What is the Procure-to-Pay cycle?

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Purchase-to-pay / procure-to-pay / source-to-pay / source-to-pay these words might confuse you when the time comes to conduct your business.


However, don’t get them mixed up because they aren’t interchangeable. Recognizing each concept and the actions involved with each process can make your procurement efforts a lot easier.


In this article, we’ll walk over the procure-to-pay process and show you how it works. Ready? Let’s get to know Procure-to-Pay Cycle.

What really is the Procure-to-Pay Cycle?

A smooth and fast procure-to-pay (P2P) procedure is critical to your company’s success. The process of linking acquiring products and accounts payable systems to increase efficiency is known as procure-to-pay. It is part of a wider procurement cycle that has four stages: selecting products and services, ensuring compliance and order, receiving and settlement, and invoicing and payment.


On a daily basis, various departments require distinct commodities and services. There are also hundreds of vendors and product variations to consider. You must also follow all internal and external regulations. Simultaneously, speed is critical. But not at the expense of quality or accuracy.


Your procure-to-pay procedure will most likely need to be advanced as your company grows. It must meet the needs of today’s millennial users while also adhering to all of your procure-to-pay regulations.

Imagine sprinting 100 meters while your legs are tied. That’s how it feels when your procure-to-pay process is clogged with waste and inefficiency. Your competition will have already bought what they require and gone on while you are messing around and manually generating purchase orders for key commodities.

It is part of a wider procurement management process that has four stages: selecting products and services, ensuring compliance and order, receiving and settlement, and invoicing and payment.


Procure-to-pay software and services can help you improve safety and management among vendors, agreements, laws, buyers, and payable accounts by digitizing your procurement process. Process automation with procure-to-pay can enable firms to acquire from chosen suppliers at agreed pricing without the human paperwork and spreadsheet difficulties. In short, you can:

  • Control and improve worldwide spending by being proactive.
  • Consolidate the majority of manual commerce operations to cut down on errors.
  • Streamline catalog administration to save time and resources.
  • To optimize the benefit of sourcing discussions, push savings to the bottom line.

Too many firms throughout the world continue to handle their procure-to-pay cycle and operations using antiquated methods. It could not only cause operational challenges, but it could also jeopardize your long-term growth. The good news is that P2P processes have advanced greatly in recent years, eliminating complications and simplifying the procurement cycle from beginning to conclusion.

Steps to Procure-to-Pay Cycle?

Step 1: identify Needs

With the support of cross-functional stakeholders, develop and define the business needs as the first stage in the procure-to-pay process. Procurement teams draw out high-level specifications for goods/products, terms of reference (TOR) for services, and SOW which means statements of work after a valid need is recognized.

Step 2: Produce requisitions

Once the parameters have been approved, formal purchase orders are produced. Before filling out the purchase requisition form, the applicant must check that all necessary procedures have been accomplished.

Step 3: Approval of a purchase requisition

Superintendents or procurement managers examine the purchase requisitions that have been submitted. After reviewing the requirement, checking the actual funds, and verifying the purchase request form, approvers could either accept or reject the purchase requisition. Purchase requisitions that are unfinished are returned to the sender for modification and resubmission.

Step 4: Make a purchase order/spot buy.

The creation of purchase orders for approved purchase requisitions is the next stage. A spot buy can be done for low-value companies. A spot buy can be done if the required goods/products contain features such as unsupervised category buys, one-time unique purchases, or low-value products. Purchase orders are created if purchase requisitions are granted.

Step 5: Purchase Order Approval

Purchase orders, like requisition requests, need to be authorized. This analysis is done to guarantee that the requested things are accurate and legitimate. Purchase orders that have been approved are subsequently issued to suppliers.


A purchase order can be negotiated, approved, or rejected by the vendor. Both the buyer and the supplier get into a legally enforceable contract once a vendor confirms a purchase order.

Step 6: Goods Receipt

The vendor delivers the desired items, which the buyer inspects to check if they match the purchase order’s criteria. After that, the items or services are either authorized or denied.

Step 7: Performance of Suppliers

The buyer assesses the vendor based on a set of criteria including contract compliance, product/service quality, response, timely delivery, and cost of ownership. This is also recorded if the supplier defaults.

Step 8: Approval of the invoice

The invoice is authorized and transmitted to the accounts department for payment distribution if no problems are discovered. After approval, a goods receipt is delivered to the finance department for clearance and settlement. Invalid invoices are disallowed and sent back to the vendor to be corrected.

Step 9: Make a payment to the vendor.

The financial department will process payments in accordance with the contract terms once an invoice has been accepted. Any revisions to contracts or assessments of liquidated financial stability will be considered. A payment to a supplier can be classified into one of five categories: advance, progress, partial, or installment, and final.

How does Pakka Business help in the Procure-to-Pay Cycle?

Over the last decade, the concept of purchasing has shifted dramatically. B2B purchase behavior has been infected by B2C shopping patterns. Buyers demand self-service, on-screen ease, and real-time insight into the full purchase-to-pay cycle until the circle is shut.


Intelligent recommendations on eCommerce sites like Amazon have caught the interest of procure-to-pay customers throughout the world. They want a one-stop-shop for all of their purchasing, operating, and reporting requirements.


Emails are ineffective for storing, transmitting, and tracking information, interactions, and insights connected to purchases. Excel sheets aren’t any better. These are non-automatable, noncollaborative, and compartmentalized.


Your capacity to handle and forecast spending data will be impacted sooner or later. Product and
service delivery is delayed, partnerships are strained, and your negotiating leverage is weakened.


All of this can be avoided by investing appropriately in improving your current procure-to-pay systems. And by transforming them into world-class, extremely competent, and automated operations.

Pakka Business helps you compartmentalize your orders effectively and efficiently. You don’t need to unnecessarily keep track of your invoices and purchase orders. Pakka Business helps you solve basic procurement problems like:

  • Less documentation is required while procuring products
  • Viewing supplier performance easily on one platform
  • Viewing ledgers
  • Time-efficient and Money- efficient

This will not only resolve today’s efficiency issues, but it will also protect your company from the complications that come with future expansion!

Conclusion

Consider how much time your organization will waste if the price of a purchase order is adjusted abruptly a few days after it is issued. Sure, you and your co-workers can wait a little longer for a toner shipment, but if your manufacturing is missing a critical element in the assembly line, your firm could be in trouble.


And there’s a lot more. If you have any questions or would like to improve your purchase-to-pay
the procedure, please contact us at Pakka Business!

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