Everything comes at a cost. From your Netflix subscription to the pen that keeps getting lost at your desk, every good or service has a value. Naturally, it explains why everything comes at a price. Companies must charge for the materials and services used to create the final product, and a little more to ensure a return on investment of raw goods. In the B2B world, this process is better known as procure to pay.
What is Procure to Pay?
The procure to pay cycle, sometimes known as purchase to pay, is a system that combines numerous finance department functions into one process. Most responsibilities in the purchase to pay cycle include:
- Supply management – The process of connecting to and managing supplier relationships for the purpose of ordering.
- Requisition– The process of formally ordering a product for fulfillment.
- Purchaseorder – Creating a formal order document which contains specific order quantities and requirements.
- Receiving– Accepting the physical shipment and entering the accepted order into inventory, tracking, and accounting systems.
- Invoicereconciliation – Comparing the invoice to the purchase order to ensure all costs and charges are as expected.
- Accountspayable – The final step in the procure-to-pay process is focused on approving the purchase order for payment, sending the payment, and entering the payment into accounting systems.
Tech is Transforming the Procure to Pay Process
Some companies still handle check cutting, invoicing, and other purchasing processes manually. On the other hand, modern businesses are relying on tech to save time and money. Digital processes have many benefits including better shareholder value and purchasing experiences for vendors and suppliers.
The procure to pay process includes many functions, such as invoice reconciliation from accountants and the finance department. Supply chain teams are tasked with managing inventory and vendor relations. On the other hand, the finance department manages the budget and payment methods. With such distributed management, companies are spending over $10 per invoice in the procure to pay cycle.
There’s a big difference between companies that automate procure to pay and companies that stick to the Stone Ages. According to CFO magazine, the average cost per invoice processed ranges from $4.98 per invoice for top performers and $12.44 per invoice for bottom performers. The goal of every procure to pay process is to purchase raw materials for production as quickly and efficiently as possible. Teams strive to get the goods into the hands of the right people without delay. The small details make a big difference, and should be treated with care; otherwise, expenses can balloon out of control while efficiency plummets.
According to the Tungsten Network Global Study, manual procure to pay processes are inefficient and troublesome due to obstacles such as high volumes of invoices, manual approvals and exceptions, and supplier requests. According to the study, more than 125 hours and $171,340 are wasted annually due to manual procure to pay issues. It’s time for businesses to make the switch to tech in order to get the biggest bang of their bucks.
According to Raj Aggarwal, Director of Product Marketing and Analyst Relations at JAGGAER, “Procure to pay helps reduce errors and improve efficiency by linking the entire process under one system.“
Without automation, it’s evident that the procure to pay processes can be very tedious, slow, and labor intensive. Manually organizing invoices and purchase orders wastes hours and trees, and that doesn’t include payment processing. Keeping track of all of these responsibilities manually comes with human errors, missed discounts, and lack of big data to make informed decisions on strategies and spending.
Aggarwai shares a key point that procure to pay is “all about getting rid of paper, automating, and getting more efficient.”
Procure to pay processes should do more than streamline the tedious process. Automating P2P processes provide support for purchasing and vendor decisions for the finance department and the business. In a recent study, GEP highlighted the number one benefit of automating procure to pay.
“A key benefit of automation is the ability to track detailed data on spending trends throughout the organization.”
Having quantitative and qualitative insight into procure to pay processes and purchases improves cash flow and effective spending without the worry of manual errors or oversights.