Procure to pay process could be complex but a well-optimized procure to pay process could also be a source of cost savings. If you agree that the optimized procure to pay process could be a source of cash, then that is great – this guide will walk you through a step by step process on how to generate cash from Procure to pay process.
If you disagree with this statement, we hope that this might at least trigger an evaluation of your procure to pay process.
So how to find hidden cash in your procure-to-pay process?
In this comprehensive procure to pay guide, we will cover all a step by step process for optimizing your organization procure to pay process and reducing the overall cost of operations, and realizing cost savings.
Procure to pay process is the end to end process which covers all the steps from initiation of the requirements by a user to the payment to the supplier. This includes users, creating a requisition to request a product service, the identification of the capable suppliers by your sourcing team, approval of the purchase requisitions, order creation and submission to the supplier, receipt of the goods or service by the company, invoice submission by the supplier and finally, the payment of the supplier.
Of course, the process on paper looks simple but each step in the process could be problematic and painstaking for your end-users.
Let’s take an example
How are your users create requisitions today?
Are they requesting purchases via email and filling data in Excel-based forms?
This simple step could be a source of frustration for users and a cause for lost productivity of the entire team because the entire process is manual.
So the question to ask is what is the cost of the productivity lost?
Just look at the data and the average time and you will be able to easily identify the cost savings you could have by improving just the requisition process.
This is just one example of how optimization of Procure to pay process could lead to overall cost reduction, reduced time, and happy employees.
We will cover more such examples in the following sections.
Let’s briefly look at each of the steps of the procure to pay process and what are the potential improvement areas in each step of the process.
The requisition process is the start of the purchasing process for most companies. The reason we said most companies is because not all purchases go through a Purchase order.
In some cases, the vendor just submits the invoice and the payment is made.
Requisition process could be a source of frustration for many users, especially if the requisition process is manual.
Companies don’t pay enough attention to this process.
It is not just about the ability to create a requisition but this is an opportunity for the Company to direct the spend to the preferred vendor. You can easily save a one FTE effort in a full year if your requisition process is simple and it is automated through an easy to use purchasing system.
This step might not be required in every purchase requisition. If you already have a preferred supplier for the product or service being purchased by your employees then this step is redundant.
In other cases where you either don’t have a supplier or if a new product is required from an existing supplier then your purchasing team should do a quick request for quote to identify the right supplier at the correct price. This process could be as quick as a few hours or it could take a few days.
If your purchase history is readily available then it is easier for the team to identify the source of supply.
This step includes approval of the purchase requisition as per your corporate spend/purchasing policy. The purchasing policy should have a clear identification of the owners who need to approve the requests before an order can be issued to the supplier.
In our experience, Companies that don’t have automated approvals spend a lot of time chasing the right manager or a member of the executive team.
To avoid last-minute escalations and save time for everyone involved in this process we recommend the following
a) Ensure that your process is automated and executives can approve requisitions over the phone at the bare minimum.
b) Review your approval cycles and see if the requisitions are getting approved at the right level. For example, if 90% of your approvals are going to a senior executive for approval, then that is the bottleneck in the process.
In that case, you should look at changing the approval limits such that middle management can handle more approvals. That drives accountability.
If you fear a loss of control, then that can be easily managed through reporting. You can analyze what is happening in the purchasing process and change the process to close any loopholes.
After a requisition is approved the next step is issuing the purchase order to the supplier. This step of the procure-to-pay process is straightforward, but there are few things to consider here.
a) Is your requisition to purchase order process fully automated or are you keying in the orders manually in the system?
b) Are suppliers automatically getting the orders or the orders needs to be manually sent to the suppliers?
If the answer to these question s above is that the process is manual, then you should look at automating this process.
There are two primary benefits of automating the purchase order creation
1) By not having an automated process you increase the chances that an order would be entered in error because you are typing data from one system to another.
2) Automating this process also saves your resources time and that time now can be allocated to other value add activities like negotiating to price with vendors.
