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What is procure to pay

GoCardless
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Last editedOct 20222 min read

Procure to pay (P2P) refers to the automation of purchasing activities related to the supplier cycle and the digitisation of invoicing and payments.

P2P has replaced traditional purchasing processes for many businesses and organisations seeking more efficiency in their operations and a better overall performance. Such businesses no doubt have leaders on top of the latest developments that have enabled them to streamline this vital aspect of business. In order to implement P2P, you must fully understand what it involves and how it works.

It may seem daunting to those who are yet to implement any kind of P2P process flow. However, the P2P meaning is not so complex once each step has been laid out in basic terms.

Here we answer what P2P is and show you how it can benefit your business.

P2P process

The P2P process flow includes a series of business activities including purchase requests, supplier selection, purchase confirmation, delivery and payment. It is much more than just the customer and supplier cycle, with P2P also including streamlining and digitisation to increase productivity.

The steps within the process can be separated, so below is the P2P process flow represented as a succession of the activities involved in a business to business purchase.

Need identification

Identifying a company's needs can be the responsibility of one individual within a small company or multiple individuals within a larger firm; there can be a whole department known as a procurement team. The first step of P2P is always finding and formulating a need for products or services.

Vendor selection

With the need identified, the next step is to collate all potential vendors and select the most suitable. Often the vendor is already known to the procurement team, especially for repeated purchases of products or services. It is always a good idea to keep options open unless an exclusivity deal has been arranged with a particular supplier, as better deals may arise through competition or negotiation.

Vendor negotiation

Once the ideal vendors have been identified, the procurement team enters a negotiation phase with the vendors to achieve the most advantageous conditions and rates for the purchase. Once this phase has been completed, the purchase can proceed.

Purchase confirmation

The purchase is confirmed with the chosen vendor and apurchase order for the product or service is transmitted to the supplier. The purchase order document should contain the following:

  • buyer company's details

  • vendor company's details

  • detailed order description

  • terms of delivery

  • terms of payment

  • other general terms and conditions of sale

Order receipt

The next step is the delivery and receipt of the product or service ordered. Once received, the payable order must be checked and approved by the relevant parties in the buyer company to ensure the delivery is exactly as ordered. Once confirmed, the buyer company acknowledges receipt of the goods as ordered.

Invoice reconciliation and payment

The final steps are invoice reconciliation and payment, which can be achieved automatically. The accounting department reconciles all incoming invoices with the purchase orders and any other relevant documents in order to certify their accuracy.

Once certified, approval of the payment is granted, and the payment proceeds according to whatever terms and conditions were agreed during the purchase confirmation phase.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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