Procure to Pay: The Full Guide for P2P Processes

Businesses come in many shapes and sizes 

You could be running a large multinational or a growing local company, it doesn’t matter, at the core of your operations, you are still dealing with procurement. 

So why not learn more about it? 

Procure to pay or P2P is an integrated process that connects purchasing with accounts payable and while it might not be something new, there are certain practices and details that you must consider if you are aiming for a more organized approach to your business. 

Let’s discover them 

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What’s Procure-to-Pay?

The simplest way to understand procure-to-pay is by going over its three main activities: Requisition, that is when you or someone in your company identifies the need to purchase a product. Purchase, the action of actually buying something. And payment, when you have already received the goods and the supplier sends you the invoice. 

As you can see, it’s a long process so knowing all the important tips and mistakes to avoid can really signify a great benefit for your company.

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Processes included in P2P

Sourcing

If you or someone else have found that’s necessary for that new project or to improve some daily activities, buy or acquire the products or services of a vendor, then the first thing you need to do is to look for all the options available that match your needs. 

Purchase requisition 

This comes at the moment when the product and potential list of suppliers is decided and now you need to inform the responsible department, usually procurement, about your intention to purchase. A purchase requisition is the document used for this purpose. 

Requisition processing and approval 

The whole point of a purchase requisition is to obtain the approval of the person/area in charge, so it’s not a surprise that every single purchase requisition needs to undergo a process of review and approval. 

Purchase order creation 

Once the approval is granted, the next step is to create a PO, this legally binding document serves as a reference for all the important bits surrounding your purchase. From the item description to the expected delivery date. 

Receipt of goods 

A quite important moment arrives when you get the product, and no, it’s not just because you finally see what you paid for. But more of that on the next point.

Invoice reconciliation and processing 

What’s more important than receiving your goods? Making sure that everything across the PO, the invoice, and the actual product in your hands. 

Payment 

One of the final steps is to process the payment, this had to be done right on time to avoid complications in your supplier relationships. 

Accounts payable maintenance 

Just like we said at the beginning the cycle of P2P finishes with accounts payable. Managing your company’s liabilities is the key to maintaining your brand’s reputation and financial stability in check. 

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Advantages of Procure-to-Pay

Saves money

When structured well, P2P can make wonders for allocating your resources in the most efficient way, saving money, and increasing productivity along the way. 

Standarizes processes 

Once there’s a friendly and established approach to handling purchases and payments, it becomes easier to have everyone onboard. 

Better supply relationships 

Constant and honest communication combined with delivering money when it’s expected and not a second later is the recipe for success with your supplier relationships. 

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Efficiency in your operations 

This is even more true for P2P processes that are automated, as it reduces manual errors, saves time, and increases productivity. 

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Visibility 

Yes, P2P is the result of basically three processes. The result? You gain end-to-end insights into the whole purchasing process. 

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Challenges and Solutions for P2P Processes 

We say it here constantly, nothing is completely free of obstacles, but look at the bright side, at least for procure-to-pay, there are some simple methods to overcome its challenges.

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No clear standards 

While P2P is by definition an integrated procedure, it can find itself trapped by inconsistency and poor communication. One of the best ways to solve this problem is by developing easy-to-understand policies and keeping your doors open should any questions arise.  Having an automated system also helps. 

Manual errors 

Speaking about automation, the main reason why we are always putting it at the forefront of best practices for procurement is that it removes from the equation the chance of finding your operations ruined because someone put the wrong information or forgot about a crucial date regarding payment. 

Issues with suppliers 

Nobody likes to discuss with a partner, especially when said partner is your supplier, maybe it’s not necessarily the fault of either of you, perhaps there’s a disruption in the service due to natural disasters, and yet you can see your P2P cycle deeply affected. The most feasible solution? Try to build a more diverse supply network so you can be better prepared for anything. 

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Should I automate my P2P processes? 

Short answer: Yes.

Automation is no longer an accessory to consider, it’s pretty much the only and best solution to handle your business’ purchases and payments. But if you are still having doubts, let’s remember that procure-to-pay is a complex process that demands high levels of attention and responsibility. As one step is connected to the next, any minor mistake can greatly impact the whole cycle, and not in a good way. Choosing a P2P software will not only make your purchasing life simpler and happier, but it will also give you the insights you need to develop more precise business strategies. 

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