What is procured to pay
Procure-to-pay is an end-to-end process integrated with an organization’s needs, used to manage the procurement of goods and services from vendors, from the initial request to the final payment.
P2P essentially relies on the coordination between the purchasing and accounts payable departments to acquire goods and services for the organization. It is designed to integrate these functions and channel a smooth procurement workflow with better control and insight into every phase of the process.
What are the challenges in the procure-to-pay process?
The procure-to-pay process is known for transparency and efficiency. However, we often witness some deeply rooted issues, such as a lack of data transparency, redundant manual tasks, and inefficient communication, which usually lead to problems in the long run. The typical difficulties include uninformed decisions, the risk of fraud and non-compliance, inefficient spending management, and poor time management..
Lack of visibility in the P2P process can lead to issues like incorrect order estimates, fraud risks, payment delays, redundant spending, manual data entry, and supplier relationship problems. Additionally, errors in KPI calculation lengthen and disrupt the P2P process.
A P2P automation system reduces turnaround time from many days to a few minutes by automating midway processes.
Procure-to-pay challenges and problems
P2P challenges can differ depending on the business size and scale of operations. We will depict some of the common ones here.
Paper invoicing
Sorting paper invoices can be a complicated task. Getting approvals, signing off on paper invoices, detecting problems, and handling them efficientlaree also difficult. Digitalization helps solve this problem by providing solutions for submission, approvals, and future reference.
Manual data entry errors: Paper invoices usually require manual intervention, increasing the likelihood of data entry mistakes. These errors often disrupt the process, leading to delays and rework.
Lack of visibility: Paper-based processes make it difficult to track the status of an invoice, leading to transparency issues and a lack of control over the payment process
Repetitive and manual tasks
Repetitive tasks like creating purchase orders consume valuable time and resources, usually making the process tedious and complicated.
Non-PO based invoices
Without a purchase order, matching invoices becomes difficult and requires substantial effort from the accounts payable team. However, the AP team can extend beyond data entry, allowing companies to leverage their full potential in problem-solving and root-cause analysis.
An automatic Procure to Pay solution digitalizes the process smoothly. The solution maintains documents electronically and leverages an Optical Character Reader (OCR) to verify them.
Non-automated processes
Lack of automation in the P2P process increases challenges for the P2P team. It often leads to inefficiencies, including manual data entry errors, delayed approvals, and poor visibility into procurement workflows. Often witnessed are higher risks of fraud, compliance issues, and extra spending. Additionally, the absence of automation in the P2P cycle complicates supplier relationship management and increases companies’ overhead. Integrating automation into the P2P process can address these challenges, improving accuracy and control over procurement activities.
Lack of spending transparency in the P2P department
Medium and large businesses with several supply chains and suppliers face challenges in having complete spend visibility. The procurement teams are often unaware of how much, on what, and with whom they need to spend the budget. This step involves many challenges without clear visibility in the P2P departments. However, technology can cut down on these challenges by providing a clearer vision of spending and reducing costs.
Poor Time Management
A lengthy approval cycle for purchase orders and payments is a significant challenge in the P2P process. This adds to the procurement timeline and creates a cumbersome process, ultimately reducing efficiency and preventing focus on strategic work.
Integration and Scalability Issues
Business growth lies in integrating technology with the current workflow. Difficulty in integrating the P2P process with existing enterprise systems creates inefficiencies. As businesses grow, scaling the P2P process to accommodate increasing demands becomes challenging.
Best practices to avoid procure-to-pay mistakes
1)Ensure Proper Training
It becomes important to run a smooth procurement workflow to educate your accounts payable team about P2P policies, procedures, and systems. A well-trained team can effectively handle tasks and eliminate potential flaws.
2)Embrace P2P automation technology
Embrace the technology that becomes the need of the organization in today fast-paced technology, so embracing p2p technologies enhances accuracy and minimizes errors in the process, allowing your p2p department to focus on key strategic areas
3)Forecast the procurement budget
Set a P2P budget for a fiscal year and stick to it. Financial spending discrepancies can strain future procurement. Use technology to check real-time spending.
4)Centralize Vendor Management
Maintaining a vendor database: Keep an up-to-date, straight record of information, payment terms, and performance history. It is crucial for centralized vendor management. Conduct due diligence before partnering with new suppliers.
Conclusion
A procure-to-pay solution ensures the organization runs a smooth procurement process. The key factor of procure-to-pay software is its ability to handle complex tasks and provide efficiency, eliminating prevalent flaws in the process.
