Procure-to-Pay

What Is Procure-to-Pay (P2P)?

The procure to pay (P2P) definition can be stated as follows — an end-to-end process that covers the acquisition of goods and services by an organization. It spans the gamut of requisitioning, sourcing, issuance of purchase orders, receipt of goods/services, raising of invoices and their payment.

An effective P2P process in finance ensures that procurement operations are efficient and compliant to standards and regulations.

Why does procure-to-pay (P2P) matter for business?

The importance of procure-to-pay for organizations lies in its ability to acquire vital resources in a structured and integrated manner. Its streamlined processes enable the necessary goods to be procured efficiently, in alignment with the company’s policies and budgets — while controlling costs and minimizing the risk of financial errors.

A modern P2P system also transforms accounts payable processes, unifies siloed activities, and ensures meticulous compliance.

What are the key stages in the procure-to-pay (P2P) process?

The procure-to-pay process steps comprise the following:

• Identifying the goods or services needed
• Creating a formal purchase requisition
• Sourcing the right suppliers
• Issuance of purchase orders
• Receipt of the goods/services
• Submission of invoices
• Payment of approved invoices

What are the benefits of an optimized procure-to-pay (P2P) process?

An effective P2P process provides an integrated way to enhance an organization’s financial and procurement processes. Key benefits of an optimized P2P process include:

• Accurate financial forecasting and budgeting
• Data-driven predictive modeling to anticipate changes, risks and opportunities
• Enhanced productivity and operational efficiency
• Higher cost savings
• Improved transparency and visibility for continuous improvement
• Better vendor relationships
• Effective fraud prevention

What are the common challenges in procure-to-pay (P2P)?

Some of the common procure-to-pay challenges include:

• Non-digitization of invoicing leading to inefficiencies, errors and delays
• Raising of Invoices without purchase orders, resulting in significant manual effort
• Payment inefficiencies due to inadequate visibility, communication and monitoring
• Opacity of spends that results in higher and wasteful expenditure
• Lack of accountability and ownership due to siloed and fragmented processes

How does automation improve procure-to-pay (P2P)

Procure-to-pay automation simplifies processes to bring consistency in the procurement and F&A functions. With the right embedded checks, it can ensure compliance across different activities such as purchase practices, supplier management, accounts payable, approvals, and more.

Automated procure-to-pay systems also effectively manage cash flow and operations, freeing people to perform more value-added and judgement-intensive work.

What are P2P platforms?

P2P platforms integrate, automate and streamline procurement and financial operations by bringing together distinct individual modules — such as purchase requisitioning, spend management, invoicing and payment, and other business processes.

In choosing a procure-to-pay (P2P) platform, organizations should look for capabilities such as extent of automation, efficiency of integration with existing business systems, analytics support, and reporting visibility and effectiveness across the procurement lifecycle.

Procure-to-pay vs order-to-cash — what are the differences?

While both procure-to-pay and order-to-cash are vital processes for an organization, they serve distinct purposes.

Procure-to-pay covers the entire procurement cycle in a company — requisitioning of goods/services, sourcing, ordering, receiving, payment and inventory management. it is an end-to-end system that unifies multiple stakeholders to ensure efficient supply chain management.

Order-to-Cash, on the other hand, cover the lifecycle of customer order fulfilment — from receiving the order to managing and completing it in accordance with the prescribed specifications, and ensuring on-time payment. It plays a critical role in driving growth by fostering long-lasting customer relationships and ensuring positive financial outcomes.