How to Achieve a Seamless Procure-to-Pay Process

Modern enterprise companies rely on multiple outside vendors to support their operations, from software providers and materials suppliers to technical support and administrative services. And every time a team or individual needs something from one of these suppliers, they have to go through the procure-to-pay (P2P) process.

The P2P process involves obtaining goods or services from external suppliers, from identifying the need to making the supplier payment. However, manual processes in P2P can lead to problems such as fraud, inefficiencies, and financial losses. Tasks like manual invoice entry, chasing signatures for payment approval, and handling physical documents can consume valuable time and resources, diverting the procurement team from higher-value activities. Streamlining and automating P2P can help mitigate these issues, enhancing efficiency, reducing errors, and preventing financial leakage.

By automating your procure-to-pay process, however, your organization can reduce the risk of mistakes and delays, save time and hassle, and ensure your employees have everything they need to do their jobs effectively. In this post, we’ll go over the basics of the procure-to-pay process, how automation can solve common P2P challenges, and how to uncover opportunities for automation.

What is the procure-to-pay process? 

The procure-to-pay or P2P process is how a company requests, acquires, and pays for external goods or services. It starts with procurement (purchase requisition) and ends with payment (paying off the invoice), hence the name procure-to-pay.

In general, the P2P process involves six stages: 

1. Purchase requisition: An employee fills out a form requesting goods or services from a particular vendor.
2. Approvals: The requisition is reviewed and either approved or rejected.
3. Purchase order: If the requisition is approved, a purchase order (PO) is created and sent to the vendor.
4. Receive goods/services: The employee receives the requested item(s).
5. Receive invoice: The vendor sends an invoice for the provided goods/services.
6. Submit payment: After the invoice is processed and approved, the company pays the vendor.

Each stage of this cycle also involves several related tasks, especially around reporting and administrative logistics. On the upstream side, for example, expense reports need to be created and potential vendors selected; on the downstream end, accruals and budgets must be managed and required activities around compliance have to be completed.

What is procure-to-pay automation? 

Even though modern procure-to-pay processes are both incredibly important and extremely complicated, they’re often managed manually. However, given today’s technological capabilities, that doesn’t need to be the case.

P2P automation is the use of automation via integrations, triggers, and pre-built workflows to streamline your procure-to-pay process from beginning to end. It takes tasks out of individuals’ hands and shifts them into automated systems, eliminating the need for manual processes.

What challenges does procure-to-pay automation address? 

By leveraging automation capabilities across the P2P process, companies can better address a number of common problems. In this section, we’ll go through a few of the main ones.

Processing and procurement errors

Manually inputting invoices and dispersing vendor payments greatly increases the chances for human error and late payment. Over time, long turnarounds for invoice approvals and/or delayed payments can harm your relationships with suppliers. By automating the processing of purchase orders, invoices, and payments, you can eliminate mistakes, while also decreasing the risk of overpaying and over-ordering. Additionally, direct integrations with your ERP system allow you to easily identify errors when they happen and address them ASAP.

Compliance issues

According to Deloitte, “P2P remains an area prone to fraud, money leakage, and inefficiencies.” With so many potential purchasing channels available to employees, regulating each one becomes a huge challenge, opening the door to unauthorized purchases and compromising the security of your systems.

With a single automated purchasing channel, however, companies can monitor all purchases in one place, reducing unauthorized purchases by adding full visibility and accountability to the process. By routing transactions to the right person and sending automated notifications whenever someone submits a PO, you’ll cut back on “rogue spending” and ensure that all transactions go through the right supplier.

Siloed systems and processes

At most companies, the P2P process requires departments and systems that are generally disconnected from one another to work together. Since this degree of interaction isn’t the norm, it tends to involve back and forth communication with both vendors and internal departments, leaving a lot of room for inefficiency. And many organizations have no way to automatically connect and synchronize upstream and downstream processes, leading to a lack of visibility around who’s spending what and why. However, establishing an integration platform that can ingest data from multiple systems provides transparency at every stage of the procure-to-pay process.

Slow order fulfillment

No one wants to wait forever for the item or service that they need to do their job, and trying to figure out who has to approve a requisition can be a hassle all its own. An automated requisitioning process can help you save time tracking down the right managers and waiting for authorization. Automation can help requisitions go directly to the correct source for quick and easy approval.

The benefits of procure-to-pay automation

Automating the P2P process can help companies avoid costly procurement errors, eliminate manual data entry, increase policy compliance and speed-to-order, and improve overall financial visibility. In addition, it can help your organization achieve the following:

Improved insights into cash flow and costs

In today’s economic climate, every dollar counts. By optimizing your procure-to-pay process through automation, you’ll be able to quickly adapt to a changing market, streamline your operations, and get a more accurate view of how and when cash comes in and out of your business.

Reduced costs

According to Paystream, organizations with no procurement tool have a cost per PO of $89.27. Those with modern, cloud-based e-procurement software, however, have a cost per PO of just $30.72. Plus, automation can significantly reduce the risk of late payment penalties and even save you money on future orders from preferred suppliers.

Employee empowerment

Do your employees know how to submit a requisition, who to go to for approvals, and where to send a purchasing question? By automating as many of these tasks as possible, you’ll make it easy and simple for your employees to request and receive the tools they need to do their jobs well. You’ll also save them the time and hassle of dealing with red tape and unnecessarily manual paperwork. And for those employees in the finance and accounting departments, automation will allow them to spend far less time on low-value tasks and more on strategic initiatives.

Stronger vendor relationships

Establishing a network of preferred suppliers is a worthwhile effort that can pay major dividends in the long run, whether in terms of preferred pricing, early access, volume discounts, or other benefits. However, you’re unlikely to become a favored customer if your payments are often late or your invoice approvals process takes ages. Automating these key tasks will help ensure you stay in your vendors’ good favor, and they stay in yours.

Identifying opportunities for automation

Just about every stage of the P2P process can benefit from automation to some degree. So, where should you start looking? Your accounting team is a great place to begin, as they’re responsible for multiple aspects of the procure-to-pay cycle. Sit down with your accounting department and work together to identify where you have manual journal entries and calculations. Most likely, these tasks can be automated relatively easily.

Another source of automation opportunities are manual spreadsheets, particularly those with multiple VLOOKUPs and IF formulas. When accountants are using these formulas, they’re likely trying to merge datasets or convert data manually. So, why not let your P2P stack do that for them?

Optimize your P2P process

As you build your familiarity with automation and what it can do for your business, the sky’s the limit. At Celigo, we’ve worked with organizations across industries and verticals to streamline their procure-to-pay process through automation, helping them solve common P2P challenges, and achieve the many operational and financial benefits automation can provide.

To learn more about end-to-end automation, speak with one of our integration specialists today.