What is the procure-to-pay (P2P) process?
The procure-to-pay (P2P) process, also sometimes referred to as purchase-to-pay, is a structured workflow that involves receiving goods or services and issuing payments.
The procure-to-pay process is often automated in order to reduce risk and improve efficiency. Most often, procure-to-pay is managed with a low-code business process automation tool.
Procure-to-pay is related to, but different from, the larger process of procurement, which includes sourcing goods and/or services, production planning, forecasting services, and negotiating terms.
While this may vary based on company needs, the procure-to-pay process typically involves automated key features like:
- Selecting goods and services from a catalog of approved suppliers.
- Sending purchase requisitions.
- Creating purchase orders.
- Processing and reconciling invoices.
- Submitted approved payments.
Why is procure-to-pay important?
Procurement managers know that a procure-to-pay process is a critical part of managing an organization’s spending and complex procurement workflows that involve myriad parties across departments.
Procure-to-pay is important because it saves costs by reducing manual, laborious work, increasing accuracy, and improving efficiency and financial controls. A bonus benefit that the procure-to-pay process provides is enforcing compliance and order, which is essential for guaranteeing accuracy and maximizing contract values.
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Benefits of the procure-to-pay process
Given the numerous parties and steps involved in the procurement process, there is significant room for automation to improve workflow efficiencies, lower costs, and build better relationships with suppliers. With procure-to-pay solutions, teams can:
Approvals, requisitions, purchase orders, notifications, and payments are processes that follow basic and consistent rules. Automating this can reduce friction and improve efficiency to make the procurement process much leaner and minimize the propensity for error.
In addition to making the procurement process more consistent, automation can reduce the costs associated with maintaining them. The more steps you can automate, the more man-hours can be reduced or assigned to more productive tasks.
Gain total visibility into purchasing.
By tracking each step of the process and centralizing data through stack extensibility, managers have a complete picture of historical and planned purchases and expenditures.
Strengthen relationships with vendors and suppliers.
By speeding up approval and payment processes, vendors receive purchase orders quickly and get paid on time. Everyone benefits from predictable, smooth processes.
Negotiate with authority.
Negotiations are about business leverage and access to information. Automation gives a business the flexibility to choose from a larger pool of vendors because managing those vendors is less of a burden.
7 steps in the procure-to-pay process
While every business is unique, most companies will follow a common series of steps for their procure-to-pay process. Below is a detailed breakdown of the seven steps that make up the procure-to-pay process:
Step 1: Create a purchase requisition.
When an employee needs to purchase a good or service, they create a document called a purchase requisition and send it to a manager for approval. Depending on the purchase amount, the purchase requisition may require multiple approvals.
Step 2: Select a vendor.
After a manager approves a purchase requisition, employees must consult an approved-vendor list when deciding where they’ll purchase the item(s). This decision may involve factors such as industry, location, and price.
Step 3: Create a purchase order.
A procurement employee then creates a purchase order (PO) to send to the chosen vendor. Depending on the size and type of purchase, there may be multiple POs sent to multiple vendors.
Step 4: Receive goods and services.
After the vendor(s) receive the purchase order(s), they deliver the goods or services to the purchaser. Assuming there are no issues that the vendor must address, procurement managers approve the transaction and mark the purchase order as “‘fulfilled.”
Step 5: Receive an invoice matching the purchase.
The vendor issues an invoice to the purchaser that includes the amount owed and the due date. The invoice will specify the goods or services provided.
Step 6: Reconcile and approve the invoice.
In order to appropriately determine the status of the purchase, the vendor invoice must be reconciled with the original purchase order. When the purchaser and other managers formally indicate that they’ve received the product/service, the invoice can move on to the payment process.
Step 7: Pay the vendor.
Finally, the procurement department sends the approved invoice to the accounts payable team, who schedules the payment. Typically, this results in an outgoing payment via a check, ACH, or wire transfer to the vendor’s bank account. However, there may be different payment requirements, particularly for international transactions.
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Common procure-to-pay challenges
Like any business process, procure-to-pay processes can experience issues that keep them from operating smoothly. These issues can stem from challenges related to:
- Adopting new technology.
- Managing and efficiently implementing process integrations, changes, and optimizations.
- Lacking an overall layer of governance and compliance control.
Procure-to-pay solutions & best practices
Using a solution like low-code BPA software to automate the procure-to-pay process will ensure that the steps are performed consistently, efficiently, and affordably. It also is a scalable solution that can enable the procurement department to manage large operations without having to increase staff to handle all the moving parts.
Here are some best practices to keep in mind as you build and optimize your procure-to-pay process:
Automate when and where you can.
In traditional procurement workflows, the request and approvals steps usually are the most time-consuming and error-prone steps. Workflow automation software can help standardize request creation, define requirements that must be completed to ensure consistency and quality, quickly send and track active approvals, and designate rules about who needs to approve certain types of purchases.
Centralize your procurement process to skip rework and improve efficiency.
Further, business procurement management software helps to centralize all of the information about ongoing and historical procurement processes so that no one has to waste time scrounging through documents or emails to understand the state of a project. This also helps to ensure that information is not lost and steps are not forgotten.
Gain control & visibility over your procure-to-pay process with Pipefy
A well-designed and implemented procure-to-pay process can help to improve the efficiency and quality of the procurement process in a scalable manner — and Pipefy’s low-code automation platform can help do that.
When you need to take control of your finance department and procure-to-pay process with the big picture in mind, Pipefy is the perfect partner. Pipefy improves workflows by adding automation that cuts repetitive, time-consuming tasks, and streamlines communication and connections between teams, departments, and processes.
Pipefy’s platform centralizes operations by easily integrating with your favorite software to unlock a seamless, streamlined, accurate, and secure, procure-to-pay operation — all from a single platform.