Better systems are key to better results, and a well-automated procure-to-pay (P2P) process offers significant business benefits. It boosts efficiency while retaining visibility into spending and helps companies surface cost savings to improve the bottom line.

But what does an effective P2P cycle look like? And how can automation ensure spending remains under control as you grow?

Download the free ebook: The Procurement Strategy Playbook for Modern Businesses

What is procure-to-pay?

Procure-to-pay is the process used to identify, request, and pay for the products and services needed to run a business. Differentiating between procurement vs. purchasing helps clarify the scope of procure-to-pay. Rather than covering the end-to-end procurement process, P2P systems focus on purchasing, reconciliation, and vendor payment, leaving out initiatives like strategic sourcing, supplier performance evaluations, vendor off/onboarding, and supply chain management.

The 7 steps of an effective procure-to-pay process

A standardized procure-to-pay process reduces maverick spending, makes the purchase process faster, improves strategic decision-making and order management, and increases stakeholder productivity and satisfaction.

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

1. Identify a business need and outline the product or materials that will work best.
2. Submit an intake or purchase requisition form requesting the purchase and outlining relevant information.
3. Put the purchase request through a standardized approval process to get sign-off from decision-makers.
4. Submit a purchase order (PO) for the approved purchase.
5. Perform invoice matching to reconcile the goods receipt (or bill of lading) against the intake form and PO. This is called three-way matching. 
6. Complete invoice approval and begin the payment process. 
7. Record the transaction for visibility and spend analysis. Consider tracking procurement using relevant metrics or key performance indicators (KPIs).

Ebook

The Procurement Strategy Playbook for Modern Businesses

Learn the key pillars of a strong strategy, valuable procurement metrics to track, and initiatives you can start implementing today.

Download the ebook

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

The following best practices can help improve business processes, maximize outcomes, and optimize purchasing and payments. 

1. Build a standard approval process for every purchase

Outline a formal process for requesting and purchasing goods. The intake process balances the need for oversight and compliance with efficiency. 

A well-documented procure-to-pay process:

• Creates a frictionless environment where employees get what they need
• Ensures consistent oversight of purchases and budgets 
• Reduces risks associated with ordering from unknown suppliers
• Increases visibility and allows finance teams to track spending 

An effective process should outline the path to approval and set expectations for requestors. It should be easy to implement, track, and repeat for every purchase.

2. Outline your contract management and departmental requirements

Create an approval process so relevant stakeholders know the parameters for in-policy purchases. Documenting and outlining your procurement policies ensures a smooth approval process. 

Consider these approvers in your process flow:

• Internal department lead
• Legal
• Security
• Finance

Making departmental procurement strategy requirements part of the intake process aids stakeholders in starting on the right foot before a requisition even enters the pipeline. It reduces friction, helps prevent purchasing bottlenecks, and ensures high quality for every purchase your company makes.

3. Consider automation

As your organization grows, procurement activities grow exponentially alongside it. In a short time, manual systems can become backlogged and inefficient. Rather than continuing to expand your company's headcount, consider implementing an automation solution to handle time-consuming tasks in your purchase-to-pay process. 

Using procurement and accounts payable (AP) automation can improve the purchasing experience while reducing the strain on procurement teams and AP departments. It frees up teams to conduct higher-value functions. It can also reduce your cost-per-invoice by as much as 76 percent (no small discount at a time when the average invoice can cost over $10 to process).

Ebook

The Procurement Strategy Playbook for Modern Businesses

Learn the key pillars of a strong strategy, valuable procurement metrics to track, and initiatives you can start implementing today.

Download

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How does procure-to-pay automation software work?

Procurement software solutions create a centralized, automated workflow for tasks ranging from item selection to invoice processing. On the front end, a cloud-based procurement management system automates purchasing and gives buyers access to a curated catalog of items from a database of approved suppliers. 

On the back end, procure-to-pay software streamlines repetitive manual processes, reducing discrepancies caused by human errors or duplicate data. All purchases go through an automated approval process, and once they are approved and delivered, the system checks invoices and reconciles them. The best P2P software options use AI and machine learning to process thousands of invoices automatically. 

How can procure-to-pay automation help?

The value of procure-to-pay software begins with improving team member productivity and maintaining purchase quality. Software also has the potential to drastically improve cost savings and reduce waste spending within your organization. 

Automated eprocurement systems optimize every stage of the procure-to-pay process. By providing a centralized purchasing system, you ensure organizational requirements are observed while reducing the friction of fulfilling everyday needs. 

With the right procure-to-pay solution, you can:

• Maintain adherence to budgets, purchasing guidelines, and approved vendor lists 
• Improve supply chain management when ordering for multiple locations
• Reduce the number of invoices, cost-per-invoice, and invoice exception rates 
• Stabilize and improve cash flow by consolidating invoices and payments
• Help surface cost savings opportunities to improve the bottom line
• Provide real-time, line-level visibility for more strategic spend management

If you’re ready to learn how automated procurement with Order.co can help you achieve these outcomes, schedule a demo of the platform today.