Procure-to-pay, otherwise known as purchase-to-pay or simply P2P, is a process needed to make a product or give out a service. It revolves mainly around getting and managing the raw materials required. The supplier is given a flow of data and any information regarding the product or service’s order and payment.
Technology aids in allowing the smooth flow of the process.This particular software is designed to watch over the life-cycle of a product or service in a business or company. Through technology, efficiency is established as processes are automated.
One of the core reasons for switching to procure-to-pay software is to significantly reduce the use of paper and, inevitably, the costs pertaining to that. Efficiency is promised and thus resulting in better productivity. Updates on spending are also given by the day, so the company is no longer a month behind when it comes to information about such things.
Day-to-day activities with regards to accounts payable are now dealt with, leaving the company to deal with more pressing matters that need attention. Deferring from conventional purchase-to-pay systems, procure-to-pay excludes sourcing. Several businesses more than just acquainted to this industry include Oracle, SAP and the Access Group Procure to Pay Module.
To link the financial department to the procurement process, several steps are considered in the procure-to-pay system. The first step involves creating requisition. A formal request to purchase is needed and can be done solely by employees. Internal requisition involves requests and transfers from within the company.
Purchase requisition is external, where materials are requested from suppliers. After approval, a purchase order needs to be made. There are four types, the first being a Standard PO, which is for one-time purchases. A Planned PO is long-term, in which commitment is made to buy from just one source. Details regarding delivery schedule and details about the products and/or services are needed.
A Blanket PO or agreement is made when details of the goods and services are available, but not the delivery schedules. A Contract agreement is made to agree on certain terms and conditions with suppliers without having to indicate the goods and services to be purchased.
Upon approval, a receipt is created. Once the goods arrive, Invoice in Payables is created to pay the supplier.A payment is made and a Transfer to General Ledger completes the cycle.
Procure-to-pay is slowly making its way to becoming mainstream. This software is on its way to prove extremely beneficial to companies, organizing and proving its worth to more and more companies as the years go by.