Category: p2p solutions

What Is Procure to Pay (P2P)?

Have you ever wondered how businesses can streamline their payment processes? The solution is procure-to-pay or P2P. P2P is an automated system that handles everything from the initial purchase request to making a payment. For you, this means eliminating inefficient and time-consuming manual processes. No more chasing down invoices or cutting checks by hand.

With P2P software, you can automate purchasing, invoice processing, and payment approvals. Requisitions, POs, and invoices are all digitized and routed for approval electronically. Payments are issued automatically on their due dates. Not only does this save you time, but it also reduces errors and ensures you capture early payment discounts. If reducing costs and boosting productivity sounds good to you, it’s time to learn more about how P2P can benefit your business. In just a few clicks, you’ll be on your way to payment nirvana.

What Is Procure to Pay (P2P)?

Procure to pay, or P2P, is the end-to-end process of purchasing goods and services, from requesting and ordering them to processing invoices and payments. For any business, it’s a crucial cycle that if optimized, can significantly reduce costs and improve efficiency.

What exactly does P2P involve? First, requisitioning – when employees request materials or services they need to do their jobs. Next comes purchasing, where buyers research options, compare quotes, and place orders with suppliers.

Once the goods or services are received, the receiving process verifies that what was ordered matches what was delivered. Only then are invoices from suppliers processed and approved for payment.

By integrating systems for purchasing, accounts payable, and more, P2P streamlines this entire workflow. It eliminates time wasted on manual data entry, searching for information in different systems, and chasing down approvals.

With P2P automation, requestors have a simple online portal to order commonly used items. Buyers get alerts about requests that need their review and can approve with one click. Supplier invoices are matched to purchase orders and receipts automatically before being routed for payment approval.

Finance teams gain visibility into spend data to better forecast cash flow needs and negotiate volume discounts. And by paying suppliers on time, businesses can build goodwill and loyalty.

For growing companies, P2P solutions are a must. They accelerate purchasing cycles, reduce overhead costs, and allow staff to shift their focus from tedious tasks to strategic initiatives. If you’re still managing P2P with spreadsheets and paperwork, it may be time to explore how automation can transform this critical business process for your organization.

The Procurement Process Before P2P

Before procure-to-pay (P2P) solutions, the procurement process was inefficient and time-consuming. Departments would handle purchasing individually, requiring multiple approval levels for requisitions and purchase orders.

The Old Way

In the past, the steps to purchase goods involved a cumbersome paper trail. Purchasing agents had to create requisitions manually, get approvals, issue purchase orders, receive hard-copy invoices, and process payments. This decentralized system lacked spend visibility and control.

Requisitioning required filling out forms to request materials or services. These would go through an approval workflow involving multiple people.
Purchasing involved selecting suppliers, negotiating contracts, and actually buying the goods. More paperwork and approvals.
Receiving required ensuring the order was correct and of acceptable quality. If not, more paperwork to return or exchange items.
Invoicing involved receiving and verifying supplier invoices, then submitting them for payment. Yet more paperwork and approvals.
Payment could take weeks or months as physical invoices went through the accounting department. Suppliers would have to wait to get paid.

This time-consuming and tedious procurement process resulted in high costs, limited spend under management, and poor visibility into budgets and cash flow. There had to be a better way! And that better way was procure-to-pay.

How P2P Streamlines Procurement

Streamlining procurement tasks with a procure-to-pay (P2P) system can significantly improve operational efficiency in your business. P2P integrates all steps in the purchasing process, from requesting items to making payments, creating an automated procurement cycle.

Reduced Costs

Implementing P2P cuts costs in several ways. It minimizes paperwork by digitizing purchase requisitions, approvals, and invoices. This reduces the time spent processing each transaction. P2P also leverages your company’s bulk buying power through strategic sourcing to negotiate the best prices from vendors. With P2P monitoring spending in real-time, you can easily spot opportunities to save, whether by consolidating purchases or choosing more affordable alternatives.

