How To Pick Procure-to-Pay Software (and 5 Tools to Consider)

Better systems are the key to better results, especially when your organization is on a growth track. A robust procure-to-pay (P2P) system is one of the most beneficial ways to speed the procurement process while retaining visibility into indirect procurement spending.

But how can you be sure your procurement and purchasing processes are optimized? What does an effective procure-to-pay process look like? And how can procurement automation ensure that spending remains under control as you grow?

To answer these questions, we’ll take a detailed look at what goes into a successful purchasing workflow. We’ll also cover some best practices that can tighten up the process. Lastly, we’ll show you how procurement automation can help you keep your procure-to-pay process functioning without breaking a sweat.

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What is procure to pay?

P2P is the systematic process an organization uses to identify, request, and pay for the goods, products, and services required to run the business.

Procure to pay does not encompass the entire procurement function. It focuses on the purchase, reconciliation, and vendor payment portions of the process.

Activities such as strategic sourcing, lifecycle evaluations, vendor off/onboarding, and supply chain management fall outside the scope of procure to pay.

How does procure-to-pay automation software work?

Procurement automation software creates a centralized, automated workflow encompassing everything from item selection to invoice payment.

On the front end, the system automates the purchasing process for buyers through a cloud-based system that centralizes supply orders. Users access a curated catalog of items provided by a database of approved suppliers.

From there, they order the goods they need within preset system budgets and parameters. The dynamic system allows administrators to set spending rules by user, department, category, or location.

On the back end, procure-to-pay software automates many repetitive and manual processes. Purchases originating from the catalog get routed through an approval process. Once purchases are delivered, the system uses AI and machine learning to automatically process thousands of invoices, ensuring they are correctly routed, reconciled, and paid without manual input from workers.

Why use procure-to-pay software?

Procurement software helps organizations manage the procurement and payment process with less manual effort. This is especially important as companies grow and their order volume and complexity increase.

Procurement teams enjoy the following benefits when they implement a fully-featured P2P system:

Automation: Many portions of the procure-to-pay process are manual and repetitive. When teams handle these processes by hand, processing slows down, errors and issues increase, and the cost to process transactions climbs dramatically. P2P software solves all these issues and creates a scalable solution that allows teams to focus on value creation. Automation also reduces the burden on accounting and procurement team members at a time when procurement workloads are increasing by over 10 percent.

Accuracy: Using manual processing for P2P can lead to errors and delays. Traditional methods of manual data entry, invoice routing, and payment reconciliation result in errors, excess time spent researching issues, unnecessary fees, and loss of vendor confidence. Automating with P2P software ensures accurate and timely transactions.

Scalability: P2P software solutions scale efficiently with the number of suppliers and transactions. Instead of manual data entry, invoice routing, and payment reconciliation, software automation allows administrators to set spending rules by user, department, category, or location.

AI enhancement: The AI and machine learning functions of P2P software enable more frequent payments. They also create a system that allows teams to monitor their procure-to-pay process in real-time through dashboards or reporting so they can quickly make any needed changes. This provides proactive rather than reactive management of the entire procure-to-pay process.

Digitization: Automated P2P software helps organizations digitize the accounts payable (AP) process, allowing the accounting team to centralize invoices and vendor information from any source (online ordering, email, paper invoicing, and even phone orders). These automation resources help organizations move away from ineffective paper-based accounting. Even though digital invoicing has made great strides, nearly half of all invoices are still received manually.

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9 Steps of an effective procure-to-pay process

The benefits of a standardized, repeatable procure-to-pay process in your organization cannot be overstated.

A streamlined workflow reduces maverick spending, makes the purchase process faster, improves order and supplier management, and increases stakeholder productivity and satisfaction.

The general flow of the procure-to-pay process is as follows:

Identify a business need: A stakeholder realizes the need for a product or service to perform their job. They may evaluate services or identify the best product or materials to solve the issue.
Request the item/service: The stakeholder then puts together a requisition or intake form to formally request the purchase of goods. This requisition kicks off the approval and purchase process.
Receive requisition approval: The requisition goes through a standard approval process and receives sign-off from all pertinent stakeholders or departments. Finance allocates money for the purchase.
Create a purchase order: After approval, the relevant stakeholder creates a formal purchase order (PO) to procure the goods. This PO has all the necessary information for order processing and delivery of goods.
Receive purchase order approval: Although the requisition has received approval, the completed PO ideally undergoes a separate evaluation and approval process. This helps reduce errors, clarify requirements, and ensure a smoother purchase and reconciliation process. Once approved, the PO is transmitted to the supplier for fulfillment.
Receive the items/materials: The order is fulfilled and delivered by the supplier. The receiving party inspects and evaluates the delivery and checks for accuracy against the order. In cases where the goods don’t match the order or meet quality requirements, the receiver may reject the order.
Evaluate vendor performance: Once receipt and reconciliation of goods is complete, a performance review is conducted. It should evaluate aspects of the purchase, including on-time delivery, order accuracy, quality/condition of goods, etc. Any issues can be noted during this evaluation and used during subsequent purchasing decisions.
Complete invoice approval: At this point, a three-way matching process begins to ensure the delivered goods are accurate to the purchase requisition, purchase order, and invoice. Once invoice matching is complete, accounts payable can start invoice processing.
Pay the supplier: This is the final step of the procure-to-pay process. The approved payment is submitted to the supplier based on the purchase order or contract terms. In some cases, timely payment of invoices can help the organization realize benefits such as early payment discounts.

