Every business deals with procurements and payment. It just comes with the territory. Every business also wants to run efficiently, especially when it comes to purchases and payments. Procure to Pay (P2P) is a process enabled by a system of selecting goods/services, receiving, invoicing, and payments. The P2P process requires quite a bit of manual work and cooperation between departments to run smoothly. Taking advantage of P2P software to automate some of these processes is valuable for streamlining an otherwise complicated process. We’ve put together a short guide on how to use P2P software at your organization to simplify your procurement procedures. Check it out below.
Understand how P2P works
The first step to automating some processes is understanding how they function. Here’s a brief explanation of how P2P works at most organizations:
The process begins when managers discover material or service shortages in any department. Then, a purchase requisition for the material or service gets sent to a Purchasing Department. After receiving the requisition, the purchasing department seeks quotes from various vendors/suppliers for the material or service. Then it’s time to select a vendor. Several departments – including purchasing, financials, and others – will choose the right vendor/supplier based on a number of vectors. These can include quality of work, past reputation, price, and other considerations. Next comes the purchase order The vendor is followed by your organization receiving the goods. Finally, it’s time to move on from the procurement stage to the payment stage. Invoices must be thoroughly checked and verified in accordance with company standards before being sent out for payment. Once the invoice goes through the verification/validation process, the vendor gets paid. But P2P doesn’t end with payment. There should be a review process in place to evaluate the vendor’s performance in fulfilling the purchase order. P2P and accounts payable (AP) are not the same thing. The AP department handles invoices and makes payments as part of the overall P2P process. Both departments work in conjunction with each other to complete procurement.
Reduce employee workload with automation
The P2P process works in two distinct cycles. There’s the procurement stage leading to the purchase order and the payment stage where all of the invoicing gets addressed. Contrary to some of the most common reasons for not adopting an automated solution, each department can suffer from paperwork overload, errors during manual processing, and lack of training/teamwork. The software helps by mitigating these issues and also alerting employees to various discounts or benefits they can attain by using a preferred supplier. It’s a practical way to make their jobs easier and free them up to take on other projects without the necessity of additional extensive training.
Benefits of an integrated/automated solution
Automating the P2P process isn’t just practical; it’s almost essential in the modern business landscape. Electronic processing not only improves overall operational efficiency but also standardizes the workflow to get everyone on the same page. While switching to a Procure to Pay software solution may seem daunting at first, the right solution can be a boon to any organization. There are significant benefits in doing so, such as:
- Minimal training
- Simple, enhanced budgeting
- Easy adoption for both suppliers and employees
- Increased efficiency for managing your cash flow
- Streamlining the P2P process
- Optimizing the entire workflow
- Budget control in real-time
- Improved supplier/vendor management
- Possible early payment discounts
While these aren’t the only benefits associated with P2P automation, they represent some of the most compelling reasons to integrate P2P automation and electronic processing into your enterprise management system as soon as possible.
Enhanced spend visibility
Spend visibility and spend under management are integral parts of the procurement and accounting processes. Managers ideally want to maximize pre-approved spend while reducing rogue spend. Controlling known spending variables and complying with regulations are also incredibly important. The problem is the excessive amount of data involved in spend analysis. Fortunately, various solutions exist to help with these issues. More importantly, part of a strong P2P software solution is how much simpler it makes managing your organization’s spend under management (SUM), which is a vital metric for most businesses. Loosely defined, SUM is the amount invoiced by suppliers during the period in which they performed the work. It includes many different variables and is an incredibly nuanced process. Procurement oversees your company’s (SUM), with software dramatically simplifying the endeavor. It can help you leverage data to determine appropriate future actions and better manage your company’s spend. Lower SUM values can indicate more errors in the invoicing process or missing out on some discounts and savings. Adding additional vendors, improving purchasing transparency, and using payment cards for employee purchases can all increase an organization’s SUM. Integrating a comprehensive P2P solution can help streamline this entire process, setting your organization up for tremendous future success.
Improve supplier relationships
A significant goal for many companies is fostering and maintaining good relationships with suppliers. If someone asked you or your management team what the biggest pain point for suppliers might be, they might offer a number of theories and/or solutions. But would they say the most significant issue is suppliers failing to get paid promptly for goods or services rendered? It’s a fairly big issue for a shocking quantity of vendors. So, how can organizations fix the problem and do better in that particular area? This is one of those situations where P2P digitization and automation can come to the rescue. Utilizing the P2P software’s database and powerful functions, you can ensure vendors get paid accurately, promptly, and consistently. While the software is useful for onboarding/contracting with new suppliers, you can use it to build better relationships with existing suppliers too. They can be integrated into the software and you can gain access to the most up-to-date lists of products, services, and suppliers to suit your company’s needs. Fostering good relationships is crucial to running a successful business. Leveraging the tools you already have at your disposal—along with paying invoices promptly, of course—will line you up for success for a long time into the future.