Table of Contents
Key Takeaways
- Procure-to-pay processes define the connection between procurement and AP workflows.
- To streamline procurement, identifying an efficient P2P cycle requires access to granular data—something made possible by clear policies, automation, and spend controls.
- Selecting the best procurement platform often requires evaluating a set of 8 criteria: Accessibility, reconciliation, spend under management, ease of implementation, time-to-value, visibility, usability, and time-to-approval.
Despite being a critical function, finance professionals report that legacy procure-to-pay technology hinders growth. Procurement and accounts payable professionals require the right tools to reduce late payments, build stronger relationships, and drive savings.
In Ardent Partner’s The State of ePayables 2023 report, accounting teams are looking to technology to solve today’s challenges. From enhancing reporting to automating invoicing, it’s clear that having an efficient P2P cycle is more than a box to check—it’s a competitive advantage.
In this article, we’ll clearly define what procure-to-pay workflows entail, how to improve the process, and 8 criteria for choosing the best P2P software for your team.
What is procure-to-pay?
Procure-to-pay (P2P) is the intersection of traditional procurement and accounts payable (AP) processes to boost transparency and efficiency. The process starts with identifying goods or services, leading into due diligence, reconciliation, and ending in payment.
The process appears simple, but it is vital to enforcing compliance and streamlining approvals.
A secure and effective procure-to-pay process offers numerous benefits, including:
- Greater control over spend and reduce fraud risks
- Centralized processes and breaking down procurement and AP siloes
- Approve spend and new vendors faster
- Build stronger relationships with vendors and suppliers
- Granular data collection and analysis of the payment process
Defining the P2P cycle: What is the procure-to-pay process?
The procure-to-pay process, also referred to as the P2P cycle encompasses seven basic steps:
- Determining needed goods and services
- Evaluating potential vendors and suppliers
- Creating purchase orders (POs)
- Receive goods and services
- Process invoices
- Payment approvals
- Vendor management
This procure-to-pay cycle ensures that vendors and payments are compliant both legally and with company policy. It also helps to mitigate fraud and ensures every transaction is traceable.
How to improve the procure-to-pay cycle effectively to improve efficiency
The P2P cycle isn’t a cookie-cutter approach. Local, regional, and national regulations, combined with organization-specific policies, often requires companies to tailor their process. In addition to CFO changes and finance turnover, procurement and AP gradually begins to suffer from poor standardization, legacy technology, and unclear policies.
The good news is that you can tighten your system to boost efficiency—and make future adjustments easier.
Ditching manual data entry for automating procurement
Shifting away from manual data entry to automated spend management and procurement is the first step to reduce errors and identify cost saving opportunities. You can often automate repetitive, time-consuming tasks like invoicing and PO matching, invoice processing, payment approvals, and vendor management. Taking this approach often benefits the entire accounting automation process.
Develop clear policies
Another low-hanging fruit to a well-oiled procure-to-pay system is updating and simplifying company policies. When combined with automated platforms, you can also streamline policy flagging and review.
Dive deep into granular reporting to gain insight on procure-to-pay efficiency gains
Tapping into insights can help you identify bottlenecks or spend leaks—but only if you have access to deep and accurate data. Ensuring that your chosen AP and procurement software offer in-depth insights on every step of the procure-to-pay process ensures you can make well-informed decisions while optimizing the process.
Define spend controls
It’s important to regularly review spend controls and access to both reduce fraud and ensure company accounts are used responsibly. Often, software can make it simple to limit or give control to team members.
Choosing the best procurement-to-pay software
Optimizing the procure-to-pay workflow often hinges on your chosen tech stack. Too narrow of a feature list will limit your growth, while an overly comprehensive and bloated platform can make your solution unusable. With the wide range of P2P software available today, it can seem overwhelming to sift through all the options.
However, some capabilities are non-negotiable. Features come and go: Almost every best-in-class software is regularly upgrading and editing their feature list as finance team needs change. Capabilities, however, are constant.
In many cases, you’ll find the best procure-to-pay software or integration isn’t specific to procurement. Spend management options can also provide full support for procure-to-pay processes.
There are 8 capability criteria you can use to evaluate every procure-to-pay solution:
1. Accessibility
First, how many team members can even access the software? Legacy procure-to-pay software often limited organizations by a few seats, with each new seat adding costs. Best-in-class options, however, are company-wide. This aspect breaks down siloes, promotes data ensuring and communication, and provides a foundation for seamless procurement.
2. Reconciliation
Ensuring that your reconciliation process isn’t manual is paramount. Automated reconciliation will save you hours of headache and speed the process up.
3. Spend under management
In many cases, a basic procure-to-pay solution only shows 63% spend under management (SUM). A full-scale spend management platform will often empower teams to see 100% SUM.
4. Implementation and maintenance: procure-to-pay integration options
Another key consideration is implementation—something that will make or break your new procure-to-pay software's adoption. A simple, IT-free implementation and maintenance can reduce friction and speed up training, optimization, and troubleshooting.
5. Time-to-value: procure-to-pay cost savings
Many procure-to-pay only software takes up to 24 months to show results. A comprehensive spend management platform, which includes the same features, can take as little as 14 days. This is especially true if other capabilities are met.
6. Visibility
Many procure-to-pay only software are limited to specific views of data—and they may or may not integrate with other reporting software. You will want to ensure that your chosen solution includes democratizing and real-time data collection and analysis for full transparency.
7. Usability
Financial software can easily become bloated and challenging to navigate. Reviewing a procure-to-payment software solution for ease-of-use is critical to a successful adoption and streamlined training. Ideally, you’ll want a conversational interface that is easy to read and understand.
8. Time to approval
Finally, you’ll want to look at the approval process. Procure-to-pay only software, given that it is hyper-focused on a specific process, can still take hours, sometimes up to a day, to handle approvals. This is because it is siloed from other activities. Often, spend management software approvals for procurement activities take only minutes, since it is open to better integration, shortening the procure-to-pay cycle.
Successful procurement with spend management
The best procure-to-pay solutions are often a part of a larger spend management platform. These comprehensive solutions don’t only connect procurement and AP, but make it easier to manage spend company-wide.
Automation procure-to-pay workflows is just one part of a larger solution to maximize savings, minimize costs, and build stronger vendor relationships.
As a leader in AP and spend management software, Teampay offers companies a wide array of tools in an intuitive software package to streamline procure-to-pay processes. Discover how we can transform your finance operations through our procurement solutions.