A receipt is the confirmation of the delivery of the goods by the supplier. In most companies where the end to end process is not automated, receipt management is a very manual process.
The A/P (Accounts Payable) team often has to checks with individual users whether the products have been received or not so that they can reconcile the invoices.
In the case of services, there might not even be a check whether the service is delivered and as per the agreement.
Also, the lack of centralized documentation means that if at any time in the future you have to look at the packaging slips, etc, you have to reach out to the individual who confirmed the delivery.
Companies can reduce the overhead of receipt management by shifting the responsibility of creating the receipt to the person who is accepting the delivery.
If you have a modern purchasing system, then the process of receipt management is much easier.
The next step in the process is receiving the invoice in the system. In reality, vendors ship invoices as soon as they ship the product.
So you might have an invoice before the product even hits your warehouse docks or that matter your office.
How are you creating invoices in your system today?
The most common scenario we have seen is that companies receive invoices via email, snail mail, fax, etc. Those invoices are then keyed in manually in the accounting system by the A/P department.
Let’s do a quick time analysis
Assume that it takes 10 minutes to key in an invoice, and let’s say you receive 10,000 invoices a year.
That is 100,000 mins or 1,666 hours. That is almost one FTE worth of effort you are spending on entering invoices in the system.
Best in class companies automate the process in such a way that suppliers are asked to submit the invoices electronically so that you don’t have to key them into your system.
The next step in the process is a reconciliation of the purchase order, invoices, and receipt to ensure that you received what your orders and the invoice amount match the purchase order amount.
Based on the number of documents, you can have a 2-way match or a 3-way match.
Again if there is a lack of automation, your team could be manually chasing users or suppliers for these documents.
Assuming your invoice is reconciled, it is now ready to pay.
In some companies, this could be a two-step process, the invoice might be reconciled in one system and once the invoice is reconciled in that system, it is sent to another system for payment. The ERP/Accounting system then issues the payment based on the payment terms of the supplier.
The last step in the process is of course payment to the supplier.
The area for improvement here is to move away from paper checks and move to either ACH payments or payments via credit cards.
As per a study by bottom line technologies, the cost of issuing a check could be anywhere between $2 and $4 dollars.
In contrast to that, the fee for ACH could be anywhere between $0.15 to $0.95 per transaction.
As you saw in the previous section, any organization can reap significant benefits by improving the procure to pay process.
So if this is so obvious, why aren’t companies doing this already?
We think companies are living with suboptimal procure to pay processes for the following reasons
Purchasing and accounts payable are two different teams in most companies. But we are seeing companies who have started integrating these functions to ensure the processes are efficient.
Purchasing organization generally handles the source to PO process and once the PO is issued, it is the responsibility of the AP department to clear the supplier invoices.
Since there is segregation of duty, both departments look at their own individual initiatives for process improvement. But when you think about it, one can’t be optimized without the other.
For example, a vendor submits a wrong invoice and then AP needs to chase the PO owner to ensure that the vendor can be paid. However, if there is a single process owner, they can easily look at optimizing the end to end process rather than their individual silos.
When you start looking at Procure to pay as one process and not two different departments, then you can easily identify areas for improvement.
That includes a common set of procurement technology, for example, a technology that can automate the whole purchasing process. This could also lead to changes in upstream processes which favorably impacts downstream processes.
For example, if you have a lot of issues while the invoice reconciliation process where the invoice is not matching with what you have on the PO. The issues could be caused because of the way the PO is created in the system.
So when you have single ownership, it is much easier to resolve issues like this.
Depending upon the size of the company, procurement and AP might be just considered back end functions.
Most of the executives look at these functions at necessary evil, something you require to run operations.
Procurement in small companies could be under the department who spend the most money and accounts payable is generally reports to the Controller of the company.
However, if companies start looking at an end to end process optimization, they would soon realize that an effective procure to pay process could be a source of competitive advantage.
Hopefully, by now you are convinced that procure to pay optimization is the right step for your company to gain efficiencies in the Procurement and Accounts payable process.
But how do you quantify this into hard cash?
