Procure to pay process

What is the procure to pay process?

Procure to pay is the process of integrating purchasing and accounts systems to create a fully automated system that increases efficiency and gives greater visibility to the procurement and supply function. There are a series of steps that organisations must follow within the P2P process to manage the goods and services from external suppliers.

Why is procure to pay important?

Using a procure-to-pay system, strengthens your control on contracts, regulations and accounts payable. Organisations are able to buy from preferred suppliers at negotiated prices, without the need for manual paperwork and intervention. This helps the procurement and supply function to: Reduce errors and consolidate manual processes

• Approve suppliers quickly
• Free up resources
• Control and improve spend
• Maximise the value of sourcing negotiations

What are the steps in a procure to pay process?

The steps involved in the procure to pay process are as follows:

1. Identify needs: Determine and define your requirement and ensure you have consulted with stakeholders. Once identifies, you must outline the specifications for the goods or services, terms of reference and statement of work.
2. Create requisitions: A formal purchase requisition is created. The request will need to submit the filled-out purchase requisition form.
3. Purchase requisition approval: These are them reviewed by department heads and you can either approve or reject adhere evaluating.
4. Create a PO: Purchase orders are created from approved purchase requisitions
5. Purchase order approval: Approved purchase orders are sent to vendors, and they can either approve, reject or start a negotiation. Once approved, a legally binding contract is activated.
6. Goods receipt: Once goods or services are delivered, the buyer must inspect them to ensure they comply with the contract terms. The receipt is them approved or rejected
7. Supplier performance: The performance of the suppliers is them evaluated on quality, time, services, responsiveness and more. Non-performance is then flagged in the system for future reference.
8. Invoice: The invoice is then approved and sent to the finance team for payment.
9. Vendor payment: The finance team will process the payment and be made to the vendor.

The cons of the procure to pay process

Although procure to pay has it’s benefits with increased efficiencies and cost savings to be made, there are some cons too. For efficiency procurement to pay operations, internal teams such as finance and procurement communicated, as this can lead to delays.

The procurement and supply teams must also make sure they request goods and services within their budget and ensure that invoices are accurate and match the PO, but importantly, are sent on time to the vendors. Procurement teams must also ensure they have a sufficient amount of past and real-time data about suppliers, as if not, they won’t be able to assess risks or compare suppliers effectively.