What is procure to pay?

Procure-to-Pay (P2P) is a process used in supply chain management to describe the series of steps a company takes from acquiring raw materials or goods to the payment of invoices for those items.

The process involves several key stages, including:

Sourcing

Identification of requirement: The process of identifying the goods or services that are in need.

Determination of the specific: The exact specifics of the product or service that is required to be bought.

Sourcing: Determining the various suppliers that would supply the specific product or service.

Finalize Contracts: Negotiating the final terms and pricing with the vendor and get a legal contractual agreement in place.

Procurement

Purchase Requisition and Order: Purchase requisition is generated by the requestor who is in need of the product or services. Purchase order is a legally binding document that details the terms and conditions of a purchase, including the price, delivery date, and quantity of goods or services to be provided.

Delivery and Receiving: Delivery is done by supplier and receiving is the process of receiving the goods or services from the supplier and verifying that they match the specifications outlined in the purchase order.

Accounts Payable

Invoicing: The process of generating an invoice for the goods or services that have been received, which includes the total cost of the purchase, the payment terms, and the due date.

Approval and Payment: The process of reviewing and approving the invoice for payment, which may involve several different departments or individuals within the company. Once approved, the payment is processed and the funds are transferred to the supplier.

The goal of the P2P process is to ensure that a company is able to effectively manage its spend and make informed purchasing decisions, while also ensuring that suppliers are paid in a timely and efficient manner.

By automating the P2P process, companies can increase efficiency and reduce the risk of errors and fraud, leading to improved cash flow management and cost savings.