Purchase-to-pay systems can offer several advantages for businesses. However, there are certain practices to carry out to get the most out of your system and increase in-house productivity further. In this guide, we discuss what purchase to pay is, the common challenges it tackles for procurement professionals, and best practices.
What is Purchase-to-pay?
Purchase to Pay (P2P) comprises several business processes that cover the end-to-end purchase-to-pay process of an organisation. The process covers the ordering, requisitioning, purchasing, receiving, and invoice processing of products or services from suppliers.
P2P is important in supply chain management as it promotes visibility. In this case, visibility refers to the ability to get a better picture of your company’s finances from the moment an order is placed to invoice processing. Greater visibility thereby helps businesses reduce risk within their supplier network and have more control over their spending. It also helps both buyers and suppliers view invoice statuses in real-time so they can direct their cash flow and working capital more appropriately. This greater connectivity throughout the organisation also leads to faster requisition approvals and the selection of the most suitable suppliers based on data insights.
With P2P, you can also benefit from reduced paper costs. This is because you can receive invoices and orders online and store them within the system. Doing so can help businesses looking to achieve a net-zero goal and improve their sustainability. A study of moderately sized organisations using a P2P system found that they saved around 55,000 sheets of paper per year.
What are the key challenges that a P2P solution tackles for procurement professionals?
Three main challenges that a P2P solution can solve for procurement professionals include:
Lack of ownership
Both SMEs and international organisations oftentimes find it hard to maintain good data profiles on their suppliers. This typically occurs because the definition of ownership between procurement and finance is obscured. Businesses struggle to identify their rights and control negotiations with vendors as a result. By increasing the visibility of the end-to-end purchase and payment process, P2P solutions allow for better tracking and ownership.
Lack of data governance
Data governance refers to a collection of processes, policies, and standards that ensure the efficient use of information. Without data governance, procurement teams remain unsure of how to use data insights to make more strategic decisions. A P2P solution ensures data is communicated throughout the supply chain and used to drive other metrics – such as contract management or spend analysis.
Insufficient communication with suppliers
It’s important to establish a meaningful relationship with your supplier population. This guarantees better engagement and positive communication. P2P solutions give both suppliers and procurement professionals better control over the whole end-to-end process, facilitating improved discussions and strategic negotiations.
Purchase to pay best practices
Understanding how to best use your P2P solution ensures you get the most out of it. Consider the following best practices to streamline your P2P process and reduce errors:
• Operate with transparency. The last thing you want to do is leave vendors and suppliers in the dark as this exacerbates confusion. Most P2P solutions provide a self-service portal where suppliers can track invoice updates, so utilise this system for better communication and transparency.
• Focus on improving supplier relationships: 92% of suppliers prefer electronic payment, so using a P2P already improves your relationship with them. However, it’s important that you show interest in wanting to establish a positive relationship with suppliers rather than viewing it as a mere necessity. Use your system to make on-time payments and provide easy access to vendor portals. Good supplier network relationships increase the likelihood of vendors wanting to work with you continuously. Make sure suppliers are also putting effort into the relationship too to evaluate their performance. For instance, use your P2P solution to ensure they invoice promptly and accurately and deliver goods on time.
• Streamline workflows: Eliminate the need for employees to carry out tedious and repetitive tasks by automating certain processes. P2P software often allows you to automate invoice approval, routing, and processing. This helps reduce workflow complications and allocate time to more important tasks. It’s estimated that supplier portals can reduce inbound inquiries by up to 80%.
• Integrate it with ERP: To ensure workflows continue smoothly, coordinate your P2P solution with enterprise resource planning (ERP). Ensure you store P2P data insights in a centralised and easy-to-access location to reduce data silos and increase productivity.
• Use the right P2P software: There’s no point in investing time and effort into running a P2P solution that doesn’t suit your needs. Choose a system that allows your business to improve communications, eliminate manual errors and delays, and cut back on costs. The best P2P software offers features such as invoice processing, ERP integration, vendor portals, and other workflow automation processes.
Purchase-to-pay software can offer several benefits to SMEs and large organisations. Take ELCOM’s PECOS purchase-to-pay solution for instance. Founded in 2002, the P2P now facilitates 118 public bodies with its online purchase-to-pay system, including the Scottish government. A total of 32.3 million purchase orders have gone through the system since March 2002, with a combined value of over 73 billion pounds. Learn more about how the Scottish Government became recognised as the most successful eProcurement service in the world here.
P2P solutions are important for greater visibility, control, and environmental efficiency. One of the first steps in procurement digitalisation in many companies is the Procure to Pay process. P2P is recognised as a process that provides visible short-term ROI while being less cumbersome than others to digitalise. To find out more on how P2P systems can help businesses generate savings, read our new blog: How Purchase-to-Pay (P2P) leads to savings.