like optical character recognition (OCR) the procure to pay solution can accurately extract procurement data from invoices and other documents, which minimizes the chances of errors or mismatches. 

Zero errors and fraud – The controls and audits incorporated by the P2P solution eliminate the risk of invoice fraud. 

Consolidation of commerce processes – P2P automation centralizes and streamlines procurement processes, which reduces fragmentation and inefficiencies.

Conclusion

Given the importance of the procure to pay process in the success of a business, it is critical to update and upgrade the P2P cycle by adopting modern technology. A no code workflow automation software like Cflow can turn things around for your business by streamlining key business workflows through automation.

Automating procure to pay process is essential for smooth business operations and control over organizational spending. The visual form builder along with a host of automation features in Cflow make it the preferred and trusted automation partner for small, medium, and enterprise businesses.

Want to find out how? Sign up for the free trial of Cflow.

What should you do next?

Thanks for reading till the end. Here are 3 ways we can help you automate your business:

Do better workflow automation with Cflow

Create workflows with multiple steps, parallel reviewals. auto approvals, public forms, etc. to save time and cost.

Talk to a workflow expert

Get a 30-min. free consultation with our Workflow expert to optimize your daily tasks.

Get smarter with our workflow resources

Explore our workflow automation blogs, ebooks, and other resources to master workflow automation.

What would you like to do next?​

Automate your workflows with our Cflow experts.​

Get Your Workflows Automated for Free!

    By submitting this form, you agree to our terms of service and privacy policy.


    • Platform
    • Resources