Procure to Pay (P2P) is an integrated process that covers the full cycle of obtaining goods or services from external suppliers, starting with the procurement plan and ending with the payment for those goods or services.

Elements of P2P

• Requisition: Requisition involves creating a formal request for the required goods or services. It allows businesses to specify what they need and route the request through the necessary approval procedures.

• Purchase order (PO) creation: This relates to the generation and management of POs depending on approved requests. It ensures that the purchase information, such as quantities, pricing, and supplier details, are accurately captured.

• Receiving goods: This involves receiving the goods or services from the supplier. The warehouse staff or supervisor records the details of what was delivered, comparing them against the PO to ensure accuracy and address any discrepancies.

• Processing invoice: This includes verifying and approving the supplier’s invoice for payment, ensuring compliance with the PO and goods received.

• Payment: This is the payment sent from the business to the supplier depending on the agreed-upon terms. After the final approval, the payment is scheduled to be sent out.

Step-by-step process

Step 1: Submit a requisition form for approval

Initiate a formal request for the purchase of goods or services by submitting a purchase requisition (PR) form to the procurement team. The form identifies and details the product/service, including budget information, required quantities, and specific terms. 

The PR is reviewed by the procurement officers, finance team, and executive management. It may be approved or rejected depending on the necessity of the request, alignment with procurement policies, cost-benefit analysis, and available budget.  

Step 2: Submit a PO and await approval

Generate a PO to formally authorize the purchase. This document outlines the terms and conditions of the acquisition, including quantities, prices, and delivery schedules. The PO then goes through a chain of internal approval to ensure accurate and legitimate specifications.

The vendor reviews it and may choose to accept, reject, or negotiate the terms. After confirming approval, a binding contract comes into force.

Step 3: Receive the goods and verify the supplier’s invoice

After receiving the goods, the buyer inspects them to ensure compliance with the contract terms. In case of issues or discrepancies, the buyer notifies the supplier and requests a resolution. 

Once satisfied with the delivery, the buyer acknowledges the receipt of the goods and approves the vendor’s invoice.

Step 4: Schedule vendor payment

Forward the approved invoice to the finance team to process the payment considering any changes in contract terms or liquidated damages. Arrange the payment schedule as stipulated, whether it involves partial payments, a final settlement, or retention amounts.

Step 5: Record Keeping

Maintain detailed records of PRs, POs, receipts, and invoices to ensure compliance with regulatory requirements. This step is also essential for creating an audit trail for internal reviews, ensuring transparency and accountability.

Benefits of P2P

• Cost savings: In addition to streamlining procurement operations and ensuring that purchases are made efficiently and correctly, P2P can also centralize purchasing activities to leverage bulk buying and negotiate better terms. It enables better management and identification of cost-saving opportunities by providing real-time visibility into spending, automating procurement workflows, and enforcing compliance with purchasing policies.

• Process efficiency: It automates all procurement activities, reducing the need for manual data entry. It streamlines procurement workflows and enforces standard procedures to improve coordination and communication among departments and speed up procurement cycles.

• Financial accuracy: Through invoice matching and validation processes, P2P ensures that payments are only made for deliveries matching the precise requirements. This reduces the risk of duplicate payments and discrepancies. P2P approval workflows and budget control mechanisms ensure that expenses align with budgetary constraints and company policies.

How tech facilitates P2P

Speeding up approvals

A digital P2P solution enables fast distribution of all documents, such as PR forms, POs, and invoices, to all relevant parties, enabling timely approvals.  

Optimizing document management

Most P2P platforms auto-generate and dispatch POs from approved requisitions. Businesses can create multiple POs from one requisition and submit batch orders to a particular vendor.

Simplifying three-way matching

The software automatically compares details from POs, receipt reports, and invoices, streamlining three-way matching to reduce manual errors and ensure accurate purchases.

Delivering procurement insights

P2P software consolidates data from various procurement activities into comprehensive reports. It provides advanced analytics on spending patterns, supplier performance, and compliance. It also offers detailed visibility into procurement processes and trends, forecasting future needs and optimizing procurement strategies.