Procure to Pay (P2P) is far more strategically important to any business than ownership knows or is willing to admit.
A P2P accounting process secures and manages the raw materials necessary for creating products or providing services. It refers to the workflow that moves the procurement process forward. P2P integrates and cross-checks transactions through the business’s accounting cycle on multiple levels.
Procure to pay yesterday
A P2P practice seeks to introduce checks on efficiency and accuracy in the transaction cycle —from the order request to the vendor point and, then, to the receipt of goods and payment to vendor. The process records, displays, and reports on P2P steps:
- Cross references, checks, and balances with almost redundant scrutiny.
- Routes purchasing requests through confirmation of approval that checks proposed spending against budget.
- Accepts requests within budget and converts them to purchase orders for email to provider.
- Receives confirmation of accurate order delivery.
- Processes payment against invoice in the general ledger.
Historically, P2P has been a tedious manual process involving much paper, multiple copies, and many sets of hands. And, frankly, because of the human involvement, it has been prone to error and even fraud.
Procure to pay today
Every business runs this P2P cycle. Mom and pop businesses may run their cycle on a spreadsheet. But, for larger businesses with multiple product lines and parts inventories, the cycle is an expensive labor- and time-intense burden.
In this global economy, efficiency, accuracy, and trust are even more vital to vendor relations and customer confidence. The procure to pay function is simply too much responsibility for a manual operation.
But, emerging cloud-based P2P possibilities are reducing the fear, fraud, and time from the procurement process start to finish cycle.
Procure to pay tomorrow
Complex businesses have learned to value the strategic role of efficient and effective P2P software.
- Global consultant KPMG predicts businesses “will increasingly be looking to Procurement to maximise their existing systems and technology to provide greater clarity into the Management Information and Business Intelligence processes.”
- And, Deloitte foresees a radical shift in procurement by 2020 when businesses will recognize strategic organizational function and core company competence.
The procure to pay events happen simultaneously across multiple organizational functions. But, if you lay out the process to show the touchpoints, it might look like this:
With the support of state-of-the-art technology, such as that offered by Precoro, P2P becomes largely automated. Their approach offers a user-friendly dashboard that displays key transaction points and metrics in the process:
- Employees find product and request what they need to do their jobs.
- Transparency provokes savings by making on-contact spend visible.
- Spend is integrated, cross-checked, and confirmed to show supported purchase-orders, unsupported P.O.s, and other expenses.
- Digital documents archive in one place for easy review, confirmation, and reconciliation.
- Invoices are received, confirmed, approved, and paid.
Throughout the process, clearly framed dashboards report process, progress, and status in real-time providing reports as needed.
Your procurement takeaway
Businesses once created procure to pay systems to save money by bringing spending into compliance with budgeting, controlling errors, and discouraging fraud. As with many business strategies, the process grew complicated and faulty over time.
Technology now expedites, clarifies, and legitimizes the entire spend system. In doing so, quality P2P systems model strategic business behavior and fully-realized business savings.