Procure to Pay Automation is the next big thing in the world of automation. Successful businesses constantly evolve to meet the changing requirements of the field. As a result, business leaders are focussing on becoming more agile and adept. They have tweaked their priorities and have included cost reduction and time-saving to the list. As a result, they are leaving no stone unturned to automate all the possible processes, and procure to pay workflow is one such lengthy, tedious, monotonous process that needs automation.
Before we dwell on the steps in p2p automation, lets us first understand what does procure to pay mean. Procure-to-pay, also known as purchase-to-pay, is the process that covers the entire life-cycle of a product or service, from order placement to invoice payment. You can think of it as a merger of two crucial departments under the finance - the procurement and accounts payable departments.
Now that you know what is the p2p process, let us see what purchase to pay automation means. Purchase to pay automation means streamlining and digitizing the entire p2p accounting process using softwares like enterprise resource planning (ERP) and technologies like artificial intelligence, machine learning, optical character recognition (OCR), etc.
Post automation, the p2p processing gains speeds, efficiency, and accuracy. It allows the users to check the status of the order/ transaction at any given point in the process by aligning the work of both departments and making them available on the screen of your computers in real-time. Let us now quickly go over the stages of p2p automation.
Since p2p processing involves everything that occurs in the life cycle of goods, it is a lengthy and time-consuming process. It starts from identifying the need and placing the order and ends when the company pays for the invoice. It is vital to note that p2p automation does not necessitate the automation of the entire process but those parts of the process that will help run the departments smoothly.
To purchase goods or products, the company should first identify the needs. This is done by various departments at individual levels, given their diverse needs. Once these needs/requirements are listed with their quality, quantity, and timeline, these requests are put forward to the procurement department in the form of a purchase requisition. The respective department can enter the details of their requirements into the purchase-to-pay software. The company can also create a pre-defined list of vendors, their services, and prices. Traditionally, the employees would have to run back and forth to get this down. However, with p2p automation, the respective employee can feed in the data, and the procurement team will receive a notification immediately for the same.
After the procurement department has approved the request, it will look for suitable vendors to procure these goods or services. The vendor can also be selected from a pre-defined list. When the vendor is locked, the department will generate a purchase order (PO), which will be sent to the supplier/vendor.
On delivery of the goods or products, the vendor will send an invoice to the company. From this step onwards, the accounts payable team steps into the picture. They must check the invoice for details such as date of issue, vendor code (if any), due date, total payment, applicable taxes, number of items orders, the price for each item, and payment terms. The accounts payable team also needs to cross-check the invoice with the purchase order, delivery receipt (if any), and other relevant documents (if applicable). This information can be automatically captured and cross-checked for congruity by an automated procure to pay solution. It is an efficient and smart way to tackle issues like overpayment, data entry errors, frauds, duplicate invoices, misplaced invoices, unregistered vendors, etc. Furthermore, optical character recognition (OCR) makes it easier to scan any invoice format (pdf, image, email, mail, fax). The streamlined system makes it easier to fetch these documents since all of them are available in one place, reducing the paper trail.
After checking the invoice, you require approval for the payment processing. Traditionally, the employee would have to physically go over to the cabin with the documents to get the approval (signature/stamp). With purchase to pay solutions, the system will automatically notify the authority, seeking their permission, thus reducing the time taken. If there is an error, the system will notify the employee for further input. Automated approval also ensures that the company adheres to its spending policy by considering complex roles, hierarchies, and approval limits. Once the authority grants the permission, the department schedules the payment and clears the due. This marks the end of the procure-to-pay workflow.
It is necessary to integrate the purchase-to-pay software with the existing ERP system to ensure that data of every transaction is consistent. This makes it easier for the company to audit every transaction. Furthermore, it enables the company to efficiently and accurately create reports and monitor the overall p2p process. These reports can then help the leaders to enhance and optimize the process.