Companies at the moment buy numerous varieties of products and providers for various functions.
The procure-to-pay course of encompasses all processes concerned in the complete lifecycle of buying items and providers.
From preliminary requisition to closing cost, this course of entails a number of stakeholders with complicated workflows and necessitates important monetary checks and management over itself.
Having a well-defined procure-to-pay course of for all procurement actions is essential for attaining operational effectivity and lowering prices. All this goes in direction of transferring the needle in direction of extra revenue for the enterprise.
With that being stated, allow us to outline the procure-to-pay course of, perceive the steps concerned in finishing it, and learn the way it may be optimized at the moment with the assistance of automation.
What’s Procure-to-Pay?
Procure-to-Pay (P2P) is the whole course of carried out by a enterprise when buying items or providers. It includes of all steps proper from ordering the products/providers to paying the provider.
An instance of P2P could be a enterprise needing to buy workplace chairs. First, a purchase order requisition is created. It’s then authorized based mostly on sure standards. The corporate would then select a provider and place an order. When the chairs are delivered, the supply is checked in opposition to the order. The bill from the provider is then obtained, checked in opposition to the order, authorized, and paid. This whole course of, from figuring out the necessity to making the cost, is the P2P course of.
Steps of the Procure-to-Pay course of
The procure-to-pay course of is a subset of the bigger source-to-pay course of.
The preliminary Supply-to-Pay (S2P) steps usually are not concerned within the procure-to-pay course of. These are particularly –
- figuring out a brand new want,
- discovering and evaluating suppliers,
- sending out requests for proposals,
- selecting the right provider,
- and finalizing provider contracts.
The above steps usually are not a part of the procure-to-pay course of. As a substitute, the P2P course of begins as soon as the above steps are full.
Allow us to now undergo the steps of the P2P course of itself.
Actually! Let’s proceed with the steps of the procure-to-pay (P2P) course of, utilizing a sensible instance as an example every step.
Step 1: Determine Wants
Think about this mid-sized manufacturing firm referred to as XYZ Corp. They’re operating low on uncooked supplies for his or her manufacturing. So, the manufacturing group takes a take a look at their upcoming orders and realizes they want 500 items of high-quality metal sheets.
To ensure every little thing runs easily, the manufacturing supervisor and procurement group work collectively to nail down the precise specs and portions wanted.
Step 2: Create Requisitions
As soon as they’ve discovered the specifics for the metal sheets, the procurement group will get to work creating a proper buy requisition. This requisition consists of all of the necessary particulars like the kind of metal, what number of they want, after they want them by, and any particular dealing with directions.
They fill out the requisition kind and submit it electronically by way of the corporate’s procurement system, ensuring they have all the required approvals in place.
Step 3: Buy Requisition Approval
Now the acquisition requisition will get despatched to the division head for approval. The division head takes a superb take a look at the requisition, checks the price range, and makes certain they actually do want these supplies. If every little thing checks out, they provide it the inexperienced mild and cross it on to the procurement group for the subsequent steps. If there are any points or adjustments wanted, they’re going to ship it again for revisions.
Step 4: Create a Buy Order
The procurement group places collectively an in depth PO based mostly on the authorized requisition. It consists of issues just like the title of the seller, how they’re going to ship the products, and the cost phrases.
Step 5: Buy Order Approval
The procurement supervisor takes a take a look at the newly created PO to double-check every little thing. They need to be certain it is all correct and follows the corporate’s insurance policies. As soon as they’re happy, they provide it the thumbs up and ship it off to the chosen vendor. The seller evaluations the PO, agrees to the phrases, and confirms the order. This makes it a legally binding contract.
Step 6: Items Receipt
When the metal sheets arrive at XYZ Corp’s warehouse, the receiving group rigorously inspects the supply to ensure it matches the specs within the PO. They verify for issues like high quality, amount, and any damages. As soon as they’ve executed a radical inspection and every little thing meets the required requirements, they report the products receipt within the system.
Step 7: Provider Efficiency
After a profitable supply, XYZ Corp takes a second to guage how the provider carried out. They contemplate issues like whether or not the supplies had been delivered on time, the standard of the supplies, and whether or not the provider caught to the contract phrases. This efficiency knowledge will get logged into the corporate’s provider administration system. It helps them make smarter buying choices sooner or later and keep excessive requirements for his or her suppliers.
Step 8: Bill Approval
The provider sends over an bill for the metal sheets that had been delivered. The finance group does a three-way match, evaluating the bill to the PO and the products receipt. If every little thing strains up and there aren’t any discrepancies, they approve the bill for cost. But when they discover any mismatches or points, they’re going to ship it again to the provider to get issues sorted out.
Step 9: Vendor Cost
Lastly, the finance group takes care of processing the authorized bill in accordance with the agreed cost phrases. XYZ Corp has a web 30 cost time period with the provider. What does that imply? Nicely, it signifies that the cost might be made 30 days after the bill has been given the thumbs up. The finance group is up to the mark, ensuring to schedule the cost and settle the provider’s dues precisely and on time.
As now we have seen above, the P2P course of entails 4 key stakeholders: the division that initiates the request, suppliers, procurement, and accounts payable (or an exterior company in case of outsourcing).Â
Challenges within the P2P Course of
Implementing the procure-to-pay (P2P) course of is just not with out its challenges.
