The critical imperative of re-thinking your existing Process-To-Pay (P2P) process is to move away from the siloed business functions. Many facets of the conventional Procure-to-Pay cycle is plagued with bottlenecks such as complex workﬂows, manual operations, and delays. The strategic shift to the next phase of transformation will help organizations identify inefﬁcient spend practices and predict the payment life-cycle.
Procure-to-pay (P2P) is the process of obtaining materials and services required to run a business and making payments for the same. The P2P process is one of the core business activities and is necessary to run efﬁciently to manage vendors, optimizing cash ﬂows, and avoiding complicated process ﬂows.
A P2P system that has been fully integrated can do much more than just obtaining goods and making payments. Procure-to-Pay needs to be looked at as an effective and efﬁcient solution that seamlessly facilitates automation, which reduces error reduction and ultimately improves the organization’s bottom line. Procurement organizations should always be on the look-out to spot any symptoms of inefﬁciencies and inefficient processes that hamper the business.
The critical imperative of re-thinking your existing P2P process is to move away from the siloed business functions. The strategic shift to the next phase of transformation will help organizations identify inefﬁcient spend practices and predict the payment life-cycle.
The transformation journey starts with a carefully laid out plan after thorough analysis.
Many facets of the conventional Procure-to-Pay cycle is plagued with bottlenecks such as complex workﬂows, manual operations, and delays. For these reasons, organizations must build and implement efﬁcient process ﬂows.
Some key areas that require automation in regards to P2P are:
Purchase Requisition and Purchase Order Approvals
Automating Purchase requisition and Purchase order approvals in the procure-to-pay cycle can save precious time for the procurement teams and requisitioners. To go the automation route, ﬁrst, the correct data needs to be gathered and then funneled through the necessary channels of approvals with an automated workﬂow.
- Undeﬁned workﬂows and complex hierarchical structures can easily result in unwanted process delays in requisition and approvals.
- Approvals can be automated as per procurement and organization policy, taking the administrative burden off the procurement function.
- There are many documents involved in procurement; organizations still keep soft and hard copies of all of them. This practice creates redundant steps in the processes, and this also takes up a considerable amount of time.
- Traditional time-consuming, email-based, manual processes can be replaced, far from seamless, and often require constant follow-ups.
One of the most time consuming and complicated tasks for the procurement team is invoice approvals and matching them with the relevant Purchase orders (PO).
- Invoice extraction from emails and collecting hard copies, along with managing them, is another cumbersome task. By setting guidelines, invoices can be processed once matched automatically.
- If an invoice cannot be reconciled, a trigger will require human intervention. Another added advantage of automating this function is that it facilitates three-way invoicing matching, which can help avoid business risks and prepare for audits.
- Three-way matching can help highlight any discrepancies in the purchasing process’s three primary documents: purchase orders, order receipts, and invoices. Invoice automation can help save businesses from overspending and save valuable time.
For the procurement team, managing a vast number of vendors becomes too complicated and complex task. Automating this particular aspect of procurement has two advantages, ﬁrst being able to manage vendors in a centralized manner. Second, it saves tremendous time for the procurement teams, which can be devoted to more strategic aspects.
- Switching to an automated solution, procurement teams can streamline vendor selection and easily track their performance on pre-set criteria.
- Supplier information, transaction history, and past orders can easily be mapped and enable better decision making.
- Organizations can identify areas of problems or grievance facing the vendor and resolve them quickly
The last aspect of the procure-to-pay cycle is the payment of the invoices to the vendors; this particular step involves ﬁnance as well. The payments aspect of purchases made has a strategic element: working capital optimization, exploring discounting options, and favorable payment terms.
- Automated solutions such as dynamic discounting can make the life of the accounts payable department and procurement much more manageable by identifying discounting opportunities.
- One of the main objectives of ﬁnance and procurement is to optimize cash ﬂows, automating this step gains a lot more importance. With modern solutions, favorable payment terms could be made that are beneﬁcial for both vendors and purchasers from overspending and saving valuable time.
Building a base; Prerequisite and essentials for an automation strategy
Every organization is different. Every organization has a set of policies, practices, culture, and hierarchical structure, which as a combination, is unique to that particular organization. The ﬁrst step in the automation journey starts with the organization’s “deﬁning” itself. They are drawing out how things are done and the areas of improvement to cut down redundancies in the procurement process. This will serve as an excellent enabler for implementing an automated Procure-to-Pay strategy. Some key areas that need to be put under the scanner are:
- Consistency in the procedure for approvals and same kinds of purchasing
- The sourcing process
- Access to relevant information
- How suppliers are assessed for their performance
- Supplier information, transaction history, and past orders can easily be mapped and enable better decision making
Owing to the complexity of work undertaken by the procurement department, building a practice of having clean and reliable data becomes very difﬁcult. Clean data is a non-negotiable pre-requisite; however, an automated process is an enabler to creating clean and reliable data. The common bottleneck for having valuable data is the lack of a governance model that ﬁxes the discipline of information input discipline. Even a good governance model cannot be sufﬁcient as capture, interpret, and enter data in a system that may vary. Clean data is the responsibility of everyone in the organization. Some problems arising due to lack of quality data:
- Supplier information and tracking prices
- One of the main objectives of ﬁnance and procurement is to optimize cash ﬂows, automating this step gains a lot more importance. With the help of modern solutions, favorable payment terms could be made which are beneﬁcial for both vendors and purchaser from overspending and save valuable time
- Maverick spending on account of inconsistent information
- Compliance issues
Automation strategy demands the right technology; it is the starting point in the transformation strategy’s execution leg. Choosing the right ﬁt for an organization is the key in this step; considerations like automation are another critical aspect. With advances in cloud-based solutions, these technologies have become accessible to almost all sizes of organizations.
Techwave’s comprehensive end-to-end support for CFO offices adds significant value to a business, making us a strategic asset to our clients. Our BPO solutions can integrate into any ERP systems/tools. We make our clients’ financial functions lean and efficient through automation and agile technologies that are entirely driven by Metrics. We approach clients’ vision of creating stable process in Finance & Accounting with innovation, agility, and transparency.
Techwave’s deep Functional and Technical expertise transforms and runs smart and efficient PTP operations helping its clients :
- Conduct Spend Analysis
- Accurate invoice processing and timely payments
- Operational efficiencies
- Monitor vendor performance
Techwave’s P2P services include but are not limited to:
- Invoice Processing
- AP Help Desk
- Travel & Expense
- Reporting & Analysis