Procure to Pay (P2P) process involves everything from requisitioning, ordering, purchasing, & payment during a procurement lifecycle. The process generally includes two steps;
- Purchasing which involves, creating order & sending orders, & receiving goods.
- Invoicing process includes receiving invoices, approval of an invoice, and payments.
Now let’s get into details.
How does the Procure to Pay process work?
The Procure to Pay market is growing rapidly. One of the reasons behind this is P2P solutions, which make the procurement process effortless. P2P software today helps industries control their expenditures by implementing e-procuring solutions. However, before we discuss how the latest P2P solutions help, let’s find out how P2P works first.
- Requisitioning: The P2P process begins as a company sends the list of requirements for some goods or services to their procurement team.
- Review and approval: In the next step, the approving manager reviews the requisition and evaluates it.
- Creation of a purchase order: After the requisition gets approval from the managers, a former purchase order is sent to the purchasing team.
- Deciding & finalizing budget estimates: The purchasing team is provided with budget estimates for the approved purchase requirement too.
- Vendor shortlisting: The purchasing team of the procurement company shortlists the best vendors for the goods & services after budgeting.
- Requests for a quote: The team asks for quotes from the selected vendors for the specified goods & services.
- Negotiation and final vendor selection: The purchasing team of the company then negotiates with the selected vendors. They discuss costs & finalize vendors based on past relationships, goods quality, & credibility.
- Confirmation of PO from the vendor: After selecting the vendor and sending them the requirements, a formal confirmation comes from the vendor for the specified goods. This confirmation covers details like the quantity, quality, shipment date, etc.
- Order delivery or receiving of Goods and Services: The vendor delivers the required goods to the company, and the company confirms the completion of delivery.
- Receive invoice after delivery: After delivering goods, the vendor sends the invoice to the recipient company.
- Invoice approval: The financing team reviews the invoice & then forwards it for approval & payment.
- Payment at the end of Procure to pay process: The vendor is paid by the company as per the invoice terms, completing the procure-to-pay cycle. The payment options include installments, holdback, partial, final, or advance payments.
Challenges Faced by Businesses Due to Traditional P2P Process
- Increase in invoice process time
Sadly, delay in payments is what most companies face who follow the traditional P2P process. Manual payment approval is time-consuming and leads to late payment penalties.
Now, this can damage your relationship with suppliers & delay the P2P process. Therefore, it is best to invest in a P2P Solution that automates these processes and makes invoice approval & payment fast.
- Reduce accuracy and increase risk of data errors
Some manual error is bound to happen when your in-house team invests a lot of time in paper and manual data entry. However, if you invest in P2P software, you can ensure business growth without overworking your in-house team.
- High Costs per Invoice
Storage of a massive number of physical copies of invoices & POs in your company only increases costs. In addition, processing errors that require resolution may not come to attention due to a lack of real-time visibility in the traditional P2P process.
- Lack of spend visibility
Sending purchase orders, acquiring goods, and approving payment, this whole process is tedious. Without proper knowledge of cost flow at each step, a profitable P2P process becomes impossible.
- Difficulty in data retrieval in time
Storing manual data makes it impossible to find reports from audits & vendor inquiries when you need it.
The Importance of the modern Procure-to-Pay Process in industries
Experts forecast that the Procure to Pay software market will reach $5.38 billion in 2027. Now, this is because P2P software is successful in accomplishing the purchasing to payment process seamlessly. Here are some reasons why P2P solutions are crucial for industries.
- Increases control measures during the P2P process.
- Helps to cut back on lost inventory, order errors, incorrect requisition costs
- Offers automation efficiency by reducing human error during bulk orders
- P2P solutions help CPOs make profitable decisions with clear spend visibility.
- P2P software has a positive impact on the cash flow due to error reduction while sending purchase orders.
- Improved spend management by automating purchasing and payment processes.
- Keeps the whole P2P process transparent by providing real-time data whenever needed
Benefits of E-Procure to Pay Process
- Upgrades speed and scale of a business
Traditional purchasing of goods and services is time-consuming. It takes a lot of money to ensure a thriving purchase order, delivery to the payment process. However, a top-notch P2P process speeds up long purchasing cycles.
- Best P2P solutions provide direct visibility.
Without a robust P2P solution, your in-house team invests an entire day in gathering monthly expense details. However, P2P solutions upgrade your buying process by providing access to purchasing data & reports, etc., promptly.
- It simplifies procuring processes.
With a 2.3% growth rate each year, the procurement software market is going to rise. Why? P2P software automates every procurement process of organizations. It makes requisitions sending, selecting suppliers to POs fast electronically.
- It lessens invoice processing costs.
P2P solutions make everything paperless. Thus, a firm can reduce the risk of errors, time & costs with digital procure-to-pay software.
- P2P software keeps everyone in the loop
With P2P software, both the buyer and supplier get the opportunity to view invoice status in real-time.
- Faster error tracking and better management
Everything is recorded digitally during the procurement process with P2P software. Therefore, if there is an issue during the process, it gets attention fast, & the team can resolve the problem quickly.
- Help build great relationships with supplier relationships.
P2P solutions help a company to select a reliable supplier based on previous performances. In addition, it provides an opportunity for the suppliers to know when they will receive payment & other information they need. Now, this reduces the chance of disputes & helps build trusted relationships.
Top Features of the latest Procure-to-Pay process
- Fast and quick procurement solution
P2P software can lessen the time of the procure-to-pay cycle from weeks to just days. With this software, you can cut short your Requisition, PO, and invoicing process time.
- Visibility like never before
Latest P2P solutions help you get all the information you need fast. It helps to reduce time follow-ups with vendors. In addition, it provides you visibility of the entire P2P process inside and outside your company.
- P2P solutions help your in-house team save valuable time
P2P software helps your team select top vendors according to their expertise and past purchase history. Therefore, with AI-powered P2P solutions, your teams can auto-assign requisitions to the best Vendors.
- Improved Supplier communication
With P2P software, you can help your suppliers check on quote approvals, invoices, payments, etc. Therefore, the P2P software helps you collaborate with your suppliers & communicate with them in a better way.
So are you looking for a P2P solution that will upgrade your purchasing actions fast? Procurement Partners provide leading P2P solutions that guarantee greater P2P process efficiency. For more details, check out our services now.