What Is Purchase-to-Pay?

Purchase-to-pay (P2P) is an integrated system that fully au💟tomates the entire goods and servicesಌ purchasing process for a business.

The P2P system's name refers to the fact that it handles all aspects of acquisition, from the request for and purchase of goods to the payment of the vendor. The key benefits to P2P are efficiency, cost savings, and increased financial and procurement visibility.

Understanding Purchase-to-Pay

The purchase-to-pay system begins with requisitioning, proceeds to procurement, and ends with payment.

澳洲幸运5官方开奖结果体彩网:Requisitioning is the process of formally requestinﷺg a service, item, or product with a purchase request form. Procurement happens when the goods or services are received. The entire P2P process ends when the p𓂃ayment owed is made to suppliers.

Goal of P2P

P2P seeks to optimize the purchasing process, thereby benefiting an organization through better financial controls and 澳洲幸运5官方开奖结果体彩网:efficiency. This streamlined, integrated system saves money and reduces risk because finance departments have timely purchasing data at their fingertips.

P2P systems are not intended to speed up the payment process. While this would be a laudable objective, the reality is that it would not be a priority for most companies because paying bills faster could affect their own 澳洲幸运5官方开奖结果体彩网:cash flows in unwelcome ways.

Step-by-Step P2P Process

A typical P2P system includes five steps and requirements for completion:

1. Catalogs: Catalogs from preferred suppliers are the first requirement in a purchase-to-pay system.
2. Purchase requisitions: Once a product has been selected from a catalog, the buyer sends a purchase requisition to the appropriate manager.
3. Purchase order workflow: A purchase order is generated once the purchase requisition is approved by the manager.
4. Invoicing: This is a critical component of a purchase-to-pay system since manual processing of invoices is a hugely laborious and time-consuming process. Automated invoice processing saves time and money and includes a reconciliation feature that matches purchase orders to invoices.
5. Payment: Once an invoice is approved for payment, a file is generated in the company’s 澳洲幸运5官方开奖结果体彩网:accounts payable system. The approved invoice results in payment to the supplier by the end of the period for which the supplier has extended credit.

P2P Best Practices

Best practices for purchase-to-pay systems include solid technology th🐓at uses a single point of contact, such as a suppliౠer portal; reduced complexity in catalogs and buying channels; and support from top management.

A P2P system should provide key data on how much is being spent, the products or services being ordered and received, an💎d delivery times.

Advantages and Disadvantages of Purchase-to-Pay

Advantages

• Improved efficiency, with automation trimming the time and effort of managing procurement
• Lower administrative costs due to greater efficiency
• Better financial controls, as finance departments have access to timely purchasing data
• Procurement transparency and control, as P2P can help ensure compliance with internal policies and external regulations
• Cost savings, as catalogs can provide better spending visibility, thus helping procurement teams identify cost-saving areas

Disadvantages

• Limited scope due to the system design addressing transactions only
• Inability to address strategic sourcing needs such as long-term vendor evaluation or risk mitigation
• The potential for lack of data
• Redundant tasks and inefficient or uninformed communications and decisions
• Risk of fraud and noncompliance

Any one of these disadvantages can affect extraneous costs and, ultimately, the company’s bottom line.

The Bottom Line

The purchase-to-pay system fully automates a business’s goods and services purchasing process. It involves product or service requisitioning, procu𓃲rement, and vendor payment. The system behind this integrated process saves a business money and reduces risks inherent in the purchase pꦗrocess.