3 Best practices for improving your procure-to-pay process

Improve your business processes, maximize outcomes, and improve purchasing and payment functions with three highly impactful best practices.

1. Build a standard approval process for every purchase

Outlining a formal process for requesting and purchasing goods balances an organization's need for oversight and compliance with the need to support its staff and avoid hindering their progress.

A well-documented procure-to-pay process:

Creates a frictionless environment where employees get what they need without uncertainty. It allows staff to remain productive and feel supported in their role.
Ensures consistent oversight of purchases and adherence to budgets and departmental prerequisites.
Reduces risks of ordering from unknown suppliers or making out-of-process, unsanctioned purchases.
Increases visibility, reduces redundancy, and allows finance to track, analyze, and forecast spending.

The process doesn’t have to be elaborate. It should lay out the path to approval and set expectations for requestors. The best processes are easy to implement, track, and repeat for every purchase, enhancing the procure-to-pay cycle to ensure continuous improvement of these functions.

At a minimum, the purchase approval process should include:

A standard requisition or intake form that includes all required information
A point of contact or process owner to begin the requisition and approval
Clearly defined approvers and approval parameters for each purchase
A system to track and document requisitions and orders as they go through the process
A post-financial close process for evaluating purchases, strengthening beneficial supplier relationships, and offboarding vendors at the end of service

2. Outline contract and departmental requirements

Each approving department in the purchasing process likely has standard requirements for its purchase requisitions. These prerequisites are essential for ensuring high-quality procurement while reducing risk. However, stakeholders and purchasers can only meet these requirements if they know what they are. Specific requirements are unique to each organization and their strategy, but they form an important part of the decision-making process and the ultimate outcome of the request.

Possible departmental requirements include:

Internal department lead: A department management may have preferred suppliers or integration partners based on current tech stack or other partner agreements.
Legal: General counsels often have specific terms or clauses to enforce adequate contract protections and cover common issues like service-level agreements (SLA), downtime clauses, disaster recovery responsibilities, arbitration, etc.
Security: Information systems departments often require the completion of a supplier questionnaire to determine security and risk management thresholds.
Finance: Early in the process, Finance may ask for preliminary budget estimates or project milestones to aid budgeting and forecasting activities.

To ensure a smooth approval process, document and outline these requirements in one place.

Making departmental requirements part of the intake process helps stakeholders acknowledge and fulfill them before a requisition enters the pipeline. This reduces friction, avoids purchasing delays, and ensures high quality for every purchase a company makes.

3. Consider automation

As organizations grow, the purchasing process expands exponentially, including contract management for dozens or hundreds of vendors. In a short time, the manual procure-to-pay process can become backlogged and inefficient.

Rather than continuing to expand the headcount for these operations, consider implementing automation to handle the repetitive and manual tasks in the purchase-to-pay process.

Using procurement and AP automation can improve the purchasing experience for buyers while reducing the strain on procurement teams and AP departments. In addition, it can free up these important teams to conduct higher-value functions in the organization.

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How to choose procure-to-pay software

Features and usability are the biggest selling points for a P2P software system. When considering options, look for tools that meet the following qualifications for functionality, ease of use, and reporting:

Automated invoice processing and matching: Three-way matching is a great start, but look for options that create more ways to verify and match invoices to procurement activities.
Streamlined approval processes: The procurement process requires buy-in from the different departments and leaders helping to administer purchasing. Automated approvals make it easier for everyone to see, research, and approve purchases.
Reporting capabilities: Look for dashboards and easy-to-customize reporting views that simplify visualization of key metrics and understanding the spending narrative.
Integration potential: Every system becomes more valuable when it can communicate with the other software tools already at work. A strong P2P system offers the ability to integrate with other enterprise applications.

5 Great procure-to-pay software options to consider

1. Order.co

Order.co provides businesses of all sizes with simple, straightforward procure-to-pay features that are powerful and flexible. The system offers ordering through a dynamic, curated catalog alongside next-level features like AI product substitution, role-based permissions, extensive reporting features, vendor-agnostic cart and ordering, preferred advance financing, and full transaction capture for catalog and off-catalog spend.

Pros:

Vendor-agnostic purchasing using dir