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Procure-to-pay software helps achieve procurement process excellence

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Procurement not only means the final act of purchasing goods and services to meet the business purposes of organizations, but it also includes all activities associated the procurement process which, when it is well managed, will result in the organizations obtaining the goods / services of the right quantity, at the right price, and at the right time. It is critically important for organizations to ensure that they make the procurement process efficient and effective as it has a direct impact on their bottom line. Therefore, procurement is a strategic function that enables companies / organizations to achieve business excellence. Driven by this consideration and the realization that information technology solutions can significantly help improve the procurement process, companies are switching over from manual practices to deploying software solutions, such as the procure-to-pay, and automate the processes. Automation helps in decreasing errors, increasing accuracy of data, keeping data & documents better organized, and efficiently streamlining the procurement process.  


Procure-to-pay, also known as purchase-to-pay / P2P, is the processes associated the procurement activities a company undertakes to obtain the goods / services it needs. The activities range from identifying the company’s need for goods / services that can be fulfilled through procurement to the concluding stage of approving of invoices and making payments to suppliers. Procure-to-pay software is used to automate the procurement activities.

Procure-to-pay software suite helps to streamline and efficiently manage the procurement process from processing of purchase requisitions to supplier payment. It integrates and automates the procurement cycle, which is procedure intensive, and helps manage various procurement activities that include generation and processing of requisitions, managing of information from suppliers, procurement approval, generation, and release of purchase orders, receiving of goods, paying invoices, and such others

The procure-to-pay process

The procure-to-pay process includes the following activities:

  • Identification of the requirement for goods and services

Identifying the requirement of the organization for goods / services along with information about the budget availability for procuring the same kick starts the procurement process

  • Raising the requisition

The next in the process is raising the requisition, an internal document generated to buy the identified goods / services. The requisition document will contain details of the goods / services to be purchased along with delivery instructions. It may also include price information / quotations received from the potential suppliers, and such others.

  • Evaluation and approval

The requisition is evaluated to assess the legitimacy of the need & determine that it meets the other criteria and processed for approval. 

  • Issuing the purchase orders

Upon the approval of the requisition, the procurement department will select the appropriate vendor and generate the purchase order to be released to the selected supplier. The software will facilitate sharing of the purchase order copy with all relevant stakeholders for final approval and dispatching the same to the approved supplier. The purchase order will include details about the ordered item / items, price, quantity of the products / services being purchased, etc.

  • Receiving and inspecting deliveries from suppliers and checking them with purchase order for correctness

If the delivered content is found defect free and in conformance with the purchase order, the records in the P2P software will be updated to reflect the same. If not, the necessary remedial action will be initiated.

  • Verification of the invoice

After delivery acceptance, the supplier’s invoice will go through three-way matching with the purchase order and the content delivered by the supplier. Invoice will be approved for payment if no discrepancy is found.

Three-way matching involves comparing what was ordered, what was delivered, and the supplier’s invoice to verify that the invoice is legitimate and ready to be paid.

  • Making payment to the supplier

Upon invoice approval, the payment will be released to the supplier by the accounts payable department.

  • Documentation

It is important to capture and maintain complete records of all procurements carried out by an organization from the audit-trail perspective, which requires maintaining a date and time-stamped, sequential record of the history and details around a financial transaction.

Benefits of using procure-to-pay software suite

The use of procure-to-pay software will result in automating, streamlining, and improving the procurement and accounts payable procedures. It provides complete visibility and makes the process transparent and human error free. Some of the benefits, as a consequence, are the following: 

  • Reduces the procurement processing costs
  • Enhances efficiency and throughput by minimizing errors and delays
  • Helps save time, budget monitoring, and spend control 
  • Ensures better coordination and collaboration among the stakeholders – the department raising the requisition, the procurement department, suppliers, and the accounts payable department
  • Contributes to enhancing the relationship with the supplier
  • Ensures stronger compliance with the organization’s procurement policies
  • Acts as a repository of procurement information

The use of procurement–to-pay software can alleviate some of the procurement challenges associated with manual methods. It ensures transparency, accuracy, reliability of data, traceability of vendor performance in terms of quality & timeliness of deliveries, and others. Driven by business compulsions to improve effectives, efficiency and productivity of the procurement process and the growing awareness about the power of procurement-to-pay software in solving some of the challenges and the benefits that could accrue from its deployment, organizations are investing in P2P software suite. As a consequence, the market for P2P software is robustly growing. Geopolitical and other supply chain & business-related developments are also pushing organizations to deploy the software solution instead of depending on error prone, expensive, and difficult to manage paper based manual methods.

Author:

Rajabahadur V. Arcot  is a Senior Advisor, Quadrant Knowledge Solutions