As now we have seen above, P2P is a relay race – each the execution of every activity and the pace of transition to every subsequent activity determines the effectivity of a enterprise’ P2P course of.
Let’s delve into some widespread challenges confronted within the P2P course of:
- Guide Processes and Errors: Many companies nonetheless depend on guide processes for numerous levels of the P2P cycle, corresponding to bill processing, approval workflows, and knowledge entry. This reliance on guide duties can result in human errors, delays, and inconsistencies.
- Lack of Visibility and Management: With no centralized system to handle procurement actions, companies typically wrestle with restricted visibility into the P2P course of. This lack of transparency makes it tough to trace spending and ends in unauthorized purchases slipping by way of the cracks.
- Complicated Approval Workflows: Approval workflows within the P2P course of could be cumbersome and time-consuming, particularly in bigger organizations. A number of ranges of approval, unclear approval hierarchies, and delayed responses can decelerate the procurement course of, affecting total productiveness and operational effectivity.
- Compliance and Regulatory Points: Adhering to procurement insurance policies, trade rules, and compliance requirements is important for avoiding authorized and monetary dangers. Nonetheless, managing compliance manually could be difficult, resulting in potential breaches, penalties, and reputational injury.
- Information Administration and Integration: The P2P course of generates huge quantities of knowledge, from buy requisitions to provider invoices. Effectively managing and integrating this knowledge throughout completely different techniques, corresponding to ERP and accounting software program, is essential for correct reporting and knowledgeable decision-making. Poor knowledge administration may end up in knowledge silos, duplication, and discrepancies.
An outdated P2P course of can sluggish a enterprise down tremendously.
The following part will discover how these challenges could be mitigated and the P2P course of optimized by way of automation.
Easy methods to Optimize the Procure-to-Pay Course of?
Environment friendly procurement efficiency, value management, and powerful provider relationships rely closely on a streamlined procure-to-pay (P2P) cycle.
We all know that guide processes nonetheless hamper groups throughout important levels corresponding to bill processing, cost, items receipt verification, and utilization of provider portals.
Even in at the moment’s technological panorama, it is stunning that 31% of organizations depend on guide techniques to handle these levels.
The excellent news is that the P2P processes have developed considerably over the previous few years. AI, ML, and automatic workflows can now be built-in to extend effectivity. These developments scale back processing instances, mitigate errors, and let your groups think about necessary duties somewhat than knowledge entry, operational duties and guide reconciliation.
Today, numerous P2P automation software program can be found which automate and streamline majority of the procure to pay course of.
if you’re excited about getting a procure-to-pay answer in your group, listed here are just a few prime ones so that you can contemplate:
- Nanonets
- SAP Ariba
- Coupa BSM Platform
- Jaggaer One
- Basware Buy to Pay answer
However let’s dig deeper into how a P2P automation software program like Nanonets optimizes P2P.
Right here is how a typical P2P course of automated utilizing Nanonets seems like –
The workflow begins with the necessity of a brand new buy.
1. Buy Request:
An worker logs into the Nanonets portal to submit a purchase order request digitally.
2. Buy Order Creation:
Nanonets robotically creates a Buy Order (PO) based mostly on the main points supplied within the request.
3. Buy Order Approval:
The PO undergoes an automatic approval course of inside Nanonets.Â
You may set predefined guidelines and situations to make sure consistency throughout procurement actions, minimizing errors and stopping unauthorized expenditures.
Approval notifications are despatched and managed simply by way of fashionable communication instruments like Slack and Microsoft Groups, that includes direct Name To Actions (CTAs) for fast decision-making.
4. Buy Order Dispatch:
As soon as authorized, the system robotically sends the PO to the provider through built-in e-mail or provider portals corresponding to SAP Ariba or Coupa.
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5. Items or Companies Supply:
The provider processes the order and updates the supply standing within the provider portal, which syncs with Nanonets.
6. Bill Information Seize and Matching:
Nanonets robotically extracts knowledge from invoices, buy orders, and supply notes, lowering guide entry and errors.
Automated three-way matching ensures accuracy by verifying the alignment of invoices, buy orders, and supply notes earlier than cost processing.
7. Cost Processing:
Nanonets streamlines the cost course of, guaranteeing all transactions are accomplished effectively and on time.Â
This helps keep good relationships with suppliers and keep away from late cost penalties.
8. Integration with ERP/Accounting Software program:
Nanonets integrates seamlessly with numerous ERP and accounting techniques, offering a unified expertise for procurement and monetary knowledge administration.
It’s clear that procure-to-pay automation streamlines the acquisition course of and enhances the efficiency of what you are promoting operate.
Listed here are some generally seen advantages of automating the procure-to-pay course of:
- Value Discount: Automate repetitive duties to scale back labor prices and reduce errors.
- Effectivity Features: Streamline approval and bill processing workflows to hurry up the procurement course of.
- Compliance Enchancment: Guarantee adherence to procurement insurance policies and requirements by way of automated checks and balances.
- Provider Relationship Administration: Improve communication and coordination with suppliers by way of automated techniques.
Ultimate ideas
Working a profitable enterprise is like managing pit stops for a Method 1 group. It’s a must to continually optimize your processes so to eke out each final little bit of efficiency.
Your P2P cycle is actually one space that you simply shouldn’t overlook. Seamless procurement is the way in which ahead. Those that embrace P2P applied sciences could have a bonus in expenditure incurred, consumer expertise, and avoiding enterprise disruptions.