In the following sections, we will cover areas which you can assess to quantify the benefits of the procure to pay optimization
When it comes to reducing operating expenses, it always works when it is done proactively.
What is a good Cost control benchmark?
As per research by Spendmatters, mid-market companies can reduce 2-3% of their Spend through effective spend control and by implementing strategic cost control mechanisms.
Assuming your annual revenue is $100M, approx. 30% of spend is with external vendors, that is $30M annual spend which can be controlled strategically.
With effective cost control, you can save 2-3% which is $600,000 to $900,000 in cost control savings.
That is not an insignificant amount. Even if you get a 1% reduction due to cost control, that is still $300,000 in annual savings.
Using a purchasing system would allow you to implement flexible cost controls.
Most of the companies create a bureaucratic process to control cost. Every order has to be approved by senior management or in small companies, every order has to be approved by the owner of the company.
On the other hand, you can’t assume that every employee in the company will behave reasonably.
So let’s look at some strategies for effective cost control
a) Budget controls
b) Category and spend based approval controls
c) Cost avoidance through better contract management
If you already have a set budget for projects or for general operating expense categories like office supplies, you can use your procure to pay process to ensure cost control.
By ensuring that budgets are part of your procure to pay process, you can ensure that spend is within the allocated budget.
From there you can control the overspending scenarios by requiring approvals to extend the budget.
This can automatically be done by purchasing systems, whereby you can build automated controls on what should happen if the purchase is going to exceed the allocated budget.
For example, you can block the purchase and require further finance approval before the purchase can be made.
Another way to control cost is to ensure that purchase requests are approved by the right person before the PO (Purchase Order) is sent to the supplier.
Let’s take an example
Michael from the accounting department is looking to purchase a subscription to a new BI tool. He liked the price and create a purchase requisition.
Now if this request is routed to an IT manager for approval, the IT manager might have some spare licenses and can fulfill the request without any additional spend for the company,
Additionally, for large spending, you can ensure that purchase request is authorized by senior management. That affords the opportunity for further review and analysis.
The goal with category and amount based approvals is to have a review process to ensure that the spend is really required.
Companies lose a lot of money every year on automated renewals of the product or services which are not required anymore.
The simple reason for that is that companies don’t have a central place to store and track contracts.
Or even if there is a central place to store contracts, there is no way to identify which contracts are required to be auto-renewed.
This can be easily solved by keeping a tracker of all the contracts including their expiration dates and then a monthly review to ensure that you are at top of your renewal cycles.
Improving the procure to pay process can lead to an improved user experience but can also lead to overall productivity improvement for your procurement and accounts payables team.
So how to do you quantify the savings due to a streamlined process?
Let’s look at two important factors that impact the cost of the purchase order.
Do you know how much does it cost to process a purchase order?
If not, that is the first step towards calculating the benefits.
The cost of a purchase order can vary from $35.88 to $500 and some studies even put the cost of a purchase order to as high as $700.
The cost of a purchase order varies based on the industry and hence such a stark variation in the purchase order processing cost.
If you want to calculate your own cost, use our purchase order cost calculator
To quantify the savings, let’s take an example –
Let’s say the purchase order cost is $50/PO.
With automation, you can reduce the cost by 50%.
Assuming that your company process 2000 PO’s per month.
That is a cost-saving of $50,000 (2000*$25) annually
Let’s now look at the cost of processing an invoice.
How much does it cost to process an invoice?
Invoice processing cost includes the time it takes to scan and enter the invoice into your accounting system, matching the invoice with the purchase order, and then sending for further approvals so that the vendor can be paid.
As per Paystream advisors research, the average cost for an invoice varies from $2.36 to $15.00. For our discussion let’s assume that the average cost is approx. $9.
With automation and by simplification of the purchasing process, and having vendors submit invoices electronically, you can reduce this cost to half.
If you process even 5000 invoices annually, that is a savings of $22,500 (5000*$4.5).
