The procurement process begins when a purchase requisition is submitted for the requirement of goods or services. The procure-to-pay process starts once sourcing is complete. The procure-to-pay process provides organizations control and visibility over the entire procurement process, cash flow, and financial commitments.
What is Procure-to-Pay (P2P)?
The Procure-to-Pay (P2P) process is that part of the procurement cycle excluding the sourcing process. The procure-to-pay process is also referred to as the purchase-to-pay process. The procure-to-pay process flow integrates purchasing and accounts payable systems for greater efficiencies. The procure-to-pay process is a part of the larger procurement management process. Procure-to-pay or p2p solutions help organizations inquire, request, receive, and then pay for goods and services. The procure-to-pay cycle involves all the activities required to complete an order.
The main intent of a P2P procurement process is to track the purchasing behavior of the organizations and how they pay for the costs incurred. Policies and procedures that govern purchases and spending patterns are included in the P2P system.
The outline of the procure-to-pay cycle is given below:
1. Purchase requisition:
a purchase requisition is submitted to procure goods or services for the organization. The department that requires goods or services raises a purchase requisition containing details on the type and quantity of goods needed.
2. Vendor selection:
the vendor is chosen based on the type of goods or services required by the organization. Once the purchase requisition is formally approved, the procurement team hunts for the right vendor to fulfill the requisition based on criteria like delivery timelines, credit period, service quality, etc.
3. Purchase order:
once the vendor is chosen, the procurement team releases a purchase order containing details on the description of goods/services, department account number, signatures of the designated authority, the quotation from the chosen vendor, and delivery instructions.
4. Receipt of goods:
while delivering the goods, vendors specify the GRN containing details such as delivery timelines and product details. Once the goods/services are received by the buyer their correctness and quality are validated.
5. 3-way matching:
3-way matching of the details such as goods and receipt number, purchase order, and tax invoice received is then performed by the procurement team to ensure that billing is done for the goods purchased.
6. Accounts payable:
upon successful 3-way matching, payment to the vendor is initiated. Payment may be done through digital channels or by issuing a cheque or demand draft in the name of the vendor.
once the payment is completed, data at every stage of the procure-to-pay cycle is documented by the procure-to-pay software.
Every retailer, service provider, or manufacturer requires an efficient way to manage purchases and maximize buying power, vendor relationships, and cash flow. The best way to achieve all of these is to optimize the purchase-to-pay process. A streamlined procure-to-pay system helps create a well-defined procurement plan containing detailed identification and pricing information of the goods and services required by the organization.
Since the procure-to-pay process involves the purchase, accounts, and reconciliation departments, it impacts business performance significantly. While a well-planned purchase-to-pay process ensures high business productivity and efficiency, it can backfire when not managed well. Mismanaged vendor relationships, miscommunication, and contract mismanagement are some of the issues that arise due to inefficiencies in the P2P system.
Benefits of Digital P2P Pay Process
The definition of procuring to pay is the process of obtaining the materials that are required to make a product and making payment for the purchase. Purchase 2 pay is the basis of a strong procurement strategy. P2P process management solutions offer several advantages to businesses. The key advantages of P2P software include:
1. Centralized process:
A digital P2P system empowers the procurement team with complete control over purchase-related activities via a centralized application. Cloud-based procure-to-pay software enables teams to formalize contract rates, make payments, evaluate vendors, and process invoices from anywhere through the web or mobile apps.
2. Adherence to Government regulations and policies:
Digital procure-to-pay solutions standardize the approval process, thereby, increasing transparency and accountability of the procurement cycle. The automated P2P platform allows multiple-level customization of the approval-flow-based process.
3. Improved spend visibility:
Automated P2P processes provide real-time analytics, which helps the finance team to gain visibility over organizational spending. These insights help them streamline the spending process and eliminate unnecessary expenses.
4. Timely payments:
P2P software enables the procurement team to schedule automated reminders that notify stakeholders about approvals and payments. These reminders ensure that payments to vendors are made on time.
5. Seamless collaboration:
Procure-to-pay software brings the procurement and finance team together for a seamless collaboration of operations. The automated system enables vendor notifications, alerts, and reminders for approvals and payments. Clarifications on payment statuses are made available through an integrated chat system.
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Best Software for Procure to Pay Process Management
Procure-to-pay software manages all procurement activities. Procure-to-pay applications help companies streamline their procurement operations and improve efficiencies through centralized access to procurement data. The accountants use the p2p software to monitor invoices and payments. Suppliers can also use procure-to-pay software for online portals.
The G2 scores are gathered from user community reviews from online and social networks. A list of top purchase-to-pay software in the market based on the G2 score is given below.
