Procure-to-pay process is the method of ordering, buying, collecting, funding for, and accounting for services and goods. The process involves various steps, from obtaining a good or service to funding it.
This process is simply a method and not a technology. Procure-to-pay software manages all steps from raising invoices, financial accounting to inventory management, and more.
Importance of a Procure-to-Pay Process
An efficient and smooth procure-to-pay (P2P) method helps your company run smoothly. Distinct departments in your organization require diverse goods and services on a regular basis from a diverse set of suppliers, manufacturers, and goods.
Modern Procure-to-Pay Methods
Buying has transformed drastically over the past few years with more businesses demanding consumer experiences. Customers now want on-screen support, self-assistance, and real-time insight into the complete purchase-to-pay process until the circuit is finished.
Organizations nowadays are constantly searching for a one-stop-destination to satisfy their buying, functional, and accounting requirements. Emails have become an ineffective form of saving, trading, and tracing records and information related to purchasing. In addition to this, excel sheets are no more useful as they are non-automatable and non-collaborative.
Due to all of these methods, the information gets stored in multiple places by different people, resulting in everyone getting a piece of distributed information and not a consolidated view. This is why many organizations are facing issues like human errors, missed accounts, supplier or manufacturer defection, along with an increased threat of fraud, impacting the capacity to maintain and propose payment data.
Your enterprise processes then suffer from slowed goods and service offerings, lower supplier relations, and reduced negotiation capability. However, all of these circumstances can easily be avoided. For evading all this situation, you must make a suitable investment in updating your current procure-to-pay methods by transforming them into world-class services that are extremely smart and automatic.
Such an automated procure-to-pay process not just prevents productivity obstacles but further secure your organizations against problems that projected growth will present.
Key Advantages of a High-Grade Procure-to-Pay Process
A highly automated and high-grade procure-to-pay process contains the following important advantages that are mentioned below.
- Speed up Operations
The buying of services and goods for your organization should use the least amount of your valuable time and money. Using procure-to-pay methods, you can successfully save a lot of time and speed up your week-long purchasing list.
- Transparency and credibility
To understand your inventory, you need transparency of the money moving out of your organization. If your organization spends a day or more looking through payments, the procure-to-pay process is inefficient.
Updating your procure-to-pay methods will allow you to compute buying data, accounting reports, and more across your organization.
A fully automated procure-to-pay process will allow you to decentralize all your company orders, purchases, manufacturers’ data, and various other information equally amongst your employees.
Multiple Steps of a Conventional Procure-to-Pay Cycle
Here are the steps involved in a conventional procure-to-pay cycle from beginning to end.
A company employee purchases some services or goods from the supplier.
- Evaluation and permission
The employee’s supervisor evaluates the demand and estimates the price and reasons for procurement.
- Buying order formulation
The purchaser then gets a buying order along with resources for the amount.
- Merchant shortlisting and calls for a quote
The purchaser shortlists appropriate merchants for the services and goods based on their merchant policies. The purchaser may call for quotes from merchants for the order.
- Mediation and merchant determination
The purchaser bargains with the shortlisted merchants and analyses based on cost, features, reliability, former relationship, and then choose the appropriate merchant.
- Purchase order approval from the merchant
An approved confirmation from the supplier comes to the purchaser for the services and goods. The confirmation incorporates the specific volume, quality features as well as date of shipment.
- Receiving services and goods
The supplier provides the ordered services and goods, and the organization verifies acceptance of the same.
- Obtaining receipt
The supplier sends the receipt for the owed amount against the specifications of goods and services provided.
- Bill matching and sanction
The purchaser’s bills payable crew examines the bill for data and cost efficiency and then reroutes it for payment.
The merchant gets paid as per the bill terms and the procure-to-pay cycle is finished.
Hurdles Involved With the Conventional Procure-to-Pay Process
In such a complicated procure-to-pay cycle mentioned above, many hurdles occur in maintaining the procure-to-pay method in the lack of an automatic web-based solution.
The conventional procure-to-pay sequence has various collaborators, contracting authorities, approving authorities, acquiring supervisors, merchants, and bill payable teams. The interaction between all of these individuals should be simple and quick for effortless fulfilment.
However, without using automated web-based procure-to-pay software, various teams have to settle to telephone calls and email communications to complete tasks. This leads to the loss of significant information and answerability.
- Compliance or acquiescence hurdles
The complete conventional procure-to-pay process includes an exchange of goods and services between the merchant and the organization.
All purchase orders including all financial details should be in a centralized location that is readily obtainable by everyone to ensure all products are paid for.
- Payment hurdles
The quicker your organization gets its services and goods to market, the more revenue the company generates. Your procure-to-pay method serves as a significant foundation for your enterprise processes; when you purchase things quickly, you can start selling quickly.
However, without automated procure-to-pay process software, you end up behind your targets.
