If you’ve ever wondered how major businesses are able to control global expenditure and maintain their resources efficiently and without error, the answer is most likely the procure to pay process. But what is this process and how can it be managed to create savings that actually reach your bottom line?
What is procure to pay?
The procure to pay process is a coordinated series of events that begin with identifying needs and end with vendor payment. The term “procure to pay” (which can also be referred to as purchase to pay or simply P2P) covers three processes – requisitioning, purchasing and payment – which themselves are typically broken down into several different steps.
The procure to pay process
Determine and define business requirements.
Create a formal purchase requisitions form.
Purchase requisitions are vetted by department heads or procurement officers and are either approved or rejected based on the need and available budget.
Purchase orders are created once the requisition has been approved. However, if the product is low value or perhaps a one-time purchase, a spot buy might be performed instead.
The purchase orders will now be sent through an approval loop, ensuring their legitimacy and accuracy. All approved orders will then be sent to vendors, who can approve the order, reject it or begin a negotiation.
The supplier delivers the promised goods or services.
The supplier’s performance is evaluated on metrics such as delivery time and quality of service.
If no discrepancies are found in the purchase order, invoice or goods receipt, then the invoice is forwarded to the finance team.
Once the approved income has been received, payments are processed.
Procure to pay solutions
A procure to pay solution digitizes, automates, and enhances the process by using software to control, verify, and validate documents, sometimes using complex automation. This lets businesses control the process (from the election of goods all the way through compliance and onto final payment) more effectively and efficiently, at least in theory.
In essence, the solution is a holistic system that uses scan-and-capture services or supplier portals to submit electronic invoices, match purchase orders to invoices and effectively take care of the entire purchasing journey.
The benefits of a procure to pay solution
It’s been estimated by Gartner that, by 2025, more than half of all businesses will use a cloud-based procure to pay solution such as Kissflow. But before you invest, here are just a few of the many benefits of digitizing the procure to pay cycle.
The software ensures that your business is buying from preferred suppliers at lower, negotiated prices.
Because the process is automated by software, you’re free from the tedious spreadsheets that once accompanied procure to pay.
The performance of your procurement will be improved significantly by improving the overall effectiveness of the process.
A seamless receipt and reconciliation process.
Manage procurement remotely online.
Contextual best practices will always be integrated.
As the process is almost entirely automated it will cut down not only on cost but on manpower, time and the inevitable risks that come with the potential for human error.
Greater visibility and control of every stage of the process thanks to consolidated and aggregated data. This will lead to deeper insights and better control of company spending.
As the process is largely automated, procurement teams are freed from repetitive manual tasks and can instead focus on more strategic roles.
We can help
If you’re interested in finding out more about procure to pay solutions, or any other aspect of your business finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.