A well-optimized procure to pay process means that you are able to process documents faster and realize early payment discounts. Let’s break this down
When you have an optimized process, it ensures that purchase orders are processed fast, invoices are entered automatically in the system and the 2-way or 3-way matching process is automated.
All that means is your invoice is processed fast and ready to pay to your vendors.
Assuming you have negotiated early payment discounts and you have sufficient cash flow to pay your vendors early, you can avail these early payment discounts.
Standard payment discount terms and how to calculate early payment discount savings
It is not uncommon to see 2/10 Net 30. That means your standard payment terms are Net 30 but the vendor would give you a 2% discount if the invoice is paid within 10 days. Let’s take an example to quantify the savings
Assuming the invoice is ready to pay within 10 days and the invoice amount is $5,000.
So at 2% early payment discount, you can settle the invoice in full for $4,900 if paid within 10 days.
That is savings of $100 and if this is a monthly invoice, you can save $1200 annually for just this one vendor.
Now, what if you don’t have the cash to pay but you are borrowing the money. You are paying 20 days early to get the discount, so let’s do the math on that.
Assuming your short term borrowing rate is 8%.
Then you would be paying $16.2 in interest ($4900*8%* 20/365). So even if you are borrowing to pay, that is a savings of $83.8 ($100-$16.2)/invoice.
Not a bad return on investment!
As you look at improving the efficiency of your procure to pay process, you should also look at how to increase the spend visibility across the organization.
Finance, of course, would have visibility into company Spend, however, most of that visibility is at the chart of accounts level. There are two main issues with GL level visibility into expenses.
a) Chart of accounts are good for a summary view of the data but lack granular spend visibility. That makes sense because a Chart of account is created to group expenses in buckets which can then drive financial statements like profit and loss account and balance sheet.
They are not designed for the purpose of doing detailed spend analysis with an intent to better understand the spend and opportunities for cost reduction.
b) Not many people understand the Chart of accounts outside the finance department. The goal of better spend visibility is not just for the finance department. The purpose is better visibility to also ensure that individual department owners understand where they are spending money.
Increased spend visibility is all about transparency and driving accountability across the organization.
How do you quantify the savings related to better visibility?
There are two ways you can measure the value of better visibility
1. What kind of resources are required to get granular spend visibility? You can measure in terms of FTE(full-time employees) effort. Let’s say it takes an annual ½ FTE worth of effort.
So now you know the baseline, you can review the process and see the impact of optimized procure to pay process on reporting. It is a measure of reduced effort.
2. The second way is to more subjective, it is the impact of the better and faster decision-making process because of better cash flow details.
Do you ever have to deal with a situation where a critical product or service was not delivered because the vendor never received the purchase order?
Have you ever been involved in a situation where you have to expedite the orders and pay air freight to get the products faster because you are running low on the supplies of the product?
If you answered yes, then it is easy to quantify the cost of disruption both in terms of disruption to the business as well as the cost of expediting the orders.
This can easily be avoided by having a better procure to pay process. By optimizing the procure to pay process, you can ensure that the orders are delivered on time, suppliers have the ability to acknowledge the order and confirm the delivery of the items.
Along with vendor acknowledgments, you can start tracking how often the vendors are delivering on time and you can use this data to work with vendors to improve delivery time frames or find new vendors who can deliver as per your schedule.
Reduce Cost – Procurement Cost savings
The next obvious benefit of an optimized procure to pay process is a reduction in spending by getting better pricing for the product and service you purchase.
Spend can be divided into direct and Indirect spend.
Direct spend is what you consider as raw materials which goes into the product and COGS spend.
Having an optimized process enables the procurement team to increase the spend under management because now they have the opportunity to review the spend before the purchase order is issued. Also, an optimized process provides better spend visibility to the team.
Indirect Spend is what the organization need to spend to run the operations, for example, IT, office supplies, marketing expenses, etc.
Direct spend is very much controlled, so we are going to focus on the opportunity in the indirect spend area.
The first measure of an optimized process is to have more spend under management. As you can see from the graph below, only 20-30% of companies have more than 90% of their spend under management.
