Purchase to Pay-P2P

Purchase to pay process, also known as the P2P process, connects the procurement and entire supply chain processes within a company through the goods receipt process, and finally to the payment issued to the vendor.

7 Steps in the Procure-to-Pay Process

The seven steps below make up the basic steps in the P2P process. One thing to note, however, is that not all businesses in Kenya use purchase orders for every purchase.

My belief is that the lack of POs can lead to significant losses when spread over an entire organization. In addition, companies that have not implemented a digitized automated system are still subject to human errors that often accompany a dependence on paper and manual processing, delayed payments due to disputes, and a complete lack of visibility into the real time status of invoices.

1. Purchase requisition — Once a need for a specific product or service is identified and approved by management (in any department of the organization), that request goes to the procurement department.
2. Purchase order — Procurement will first go through its list of approved suppliers and, based on the requisition data, select the best supplier for the purpose. The procurement department then creates a purchase order (PO) in the system that is automatically routed for approval and transmitted to the supplier.
3. Receipt of goods/services — Upon shipment of goods or completion of service, the supplier will send an invoice to the accounts payable department. Once the shipment is actually received, procurement will enter shipment information into the system.
4. E-invoicing — All steps up to this point have been handled by the procurement department; here is where the accounts payable department steps in. Invoices are sent by the supplier either electronically through the supplier portal that is part of the P2P solution or via mail, If not submitted electronically, invoices go through a process of scanning and double blind keying technology where relevant data is extracted, standardized and converted to electronic invoices (e-invoices).
5. Invoice matching — The e-invoice is then automatically matched against the PO and receipt of goods. As long as all items match within agreed-upon thresholds, the invoice is automatically advanced for approval.
6. Approval workflow — Within an automated P2P solution, invoices that pass the 2-way or 3-way match are put straight through to the organization’s ERP for payment. If established rules stipulate that invoices above 2 Million Kshs need additional signatures, the solution will automatically forward those invoices to those people and alert them that a signature is needed. Those invoices will then automatically go into the ERP for payment as well.
7. Payment — Payment methods may vary, company to company. Although I feel that electronic payments like EFT and virtual credit cards are the most efficient and cost-effective way to pay suppliers, many companies still rely on paper checks and cash. A procure-to-pay solution should offer an e-payables functionality; however, a company can still decide not to use that method.

Picture from Easy Newrooms