Increased Visibility

P2P gives you visibility into your company’s spending at every stage. You’ll gain insight into not just what is being purchased but who is making the purchases and how much is being spent with each vendor. This data helps identify purchasing inefficiencies to optimize your procurement operations. It also ensures policy compliance as all purchases go through proper review and authorization.

Improved Supplier Relationships

Streamlining the P2P process benefits both buyers and suppliers. Suppliers receive quick, accurate payments, leading to better relationships built on trust and reliability. For buyers, this means securing the best prices and service. P2P also allows you to efficiently manage vendor contracts, catalogs, and performance evaluations in a centralized system.

In summary, implementing a P2P solution leads to a win-win outcome for your business and its suppliers. Cost savings, increased visibility, and improved supplier relationships all contribute to a streamlined, optimized procurement function.

Benefits of Implementing a P2P System

According to Gartner, a procure-to-pay system is “a fully integrated solution designed to support an end-to-end process that begins with goods and services requisitioning and ends with ready-to-pay files for upload into an accounts payable system.” Implementing a procure-to-pay (P2P) system in your organization can streamline the entire purchasing process, from requesting materials to paying suppliers. Here are some of the major benefits you’ll gain:

Cost Savings

A P2P system automates many manual tasks, reducing the amount of time your team spends on repetitive work like data entry, filing paperwork, and chasing down approvals. This improved efficiency can lower overhead costs and free up the budget for other priorities.

Enhanced Visibility

With a centralized P2P system, you’ll have real-time visibility into your organization’s spending. You can track expenses, monitor budgets, and look for ways to optimize purchasing. This level of insight helps ensure you have enough cash on hand to pay suppliers on time.

Improved Compliance

A sound P2P system incorporates approval workflows, authorization limits, and other controls that help your organization follow policy and regulatory compliance. It provides an audit trail for every transaction so you can easily pull reports to monitor compliance.

Streamlined Processes

By automating steps in the purchasing cycle such as requesting, approving, ordering and paying for goods and services, a P2P system accelerates the flow of information between departments. This can improve relationships with suppliers through on-time payments, consolidated invoicing, and efficient issue resolution.

Strategic Purchasing

With full visibility into your spending patterns, budgets, and contracts, you can make data-driven purchasing decisions that maximize value for your organization. You may find ways to consolidate suppliers, renegotiate contracts, or shift more spending to preferred vendors.

Implementing a P2P system is a strategic move that pays dividends through operational efficiencies, cost savings, and data-driven insights. While the initial set-up requires time and resources, the long-term benefits to your purchasing processes and bottom line are well worth the investment. Does your organization have plans to implement P2P automation? It could be a game-changer.

Key Features to Look for in a P2P Solution

A procure-to-pay (P2P) solution like SupplierGATEWAY’s can greatly benefit your business by automating and streamlining the entire purchasing process. Some key features to look for in a P2P solution include:

Automated purchase orders

Automated purchase orders eliminate time-consuming manual entry and approvals. P2P solutions can automatically generate POs based on requisitions, saving your team hours of work.

Configurable options

Look for a solution that lets you customize workflows, reporting, and other features to match your unique needs. The system should adapt to your processes, not the other way around.

Built-in reporting

Robust reporting capabilities provide visibility into KPIs like spend under management, process cycle times, and compliance metrics. Reporting allows you to optimize your P2P processes and better manage costs.

E-procurement

An e-procurement module gives buyers a centralized place to shop for approved suppliers and items. Guided buying helps ensure they choose preferred products at the best-negotiated prices.

Invoice automation

Automated invoice processing including matching and routing for approvals cuts down on manual data entry and speeds up the payment process. Your solution should be able to receive invoices in multiple formats (email, EDI, web, paper) and automatically match them to the corresponding POs and receipts.

RFQ for tactical bidding

For high-volume or repetitive purchases, a request for quotation (RFQ) tool allows you to solicit competitive bids from multiple suppliers. Award the order to the supplier offering the best combination of price, quality, and delivery.

