Procure-to-Pay Process Cycle P2P Process Flow Explained

Procure-to-pay Process

Those benefits range from reducing manual data entry, avoiding late fees and minimizing data errors and compliance issues to reducing overall cost. In the event that your current contracted suppliers do not have the capacity to meet and fulfill orders, you can turn to this pragmatic supplier vetting solution to find another vendor to meet your requisitions. Reverse auction software allows organizations to save up to 40% of this spending while making it easier for vendors to engage in competitive bidding.

  • The use of a Purchase Order is a standard Kimberly-Clark policy and required method of communicating our commitment to purchase materials and services.
  • One of the most practical and powerful ways to optimize the P2P process is through the development of a strong procurement plan, supported by a Procure-to-Pay software system.
  • The entire P2P process consists of many individual processes that take place across different parts of the organisation and involve multiple people.
  • You can argue that the P2P process is complete once the buyer actually pays the vendor or supplier.
  • Once the supplier delivers the promised goods/services, the buyer inspects the delivered products or services to ensure that it complies with the contract terms.
  • Efficient catalog management provides easy-to-navigate, intuitive purchase, and simple search capabilities.

AP Essentials uses cognitive capture technology to intelligently classify documents and extract information, such as PO numbers, item types, quantities, and more. The same software can also quantify information from invoices and, with SAP, streamline the three-way matching process.

More advanced than the basic P2P cycle, the SAP workflow takes the basic stages and segments them into key moments for data accumulation and communication. The procure to pay process may vary in small ways from business to business, depending on how each functions, but generally, the flow is as follows. If you would like to discuss your enterprise procurement tech needs with a consultant or to schedule a demo of our suite of procurement solutions contact us today. Well, before we dive into what P2P is and its procurement process benefits let’s first define the term. Barbara is currently a financial writer working with successful B2B businesses, including SaaS companies. She is a former CFO for fast-growing tech companies and has Deloitte audit experience. Barbara has an MBA degree from The University of Texas and an active CPA license.

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These P2P software systems replace paper documents and manual data entry to make procurement, purchasing, payables, payments, and accounting processes much more efficient. Each approving department in your purchasing process likely has standard requirements for its purchase requisitions. These prerequisites are essential for ensuring high-quality procurement while reducing risk. However, stakeholders and purchasers can only meet these requirements if they know what they are. The specific requirements will be unique to each organization and their individua strategy, but form an important part of the decision-making process and ultimate outcome of the request.

Cloud-based procure-to-pay software enables teams to formalize contract rates, make payments, evaluate vendors, and process invoices from anywhere through the web or mobile apps. P2P automation drives cost savings and processing efficiencies by eliminating time-consuming and error-prone manual processes from procure-to-pay operations. When you fully automate your procurement and payables processes, you can capture 100% of your financial data, and achieve the highest levels of visibility across the supply chain. The procure-to-pay process is critical to any business, but it can be complicated and time consuming when performed manually. Many companies struggle with juggling the documents involved in P2P, including purchase requisitions, purchase orders, and vendor invoices.

Once the requisition order is approved, a detailed order form with amounts and delivery requirements is submitted. Purchase to pay, also known as req to check, is too mostly used in the context of e-procurement applications, purchasing and payment modules of ERP systems. As we saw in the case of Ariba above, you can give visibility and clarity not only to your own team members – which is essential – but also to suppliers themselves. When they can submit and track their own invoices, it removes a lot of the back-and-forth communication.

Obtain complete visibility.

But there are ways you can make your P2P processes more cost-effective and streamlined. Every organization needs some raw materials and essential services to run its business effectively.

A critical step at this point is checking the shipment against the purchase order to ensure that everything has arrived in good condition. It’s vital to note exceptions, such as damaged or missing items, to avoid paying for goods not received. The vendor receives the purchase order and transmits a confirmation of its receipt, often with an acknowledgment that their stock levels are appropriate for fulfillment. The vendor advises the business of anticipated turnaround times and shipment dates.

What Problems in Procure-to-Pay can E-Procurement and AP Automation Solve?

Electronic capture records all the transactions making it easy to track them. Procure-to-pay works by standardizing and streamlining procurement, receiving, and accounts payable workflows and documents throughout the procure-to-payment process. Forms used in the P2P process include purchase requisitions, purchase orders, receiving reports, and vendor invoices. The procure-to-pay cycle or process consists of a set of steps that must be taken in order for an organization to procure and pay for goods and services. Procurement is the process by which organizations purchase goods, supplies, equipment, or services from outside sources.

From preventing manual data entry to improving spend visibility, automated procurement software address all existing process gaps. Recently, we helped a major online delivery platform – Nana Direct improve its cost savings by 60%. Procure-to-pay systems are designed to provide organizations with control and visibility over the entire life-cycle of a transaction, providing full insight into cash-flow and financial commitments. Most of the companies using these systems look for a centralization of their procurement department, or to set up a shared services organization for the same purpose. There are steps to follow to complete the full process, this ensures there are reduced errors and frauds.

What are different machine learning use cases in procure-to-pay process steps?

Regularly monitor their performance, evaluate the quality of goods and services delivered, and ensure you pay them on time. Once the requisition is approved, the procurement or purchase department will select an appropriate vendor and create a purchase order in their P2P processing software. This order is then shared with all relevant stakeholders for final approval and dispatched to the supplier/vendor.

