Procure-to-pay (also known as Purchase to Pay (P2P)) is a term used in the software industry to designate a specific subdivision of the
procurement
Procurement is the method of discovering and agreeing to terms and purchasing goods, Service (economics), services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agenc ...
process.
The P2P systems enable the integration of the purchasing department with the
accounts payable
Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. An accounts payable ...
(AP) department. Some of the largest players of the software industry agree on a common definition of procure-to-pay, linking the
procurement
Procurement is the method of discovering and agreeing to terms and purchasing goods, Service (economics), services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agenc ...
process and financial department. The steps usually included are:
*Supply management
*Cart or requisition
*Purchase order
*Receiving
*Invoice reconciliation
*Accounts payable
Unlike source-to-pay systems, procure-to-pay systems do not include the function of
sourcing. Also, notions of
production planning
Production planning is the planning of production and manufacturing modules in a company or industry. It utilizes the resource allocation of activities of employees, materials and production capacity, in order to serve different customers.Farghe ...
and
forecasting
Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual ...
are excluded from this definition since it relates to the
supply chain management
In commerce, supply chain management (SCM) is the management of the flow of goods and services including all processes that transform raw materials into final products between businesses and locations. This can include the movement and stor ...
.
Benefits
Procure-to-pay systems are designed to provide organizations with control and visibility over the entire life-cycle of a transaction, providing full insight into cash-flow and financial commitments. Most of the companies using these systems look for a
centralization
Centralisation or centralization (see spelling differences) is the process by which the activities of an organisation, particularly those regarding planning and decision-making, framing strategy and policies become concentrated within a particu ...
of their procurement department, or to set up a
shared services
Shared services is the provision of a service by one part of an organization or group, where that service had previously been found, in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and th ...
organization for the same purpose. There are steps to follow to complete the full process, this ensures there are reduced errors and frauds. Electronic capture records all the transactions making it easy to track them.
According to the
Aberdeen Group
Aberdeen is an international marketing intelligence company. Aberdeen's headquarters is based in Waltham, Massachusetts, United States, with an additional US office location in Wilton, CT, as well as three European offices in Versailles (France), ...
, despite the availability of technology which can dramatically reduce the mountains of paperwork and inefficiencies plaguing accounts payable, few companies have addressed AP transformation like other processes essential to the business.
Risks
As with any system that touches a significant number of users, implementing a procure-to-pay system requires significant knowledge of the as-is business processes as well as the to-be. Change management is a key component i
implementing a procure-to-pay solution According to Deloitte, a few procure-to-pay challenges which ultimately impair the ability to manage and execute key activities effectively are:
* "Finance does not provide sufficient information to support decision making (e.g., spend analytics)"
* "Data governance and quality are inadequate to make informed decisions and meet Finance stakeholder needs (e.g., Vendor Master Data)"
* "The absence of, limited, or multiple/unintegrated systems supporting the process"
* "Customization of ERP which leads to abnormal entries being processed"
* "Lack of ERP knowledge/training among users which facilitates incorrect transaction processing"
See also
*
Supply chain
In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, acti ...
and
supply chain management
In commerce, supply chain management (SCM) is the management of the flow of goods and services including all processes that transform raw materials into final products between businesses and locations. This can include the movement and stor ...
*
E-procurement
E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as oth ...
*
Purchase-to-pay
Purchase-to-pay, often abbreviated to P2P and also called ''req to check/cheque'', refers to the business process
A business process, business method or business function is a collection of related, structured activities or tasks by people or ...
*
Spend management
Spend analysis or spend analytics is the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring controls and compliance. It can also be lev ...
*
Contract management Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms ...
*
Purchasing
Purchasing is the process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly betwee ...
*
Procurement outsourcing
Procurement outsourcing is the transfer of specified key procurement activities relating to sourcing and supplier management to a third party — perhaps to reduce overall costs or maybe to tighten the company's focus on its core competencies. Proc ...
*
Shared services
Shared services is the provision of a service by one part of an organization or group, where that service had previously been found, in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and th ...
References
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Procurement