The Nature of Contemporary Procure-to-Pay Methods
Although most organizations do not have automated procure-to-pay processes, 37 per cent of enterprises have a centralized team for procurement.
Numerous centralized methods are a combination of standard measures and automated operations. There are several procure-to-pay challenges that still require solutions. Most of the prevailing procure-to-pay don’t allow companies to monitor the resources they already have, often leading to overspending. This can ultimately cost companies millions of resources they may already have in their inventory.
These procure-to-pay challenges affect auditing, recording, and other accounting methods and calls for an automated procure-to-pay process.
Steps to Conceive a High-Grade Automated Procure-to-Pay Process
When switching from a conventional to an automated procure-to-pay process, mentioned below are the steps that you must employ.
- Issue regulated catalogs
A regulated digital and compliance list can protect your organization and your team from examining and re-entering information while processing the data across procure-to-pay processes. Employees must be able to search for and monitor the items in the inventory. In addition to this, your system must automatically choose the exact value analysis.
You can begin with the accurate data items in the composition of your organization routines and Enterprise Resource Planning (ERP) that require them. It is essential to obtaining effectiveness everywhere in your procure-to-pay process.
Another advantage of an automated catalog is that it allows you to demand better rates from your vendors. This makes you understand what diverse merchants charges and what amount the organization gave them for purchasing the same item the last time.
- Centralized requisition
When employees have access to automated procure-to-pay software, the trouble for the procurement team reduces greatly.
A procure-to-pay system is similar to that of a buying guide and makes it easy for your employees to browse, choose, and raise the demand for the right item.
In addition, the self-service abilities of a web-based procure-to-pay process software increases the potential of the acquisition authority to get command of their purchasing conditions, send sanction notices, and coordinate with their vendors. They start to perform a dynamic and strong-minded role perfectly during the purchasing period.
- Take your merchants online
A lot of an organization’s time is wasted in looking for various documents and supplier’s data before making a purchasing request. This is why every organization wants all of their data of suppliers, merchants, compliance documents, and quality reports of the goods and services to be readily available at a click.
Therefore, organizations require an automatic procure-to-pay process to ensure that they do not always go running to the extensive database for every record. Organizations can further utilize supplier platforms in association with independent tracking of artificial intelligence bots that browse through the purchase inbox for suggested merchant interactions (such as consignment features) and constantly follow up with these suppliers or vendors.
With the help of this streamlined vendor association, this process smoothens and speeds up your vendor interactions, trading purchase orders, vouchers, and bills correlated to them.
- Automate analysis and requests for quotes
We know that collecting quotations for purchase items from various suppliers can be a time-consuming process. However, with the assistance of an automated procure-to-pay process, you can easily manage all these quotes received automatically.
- Flip purchase requisition to purchase order to invoice
With the assistance of effective and efficient digitalization, you can easily use an automated procure-to-pay process to transform one group of documents into other ones and that too without losing their efficacy, along with making the transfer of data from one user to another an extremely easy task.
- Smart and automated expense booking
With the assistance of an automated procure-to-pay process, you can seamlessly track new purchase requests, purchase orders, and invoices from the right category based on the previous records.
This automated detection of the expense saves time during month-end settlement. Additionally, it benefits in providing an exact cost calculation for every unit and organization department, which is reliable for evaluation and choice making.
- Record and evaluate
An automated and high-grade procure-to-pay process works on the principle of learning from past errors and not repeating them. This is why this automated process can prove beneficial for your organization’s suppliers’ selections, price determinations, internal key performance indicators, and more.
In addition to this, the capacity to pursue all these metrics automatically depends on the performance reporting abilities that a procure-to-pay process system presents. Nevertheless, transforming information into insights and receiving an important advantage starts with keeping proper information in the initial place.
Features of a High-grade and Automated Procure-to-Pay Process
When you are seeking a high-grade and automated procure-to-pay process, you must easily choose amongst the various software based on the features mentioned below.
- Faster applications
With the modern era of artificial intelligence variations in the procure-to-pay process, you can seamlessly cut your organization’s process operation time.
An automated procure-to-pay process will enable your organization to become more flexible in terms of purchasing and invoice approvals. Hence, your organization must always choose a customizable procure-to-pay process that can totally be your own system.
- Enhanced visibility
This automated procure-to-pay process assists in improving your organization’s visibility by providing all the details needed to follow up with the merchants and vendors along with sending them automated follow-up emails to ensure that your organization is highly visible to them.
- Effective vendor communication
An important feature to take into consideration when choosing an automated procure-to-pay service provider is it must assist in effective vendor communication. This automated software must enable your vendors to self-check all their details like approval of quotes, payment status, and many more.
- Centralized invoice approvals and processing
With the help of an automated procure-to-pay process software, the invoice processing and approvals can become streamlined. You can easily integrate this automated software into your system. It presents power and visibility over inventory processing where all bills and transactions are tracked, including audits and vendor communication.
