What is Purchase-to-Pay? (P2P)
Its not just about saving money, its about getting value for the money that’s being spent too. P2P is a management system in which all of the processes involved in buying something are managed by one central resource, rather than each step having its own standalone system.
In most organisations, Clerical staff have to take information from one system (e.g. Purchase Ledger) and work to relate it to data in another system (e.g. Accounts Payable). In passing data from one process to another, losses and errors occur. If a goods advice note doesn’t match your Order records, you don’t know if that order has been fulfilled.
Manual vs Automatic
When you raise a Purchase Order, a P2P system will hold the essential information in readiness for the expected arrival of the product, and eventual arrival of an invoice.
When the invoice arrives, it is automatically checked to see if it is what the PO anticipated. If it is: the invoice is cleared for payment automatically.
This can make a significant reduction to the amount of manual work being done in matching PO to Delivery to Invoice. As long as the details are correct: the transaction is automatic. Only cases where the details don’t match require human intervention.
In a good P2P environment, the details of the PO you send are ‘flipped’ (copied by the Supplier) to describe the delivery, and invoice, so that your inbound documents match. your outbound ones
Purchase to Pay combines all of the processes in buying goods and services into one managed flow. Without it, Finance, Procurement, Accounts etc. pass the parcel with your purchase processes. Managing them all together means that items don’t stall or get lost between stages. Duplicate payments are prevented.Complex contracts need P2P to keep them progressing. Multi-stakeholder projects need more sophisticated management than basic Accounting can provide.
Good P2P systems integrate with ERP suites such as Oracle. By doing more than ERP modules, quicker and better, at a fraction of the cost, P2P suites act as aftermarket add-ons that leave the ERP to manage its high-level reporting while providing a plug-in point for Auditing.
The end result is streamlined cashflow. Suppliers can offer lower pricing in return for quicker payment. P2P automates checking that was being performed repetitively, thereby increasing the amount of purchases that don’t need manual intervention. Organisations that adopt P2P management systems typically find ROI times of 6-9 months.