Purchase-to-pay – from manual chaos to automated efficiency

Purchase-to-pay (also called procure-to-pay, P2P) describes the entire purchasing chain from procurement, via the actual purchase, receiving and handling of the goods and services to payment.

The purchasing chain involves many people and departments in the company. In addition, the purchase affects several different IT support systems, such as warehouse systems and business systems or similar. It is only when they cooperate with each other that the supply chain becomes effective.

The P2P process involves several steps that ensure efficient purchasing and payment for goods and services. These steps include:

1. Requisition – The purchasing department sends purchase requisitions for needed goods and services. This usually takes place via an e-procurement system or the purchasing module in ERP.
2. Approval – Management reviews and approves or rejects purchase requests based on budget and necessity.
3. Purchase Order (PO) – An official document sent to the supplier detailing the desired goods or services and their respective costs.
4. Receiving – The organization receives the goods or services and verifies that they conform to the purchase order. Here, data from the warehouse management system (WMS) is used, which is matched against the purchase order. The ERP system is also updated with information on goods received and any deviations.

5. Invoice processing – The supplier's invoice is matched with the purchase order and goods receipt in the AP Automation system or ERP system. E-invoicing services are used to convert paper invoices to digital formats and facilitate integration with AP Automation and ERP systems.
6. Payment – The organization processes and pays the invoice through the ERP system or using the AP Automation system, simplifying the approval and payment process.
7. Analysis and reporting – To analyze and report data from the P2P process, BI tools are used, which can be integrated with the ERP system and other systems to provide insights into purchasing patterns, supplier performance and potential cost savings.

What are the challenges in the purchasing process?

Despite its importance, the P2P process can be fraught with challenges, especially in organizations that rely on manual processes. Among the most common challenges are:

• Human error: Manual data entry can lead to errors, such as incorrect quantities, prices or supplier information, which can cause payment delays and supplier disputes.
• Lengthy approval processes: Manual approval processes can be time-consuming, delay purchases and create bottlenecks.
• Lack of transparency: Without proper tracking mechanisms, organizations may find it difficult to monitor the status of purchase requests, deliveries and payments, leading to inefficiencies and increasing the risk of fraud.
• Compliance: Inadequate oversight can result in non-compliance with internal policies, regulatory requirements or supplier contracts, exposing the organization to legal and financial risks.