After checking the invoice, this automated software can further send it for approval to the appropriate authority who will pass the bills and it can further lead to quick decision making and instant approvals.
What is procure-to-pay process automation?
A procure-to-pay process automation is a method created to add the capability to the methods of merchant evaluation, choice, and payment with the aid of web technology. procure-to-pay process automation makes use of software to reduce hand-operated jobs, streamline communication between departments, and save expenses by improving precision and diminished manual work.
Every person involved with any kind of marketing planning is accustomed to both acquisition and accounts payable. However, these two operations are not always in order. While the acquisition unit manages the suppliers, the accounts section handles the invoices.
Since both these departments are situated in distinct areas of building or use different software’s, it is important to look for an automated procure-to-pay process system that streamlines the process between both these departments and make communication amongst them easier.
Adoption of Automated Procure-to-Pay Process
Automated procure-to-pay software has been designed to improve the entire procure-to-pay method from beginning to end. Trusting and adopting automated software increases process time, perceptibility, and power. However, to get the comprehensive benefits of this automated procure-to-pay software, you must keep in mind the points stated hereunder.
- Place the organizations’ greatest concern first
It is essential to remember that automated procure-to-pay process software is never one size fits all. Hence, you must always ensure to place the important issues of your organization on top and then start looking for the most suitable solution. In addition, you must also ensure to focus on the long-term goals and growth of the organization in the upcoming years.
You must think about how these long-term goals can affect the organization’s associations with merchants, including the processing time of purchase orders, expenses, and departmental requirements. By placing the organization’s requirements first, you can get the solution that serves best for your enterprise.
- Start small
If your organization is taking the initial step into the world of automation, consider taking small steps. Focusing on automation and encouraging only selected purchase levels to make a more continued bet that is well within your organization’s budget. You can always start with automating one process, then think about other processes later on if that suits your allocated resources.
- Create a solid organization position for the automated procure-to-pay process
Investment leaders usually debate that an automated procure-to-pay process software grant is restricted to zero ROI, and there are no funds allocated for procure-to-pay process automation.
However, creating a strong organizational position and its advantages can influence administrators. Therefore, you must ensure to highlight the procure-to-pay process before and post automation, the result, and the return on investment made.
- Total up all the automation expenses
Before adopting an automated procure-to-pay process software, you must take into account all your organization’s costs and the budget that you must set aside for obtaining an automated software.
According to some industry experts, while buying an automated procure-to-pay process software, you must always consider its implementation, integration with the system along with comparing its expenses with the present processes.
How Does Automated Procure-to-Pay Process Influence Merchant and Vendor Relations?
The automated procure-to-pay process for merchants starts long before goods are actually collected. It starts in the vendor selecting phase. Automated software holds a great impact on the vendor and organization’s relations as it can assist you in setting clear expectations from both sides to meet the fixed criteria.
However, it is always important to discuss other choices that work most desirable for your organization. Notifying your direct expectations and calculated expansion plans could be comforting for your vendor to understand how their services and goods impact your organization. Knowing plans and expectations foster a connection that both parties can get profited from.
How to Maintain an Effective Procure-to-Pay Process System
Holding your automated procure-to-pay process software in proper working condition needs care and proper attention. Normally, the purchase and accounts teams keep regular communication with vendors and suppliers. They maintain great working relations that encourage vendors and suppliers to bargain in good faith with clients who settle their invoices on time and meet their promises.
You must note that any event, from natural calamities to political decisions, can cause the rates of raw material to increase or decrease. This increase or decrease of the prices can impact every section of the supply chain. Hence, it is important to ensure that your organization maintains good relationships with the suppliers. This way, you always remain updated with the prices of the raw materials you need from these vendors.
How to Safeguard Your Procure-to-Pay Process Automated Software From Frauds?
Every online application in the present times is prone to online frauds. It is no different when it comes to an automated procure-to-pay process software. You must note that fraudsters focus more on the accounts and finance departments of organizations. This is why every organization must keep in mind that these fraudsters can also issue fake invoices and draw funds by portraying themselves as the vendors or suppliers.
Therefore, every organization must look for a centralized procure-to-pay software that makes every individual in the organization accountable for their jobs on the software. This way, the burden on one person gets divided and the work is done with accuracy and precision and no fraud or human error can go unnoticed.
Choose the Appropriate Procure-to-Pay Process Automated Software
The automated procure-to-pay process software can fix various obstacles that acquisition managers wrestle with, including improved procuring effectiveness, expense reduction, and purchasing rate without risking non-compliance. Other vital benefits include more responsible procurement visibility and transparency, enhanced control and safety, and optimization of the vendor base.
With the help of Procurement Partners, your acquisition unit can hold a regulated and centralized procure-to-pay process that enhances visibility and efficient spending. Their simple-to-use platform presents users with a single platform to put orders and process bills for all your suppliers.