- Drive savings to the bottom line to maximize the value of sourcing negotiations.
- Quickly enable the approval of new suppliers.
- Streamline catalog maintenance, freeing up resources and saving time.
- Consolidate manual commerce procedures to minimize errors.
- Improve and control global spending.
Procure-to-pay cycle solutions create approval flows that ensure negotiated savings reach your bottom line.
What is the Procure-to-Pay Cycle?
- Also known as the purchase-to-pay cycle, it’s the systematic process that a business uses to buy and pay for raw products and services. It digitally connects regulations, procedures, organizations, and vendors where they learn about new savings opportunities. Digital procurement software programs address all existing gaps, from improving spend visibility to preventing manual data entry. Furthermore, it’s integrated with accounts payable in an organization.
- Your procurement department monitors how much your company owes your creditors and suppliers to ensure that payments are made correctly. Your procurement department and accounts payable, as well as suppliers, will have to communicate properly for a streamlined and well-developed procure to pay process to improve transparency. Keeping in touch with vendors will help organizations manage their suppliers.
Benefits of the Procure-to-Pay Cycle
Your well-designed P2P process map will improve daily functions. Below are some of the benefits you can get from investing in procure-to-pay solutions:
Optimize Procurement Methods
Your procure-to-pay cycle determines each step that you should take to transform requisitions into purchases. It enhances organization and transparency, which can improve the overall efficiency of procurement.
Reduce Processing Charges
You can reduce procurement processing costs by using paperless inventory tracking or investing in the latest inventory management software. These systems allow you to quickly adjust to stock levels when orders arrive for online ordering.
Improve Your Transparency
By allowing suppliers and purchasing teams to check their requisitions in the cycle, you can gain greater visibility into the chain.
Improve Supplier Relationships
It ensures that orders are made correctly, and payments are delivered to suppliers on time, which improves the company’s relationship with them. It also promotes collaboration and communication between both parties so that any disputes or inquiries can be addressed quickly.
With a stronger supplier relationship, your company will better negotiate more advantageous conditions as long as it helps the supplier’s bottom line.
Simplify Data Reporting
You can access reports on waste, costs, and profitability status in real-time when using cloud-based inventory management programs. It will help if you make the right decisions to simplify how you can have access to data. You can control your cash flow better.
Steps in the Procure-to-Pay Process
Using a procure-to-pay cycle involves different steps that focus on both financial and procurement procedures. You should follow these steps to ensure productivity. Below are the steps involved in the procure-to-pay cycles.
1. Identify Needs
Your management department should determine and approve particular products and services that the company requires. Your project and its requirements are thoroughly outlined in the documents.
2. Develop Requisitions
You should create your official purchase requisition after identifying what your needs are. It’s designed to inform the procurement department that a product or service order is required.
3. Purchase Requisition Approval
Once you’ve produced the purchase requisition, it’s submitted to the proper department and procurement executives. Your executives will either reject or approve the request depending on your company’s priorities, budget, and needs. If they refuse a requisition, the author usually makes corrections and submits it for a second assessment.
4. Spot-buy or Place Purchase Orders
Your procurement department can place orders for products and services after approving the requisition. Your company can only do a spot-buy if you only need a single purchase or small volume and the order is only one-time. It involves immediately paying for and receiving the goods.
5. Purchase Order Approval
Executives should review the purchase order for the specifications to be accurate. Then, the requisition is submitted to the supplier, who will reject, accept, or negotiate
it. Once the supplier accepts the order, they’ll gather their inventory to fulfill it.
6. Review Receipt of Goods
Upon receiving the products and services, you should inspect them to make sure they contain the right quality and quantity. Once the goods receipts have been received, management can acknowledge the delivery and record their new stock orders.
7. Evaluate Suppliers
You should evaluate your supplier’s contract compliance, product quality, service, and timing. Re-ordering products in the future will be easier with this piece of information.
8. Invoice Approval
You should approve the invoice and send it to accounts payable if there are no discrepancies between the goods receipt and purchase order.
9. Vendor Payment
Once you’ve approved the order invoice, the accounting system or finance department can process payments to suppliers. You can pay suppliers in different ways, including final payments, installments, and partial payments.
The Disadvantages of Manual Procurement
|No transparency and clarity
||Because the procurement process involves many groups such as suppliers, the finance department, approvers, procurement teams, and end-users, it’ll result in less visibility and a loss of control over the overall process.
|Unsatisfied customers, vendors and procurement teams
||Usually, the parties involved in the process can make mistakes. It’s not easy to address these mistakes if you’re using the manual process. In most cases, you’ll have to start again or start from where the mistakes were made, which can be anywhere in the process.
|No consistent policy compliance
||Every company has set guidelines, especially within departments like procurement and finance, which have to spend the most resources. If these guidelines aren’t followed, things can go wrong. Inconsistency is common in manual procurement. While focusing on individual tasks, other employees may lose sight of the bigger picture of the productivity
and efficiency of the department.