Procure-to-pay (P2P) is the process where organizations integrate their purchasing and accounts payable (AP) systems for more efficient usage. It involves four key stages: selecting goods and services, enforcing compliance and order, receiving and reconciliation, and finally, invoicing and payment. It exists within the larger procurement process management system.
Digitizing the procurement process with P2P software solutions can strengthen compliance and control among vendors, contracts, regulations, buyers, and AP departments. P2P software helps organizations purchase goods from preferred suppliers at negotiated prices without the need for manual paperwork and spreadsheets. The burden of system setup and data entry then falls on suppliers, thus freeing Clerk and Analyst hours up for more value-add analysis work.
With the process automation that procure-to-pay software allows, P2P software can control your organizations’ global spend, consolidate most manual commerce processes to reduce errors, and streamline catalog maintenance. These efficiency gains save time and free up resource bandwidth, as well as improve cost savings to the bottom line to maximize the value of sourcing negotiations.
When it comes to procure-to-pay software tips and best practices, keep the following in mind:
Leverage Procure-to-Pay Automation to Eliminate Data Entry
Fully automating and creating a “touchless” data processing system can lead to better purchase order compliance from your vendors, automate production of invoices, create high first-time match rates, and lead to more on-time payments. This can also impact other areas such as speed, visibility, and lead to cost savings.
Take Stock of Your Current Suppliers
The number of suppliers you have within different spend management categories reflects your overall procurement health. Too many suppliers in one category may mean that it is time to reduce the number of vendors you have, or open the door to negotiating better pricing with a select few vendors. However, it’s worth noting that solely relying on a limited number of suppliers can introduce supply chain risk. Luckily, there are sourcing tools which can help build the right plan to begin to right-size your number of suppliers.
Look at On-Time Payments
Paying invoices on time is a key indicator of a healthy purchase-to-pay cycle and is the hallmark of a streamlined Accounts Payable Automation process. If there are frequent issues involving late or missed payments, this is something that needs to be addressed. The ability to pay on time suggests procurement has been negotiated on good terms for the business, and that the AP department runs its part of the payment process efficiently. A high rate of on-time payments indicates that digital workflow is functioning as it should
Take Notice of Purchase Order First-Time Match Rate
If invoices consistently match with purchase orders as they’re supposed to, all signs point towards there being a prominent level of operational efficiency. A high first-time match rate requires that internal buyers and external suppliers follow your process requirements, meaning that processes and procedures are being followed creating less risk to your bottom line.
Provide Visibility into Supplier Data
Data and analytics are crucial to making informed business decisions. Making sure that your internal processes capture the correct information in a usable format (preferably within the same system as you analyze your spend) will make things easier on your organization.
Track The Timeline to Invoice Approval
If invoices are not approved on time, you may be missing out on impactful discounts. For organizations on the fence regarding making the move to an automated P2P software solution, the cost savings alone that result from capturing these discounts can oftentimes make up for any software implementation costs in a matter of months.
If purchase order compliance is currently under 50%, you must manually depend on your organization’s speed to approve an invoice, pay early, and take a discount. A rules-based digital workflow helps improve this metric, accelerate the process and capture discounts, not to mention keeps suppliers happy.
The ROI of automating P2P will depend on the unique circumstances of your organization, but there’s no doubt that the ability to free up manual data entry and time-consuming processing will be beneficial to any organization. To learn more about P2P tips and optimization view our recent webinar, “Procure to Pay Potential: Optimization PeopleSoft P2P with Fluid Enhancements” or set up time with our P2P Experts by contacting [email protected].