• Requisition– Requisitioning refers to the process of getting internal approval from department heads or company leaders to order the necessary raw goods or services. In many companies, this is one of the most convoluted steps in the manual P2P cycle, with signatures getting lost, department heads not being available when needed, and many other manual issues. A recent Gartner report claims that by 2025, more than 50% of organizations around the world will have a cloud-based procure-to-pay suite in place. Cloud-based procurement tools like Kissflow are gaining traction, as organizations learn more about the benefits and cost-saving opportunities of using procurement software. Using procurement and AP automation can improve the purchasing experience for buyers while reducing the strain on procurement teams and AP departments.

  • Poor Spend Visibility-Procurement software prioritizes easily trackable spend visibility.
  • Bring scale and efficiency to your business with fully-automated, end-to-end payables.
  • Policies and procedures that govern purchases and spending patterns are included in the P2P system.
  • AP Essentials intelligent algorithms automatically classify the document, file it to the appropriate system, and log the information in your ERP.
  • “For procurement to really add value the focus needs to be on tackling what matters to your organization the most.
  • Even for this well-organized minority, however, a plethora of procurement issues and complications remain.

Finally, the payment will be released to the supplier by the accounts payable team when the invoice is approved. This 7-step process must be followed every time a new purchase request is placed by any department in an organization. Anything from natural disasters to political events can cause raw material prices to rise or fall, affecting every link in the supply chain. Choice of the right procure-to-pay solution enables businesses to enhance the efficiency of the procurement function and save time, money, and effort spent on procurement operations.


While many of these terms are fairly common, they have their own meaning in the procurement context. The G2 scores are gathered from user community reviews from online and social networks. A list of top purchase-to-pay software in the market based on the G2 score is given below. Learn more aboutBasware’s Procure-to-Pay solution, and how we can support all your automation needs for today, tomorrow and the future. But before you can realize any of these benefits, it’s critical to understand exactly how the procure-to-pay process works.

One of the best things about automation is that reports and analysis help you understand what’s working and what’s not. So you can pull up the status of any task instantly, analyze vendor performance metrics, and more through custom reports and analytics. After evaluating the need, verifying the available budget, and validating the purchase requisition form. Incomplete purchase requisitions are rejected back to the initiator for correction and resubmission. The system uses AI and machine learning to automatically process thousands of invoices, ensuring they are correctly routed, reconciled, and paid without manual input from workers.

Procure-to-pay Process

But if the purchase is one-time, from unmanaged spend category, or of low value, the employee may perform a spot buy. Once the suppliers are identified, procurement department shall send the Request For Quotations/Proposal (RFQ/RFP) to the supplier, based upon the PR. You likely use the same vendors time and time again to supply vital business goods and services. The platform lets you share your procurement process with suppliers themselves. Vendors submit invoices directly to Ariba, so you don’t have to manually them. Ariba also incorporates purchase orders, so you have a clear trail from PO, to agreement, to invoice, to payment.

Companies shouldn’t just track their own performance in meeting vendor needs and expectations—they should also examine how those vendors treat the relationship. Being able to measure these sorts of things can help your organization keep better track of the P2P process.

Procure-to-pay Process

The best way to achieve all of these is to optimize the purchase-to-pay process. A streamlined procure-to-pay system helps create a well-defined procurement plan containing detailed identification and pricing information of the goods and services required by the organization. Such automated systems both reduce the likelihood of errors and increase the availability of information critical for business analytics. By using SAP as a part Procure-to-pay Process of your P2P process flow, you can electronically integrate with vendor systems and fully automate a large portion of purchasing. Using the SAP P2P process ensures efficient data capture and allows your business to conduct analytical operations to identify opportunities for savings and improvements. Although simple in theory, the modern P2P cycle for enterprise-level businesses is a highly complex undertaking with many moving parts.

It will be approved if the items and corresponding values remain consistent across the board. If not, it will be rejected and sent back to the supplier with a note on the inaccuracies. The departments needing raw materials or services will reach out to the procurement department with their purchase request. This request will contain specifications such as quantity, quality, and timeline, among others.

A peer-to-peer technology enables transparency across the supply network, allowing buyers and suppliers to see the progress of invoices conveniently. Now that you have an overview of the procure to the payment process, let’s break it down further and explore each step of the procure-to-pay cycle. In North America, suppliers may have an option to receive payment via a secure credit card.

It guides employees to use preferred suppliers, processes, and policies, resulting in happy employees and compliant spend. With a digitalized and automated procure-to-pay process, you can easily manage buying, approvals, compliance, payments, and suppliers on a global basis.

Procure-to-pay applications help companies streamline their procurement operations and improve efficiencies through centralized access to procurement data. Procure-to-pay software brings the procurement and finance team together for a seamless collaboration of operations. The automated system enables vendor notifications, alerts, and reminders for approvals and payments. Clarifications on payment statuses are made available through an integrated chat system.

NOTE that there may be a separate approval workflow for purchase orders in some organizations to ensure compliance and specification accuracy. The supplier sends the Advance Shipment to procurement department as soon as he ships the material to the buying organization. This note normally contains shipping date, transporter’s name, airway bill number, number of packages, weight of the packages, receiving location address, description of goods, etc. The procurement department then shall raise the purchase order against the contracts and then is send to the supplier. This PO is prepared in reference of the initial document prepared in the process i.e. “Every organization has a number of suppliers who deliver essential products, provide specialty services, perform regular maintenance, and complete one-time urgent repairs.

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