Procure-to-Pay Automation (P2P) – A Complete Guide.
Procure-to-pay (P2P) is a commonly used term in the software industry, referring to the procedure that involves integrating the accounts payable (AP) systems with procurement to improve efficiency across the board. Understanding the procure-to-pay cycle, and automating key parts, is essential for improving overall performance.
In the following post, we are going to talk about procure-to-pay automation, starting from procurement to accounts payable, including the workflows and technologies that can be used to achieve full P2P automation.
Procure-to-pay automation simply refers to a system that involves a series of components designed to automate the procurement process, ranging from vendor evaluation, selection, procurement, and payment. P2P automation often uses software to automate repetitive tasks, reducing human input and improving cross-department collaboration.
Both procurement and accounts payable (AP) are key functions in modern businesses, but they’re not usually aligned. Procurement departments focus on selecting vendors, whereas AP departments handle payables. Both of these often use different systems to perform their duties, often working in silos.
However, with a P2P automation system, organizations can align the two together, looking at the entire procure-to-pay process from a more holistic viewpoint, and focusing more on shared goals. Using procure-to-pay systems offers various benefits to organizations.
Automating the procure-to-pay process offers the following benefits to businesses:
Since the entire process is digitized and automated, the potential for fraud or human error reduces considerably. There is minimal human input required, and the software is responsible for processing invoices and for recording purchase orders. Automatic 2-way or 3-way matching ensures that fraudulent invoices are instantly detected.
With P2P automation software, business leaders can gain better insight and visibility into key procurement and AP processes. This can help them identify bottlenecks and problems before they turn into serious issues.
More importantly, P2P automation software allows businesses to maintain better compliance with regulatory bodies as all information is stored in a central database. Vendor contracts and other information is all readily accessible, allowing businesses to avoid penalties or fines in case of non-compliance.
Here’s how some of the key P2P processes can be automated.
Using P2P automation, companies can automate the purchase requisition process. Whenever an employee files a purchase requisition, it is received by the procurement department. A notification is sent to relevant individuals, who can approve or deny the requisition with a single touch.
Since you will maintain a centralized catalog of all goods and services and pre-qualify vendors, P2P automation can help businesses maintain comprehensive databases. This allows businesses to screen and onboard vendors that comply with the company’s procurement policies.
Notifications can be sent automatically when a vendor is onboarded or when an order is placed, offering comprehensive visibility throughout the procurement process.
Once a purchase requisition is approved, the procurement department sends a purchase order (PO) to the vendor. Since everything is stored in the same finance system, integrations can be hooked up with AP automation software to quickly oversee any pending invoices and review purchase histories. This also helps in routing purchase orders automatically and receiving invoices related to those PO numbers.
AP automation allows businesses to receive invoices, capture data and enter it into the system, and then route those invoices for approvals. The AP automation platform can directly pull and connect supporting documentation, such as purchase orders, matching them with invoices.
This offers greater visibility into the invoice lifecycle, allowing AP staff to reduce processing times. Once received, invoices are matched with GRNs and POs, or vendor contracts, and then routed for approvals to relevant individuals. All it takes is a single tap to quickly approve the invoice.
Once an invoice is approved, the P2P automation platform lets users determine how they want invoices to be processed. The invoices can be paid using one of several pre-approved modes of payment. Procure-to-pay automation makes it easy for companies to quickly pay vendors, which ultimately improves relationships and positions the company to take advantage of early-payment discounts.
If you’re looking for a comprehensive solution that lets you fully automate your entire finance process from procurement to invoice processing, you should consider SoftCo Procure-to-Pay. It is an end-to-end solution that allows businesses to eliminate manual and duplicate processes, offering greater control and visibility over their accruals and corporate spending.
It’s a fantastic solution that streamlines the vendor onboarding process and offers comprehensive visibility over all outstanding invoices. It also offers real-time reporting and AI analytics to allow businesses to gain better insights into their key processes, which ultimately helps improve decision making.