Evaluation of the software is based on the following features:
- Consolidated procurement information from disparate sources
- Define and manage procurement business processes
- Manage all procurement operations
- Monitor all procurement-related finance transactions
- Define and implement purchasing policies and best practices
The top procure-to-pay software in the market is listed below:
- Oracle procurement cloud
- Coupa procurement
- Buyer Quest
- MHC Software
Choosing the Right Procure-to-Pay Process Solution
Choosing the right purchase-to-pay software provider is important for the successful automation of the procure-to-pay cycle. The search for the right P2P process solution can be a daunting task. Identifying the right P2P solution that aligns with the operational business needs, user needs, and stakeholder needs careful consideration and understanding of the business intent of implementing the software. Here are some of the must-have features of procure-to-pay solutions:
P2P software can be used in different ways by businesses, some may want to build the tool internally, while others may purchase software from SaaS companies that are hosted on-premises or in the cloud. The best in the market procure to pay software vendors provide dynamic cloud-based software. The software remains in the cloud and the vendor modifies the overall functionality of the software to support the ongoing needs of the business.
2. Automate purchase to pay cycle:
The main intent of going in for p2p software is to streamline the procure-to-pay cycle. The repetitive and redundant steps from the P2P process workflow must be eliminated by the P2P solution. This makes the purchase-to-pay process operations more efficient and improves the work satisfaction of the procurement team. An automated procurement process right from purchase requisition to payout helps create a process workflow that is audited, validated, and error/bias-free.
3. Easily configurable:
The p2p solution must be easily configurable to the business operations. The right P2P tool must enable users to adapt the solution to their workflow and business needs. The P2P module must seamlessly integrate with existing ERP or SAP software for a superior user experience.
4. Centralized data source:
The p2p module must enable the collaboration of disparate data sources. It must improve user adoption, control spending and maverick buying, and monitor performance, compliance, and risk.
5. Provide visibility into data workflows and processes:
The ideal procure-to-pay solution must provide a comprehensive dashboard that provides deep, real-time visibility into each step of the process. Clear visibility into the process enables streamlined governance, and accurate capture of savings, and data for future analysis.
6. Catalog Management:
Efficient catalog management is a must-have feature of P2P solutions. Efficient catalog management provides easy-to-navigate, intuitive purchase, and simple search capabilities. P2P software enhances the buying experience significantly.
7. Reporting and analytics:
Automated reporting and analytics ability is a must for the procure-to-pay solution. Instant reporting and analytics equip the leadership with strategic insight and control over real-time spending management and savings. P2P software captures important procurement data that provides visibility into the entire purchase-to-pay lifecycle and assists in monitoring performance, compliance, and risk.
E-invoicing is a feature of p2p solutions that automates and aligns the procurement function with accounts payable. This feature accelerates the payment step of the P2P cycle and improves the visibility and compliance of financial transactions. E-invoicing is a feature that improves the overall responsiveness to invoices and enhances payment control.
9. Integration with other tools:
Seamless integration with other accounts and finance tools is a must-have feature of the p2p software. The p2p software must reach beyond procurement and be able to integrate with other platforms or systems that directly or indirectly impact the procurement function. Contract management systems, supplier/vendor management systems, and accounts payable automation systems are other platforms that the p2p solution needs to collaborate with.
10. Spend analytics:
P2P tools need to have reporting capabilities for capturing real-time data that can be spliced and diced on supplier spending, savings, spending by region, etc. The gathered data is then put into a format that can be easily understood by the team and used for improving efficiency and compliance and identifying maverick spending and ways to save more for the organization.
The choice of the right procure-to-pay solution enables businesses to enhance the efficiency of the procurement function and save time, money, and effort spent on procurement operations. Cflow from Cavintek is a workflow automation solution that streamlines key business processes like finance, procurement, and HR. The easy-to-use visual form builder enables even a non-technical person to build workflows within minutes. The entire workflow can be built from scratch as per unique business requirements and rules.
Procure-to-pay software streamlines the entire process from procurement to payment. Progressive organizations are adopting a cloud-based procure-to-pay process for automating and managing the source-to-pay rapidly. The demand for cloud-based processes is steadily increasing owing to their ability to provide real-time updates and eliminate inaccuracies. SaaS-based P2P software provides scalability and flexibility for businesses of various sizes and types. According to the latest research, the Global Procure to Pay Market is expected to grow at a CAGR of 7.6% to reach 9.2 billion by the year 2023.
Given the traction in the P2P market, more businesses are going into automating the P2P cycle. Cflow enables rapid and efficient automation of the P2P cycle with cloud-based workflow automation software. Sign up for the free trial of Cflow to explore new capabilities of workflow automation.
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