A robust P2P solution incorporates all these key features and more to streamline your purchasing operations from requisition to payment. By automating repetitive tasks, enforcing policies, and providing visibility into metrics, P2P software helps procurement become a strategic driver of cost savings and compliance.

Conclusion

By streamlining everything from purchasing all the way through paying suppliers, P2P enables your business to save time, cut costs, gain visibility, minimize errors, and strengthen relationships. If you want to free up resources, reduce waste, and improve the bottom line, it’s time to reach out to one of our experts and ask about implementing a procure-to-pay solution. The rewards of optimizing your payments and maximizing working capital far outweigh any costs. Join the wave of modern businesses benefiting from automated P2P and start reaping the rewards today. The future of efficient, cost-effective payments is here.

Addressing Procure to Pay Challenges with Best Practices

What is Procure to Pay (P2P)

Procure to Pay, also known as purchase to pay or “P2P”, is a process that organizations follow when procuring the goods and services it needs to do business. Procure to Pay is a process that includes requisitioning, purchasing, receiving, paying, and accounting for goods and services and includes all the steps between placing an order with a supplier through to payment. Procure to Pay solutions often include technology like ERPs, and other procurement software.

The P2P Process

The Procure to Pay process includes:

Identifying a need. The procurement team identifies the need for a new good or service.
Requisition is created. A formal purchase requisition is created.
Purchase requisition approval. Submitted purchase requisitions are reviewed by department heads or procurement officers. Requisitions can either be approved or rejected. Incomplete requisitions are always rejected for correction and resubmission.
Create a purchase order/spot buy. If the requested goods/services are considered low-value commodities, one-time unique purchases, or unmanaged category buys, a spot buy will be performed. Otherwise, purchase orders are created and approved.
Purchase order approval. Purchase orders are checked to ensure the specifications are accurate and real. Once approved, orders are sent to suppliers. After reviewing the order, a supplier can either approve, reject, or negotiate the order. When an officer approves a purchase order, a legally binding contract is activated.
Receipt of goods. Once the supplier delivers the goods/services, the buyer inspects the delivered goods/services to ensure they comply with contract specifications. The goods/services receipt is then either accepted or rejected based on the standards specified within the purchase order or contract.
Evaluate supplier performance. Supplier performance is evaluated based on how well the supplier followed the contract specifications. Qualifiers such as quality of the goods/services, timeliness of delivery, service, contract compliance, responsiveness, and Total Cost of Ownership (TCO) are taken into account. Non or poor performance is flagged in existing information systems for further consideration.
Invoice approval. Once the goods receipt is approved, a three-way match between the purchase order, goods received, and the vendor invoice is performed. This ensures that the vendor delivers and is charging for what the buyer specifically purchased. If no errors are found, the invoice is approved and sent to the finance team for payment disbursement.
Vendor Payment. Once the finance team has received an approved invoice, the finance team will process payment according to contract terms. Any contract changes will be accounted for. There are generally five types of payments made to a supplier; advance, partial, progress or installment, final and holdback/retention payments.

Procure to Pay Challenges

Ensuring your company’s P2P processes are smooth and orderly is vital to the success of your business. The efficiency of procurement is ultimately the responsibility of sourcing and procurement departments. These departments have to source suppliers, manage contracts, minimize spending, and find ways to use automation in the purchasing cycle.

Many industries face challenges with the Procure to Pay process, but there are a wide variety of solutions being created and deployed to address them, especially in the Software-as-a-Service (SaaS) realm. While the challenges may vary from industry to industry, the below challenges are generally encountered regardless of sector:

Disparate systems and processing.

Large departments within the same organization often have their own sets of tools and processes to manage different steps in the P2P process. This makes data consolidation difficult. Sourcing, procurement, and accounts payable are all handled by different departments and separate systems. These systems are specifically optimized to suit each individual departments’ needs. Companies often deploy more than one ERP system, which creates data silos. These data silos make it very difficult to integrate data from multiple departments and create reliance on manual data input. Managing manual data, like manual data entry and paper invoices creates inefficiencies that costs organizations both time and money. An effective Procure to Pay solution will help eliminate data silos and increase cross-departmental communication.

Lack of compliance.

Governance and compliance of procurement processes tend to be rather static and unchanging. Spend approvals are often seen as unnecessary bureaucracy, which often results in ad-hoc and non-contract buying. This lack of both governance and compliance increases maverick spending, which is spending done without following the company’s procurement policy. This maverick spending, caused by purchasing from out-of-contract or non-preferred suppliers, causes your company to lose out on the benefits and cost savings that were negotiated with preferred suppliers.

Lack of stakeholder buy-in.

Management often sees procurement processes as unimportant to overall business operations and success. This means that improving procurement systems with technology like automation is low-priority. Inefficiencies multiply throughout the procure-to-pay process simply due to lack of consideration or use of outdated technology.

Poor systems training and adoption.

Most Procure to Pay solutions and procurement software is cumbersome and difficult to use. Users are normally poorly trained in using the software as well. Users expect easy to understand processes due to experience with B2C platforms like Google and Amazon, but this is not often the case in B2B processes. Procure to Pay software is often designed by procurement professionals who are intimately familiar with the intricacies of procurement. These programs are often full of features and lack focus on usability. Inadequate user training coupled with unfamiliarity with procurement policy can lead to reluctance in adopting up-to-date P2P technology.

Change management.

Change management is difficult to handle in any area of an organization, let alone in procurement. Users are not often consulted about system changes or updates, and this leaves users frustrated. When making changes to procurement systems, it is vitally important that users and staff be consulted. If your staff isn’t consulted, your company may waste valuable time and money implementing a system that was a poor fit in terms of both user capability and solving departmental problems. Assessing both user needs and current problems will inform your choice regarding what new systems and technologies would be of benefit to your company.

Solving P2P Problems with P2P Best Practices

Automate your processes.

Automating your P2P processes reduces operational costs while increasing efficiency. Automation ranges from electronic purchase requisitions that automatically get turned into purchase orders once approved, automated approval routing to e-invoices. When you automate these processes, your organization and your suppliers reap the benefits of increased efficiency. Adopting automation allows your procurement team to focus its efforts on activities that add value to the organization while enabling the accounts payable department to be more productive and reduce cost.

Automating your P2P processes also improves supplier relationships throughout your supply chain by ensuring timely payments. You can significantly reduce late fees and even capitalize on early payment discounts if available, both of which add to overall cost savings.

Don’t underestimate user experience.

Investing in technology is absolutely essential for streamlining and reducing costs, but if your employees don’t use the technology the way it’s intended to be used, your ROI will be minimal at best. If the procurement team finds your new procure to pay solution difficult to use, they will resort to familiar methods or other workarounds, rendering your investment ineffective. Your procure to pay solution should provide an intuitive and responsive user experience. As you test various solutions, you should conduct a usability assessment with a framework like the system usability scale (SUS). Using a framework like this to assess software will give you an objective rating and evaluation so that you can accurately compare your options.

Use cloud technology.

Data security is of the uppermost importance. Cloud technology has come a long way, and implementing it can benefit your business in a number of ways. Cloud technology helps standardize business processes, improve efficiency, and reduce cost. It also helps support change management since support packages and other updates can be applied system-wide quickly.

Keep things mobile.

Procure to Pay solutions have traditionally been handled in-house with a P2P web portal or with digital forms. In today’s work environment, procurement professionals expect to have access to procurement systems anytime, anywhere. This means companies either need to develop or use procurement software that is not device-specific. A mobile-first approach keeps the user experience simple and allows for an easy, intuitive buying experience. Allowing access anytime, anywhere increases efficiency and reduces turnaround time on procurement requests.

Automate your procure to pay processes. Customize your P2P workflows. Save time and money while increasing clarity with your suppliers with our Procure to Pay software suite.