By spend under management, we mean the spend which is being actively reviewed by a procurement team and negotiated to get better pricing.
If you don’t have a procurement team, you can use this analysis to build the business case for having a procurement team.
So once you know how much spend you have under management, you can easily calculate the savings.
As per KPMG, the savings number could vary based on the maturity of the sourcing and procurement function. For example, if you have a high maturity in the procurement process and all your sourcing activities are centralized, you can achieve as high as 10% savings on an annual basis.
Just to be conservative, let’s assume a 4% cost reduction.
Let’s say your revenue is $100M and your Indirect spend is $40M.
Even if you have 40% of spend under management, that would be $16M.
4% saving would be $ 640,000. That is not an insignificant amount of money.
Do you know if your company is a victim of procurement fraud?
Procurement fraud can be defined as dishonestly obtaining an advantage, avoiding an obligation or causing a loss to public property or various means during procurement process by public servants, contractors or any other person involved in the procurement.”
There are different types of procurement fraud
For example, a person responsible for purchasing is taking gifts from the vendor to award them the business.
The other example is an employee awarding business to their relatives or close associations.
The chance of fraud is also higher in the A/P process because if you don’t have tighter controls, someone can set up a fraudulent company and keep on paying small amounts over time.
It is hard to quantify the savings from preventing fraud because till you don’t know the extent of fraud, it is difficult to know what you could have prevented.
So we talked about the whole procure to pay (P2P) process so far and the issues why the process is not optimized. Let’s now look at how to go about optimizing the procure to pay process. We walk you through a step by step process
The first step towards the optimization journey is to figure out what is wrong with the current process.
To start with the audit of the procure to pay process, you need to review each and every step in the process.
You could look at dividing the feedback into objective and subjective areas
This is where you look at the data for the end to end process and see how long does it take for the complete cycle. For example
– How long does it take to create the requisition?
– How long does it take to approve the requisition?
– How long does it take to create the purchase order?
– How long does it take to send the purchase order to the supplier?
– How suppliers are submitting invoices. For example, how many are paper, electronic?
– What is the average time for you to create an invoice, for example, the time to scan the document, the time to index the document?
– How long does it take to reconcile the invoices with other documents?
– How many invoices are automatically reconciled vs the invoices which need a manual intervention?
What to do with all this data? We will cover that in the next step. But before we start looking at what areas to focus on. Let’s do a subjective assessment.
Why do subjective assessments when you have all the data to review your process efficiency?
There are two reasons to do that
a) When you ask around enough time to enough people, you get a sense of most troubling issues.
b) Perception is key in the adoption of any new change. So it is important how people perceive the current process.
We haven’t heard anyone say so far that they love PO and the invoicing process. However, the goal should be that the process is optimized and easy enough so that employees don’t have to think about it.
With this subjective assessment, you should be able to identify the top 2-3 focus areas.
Let’s talk about how to make use of all this data and subjective information now.
By now you should be able to identify the areas of improvement. The areas might be identified by objective or subjective feedback.
Before you decide the next steps, let’s see if there is a correlation between objective and subjective feedback.
Let’s assume that one of the top subjective feedback areas was that it takes too long to create requisitions or that the process is very cumbersome. If you overlap this with the data you have collected (the time it takes to create a requisition”, you can easily identify whether the data supports the subjective facts or not.
Once you have done that, let’s prioritize the areas for optimization of the procure to pay process.
Focus on areas where you can deliver maximum value faster. What we mean that?
Focus on areas where the ROI is the highest and the implementation time to improve the process is shorter.
For example, after you compared the objective and subjective feedback, the topmost issue was the employees are complaining that the requisition process takes too long. You looked at your data and you realized that cost per purchase order (from requisition to issuing a purchase order to the supplier) is $30.
Let’s say you can cut this cost by 50%, so even if you were creating 5000 orders a year, that is savings $75,000.
So what it would take to implement this change?
If you have a manual process, maybe you can automate the purchasing process. Of course, it depends on the cost and the time to implement the change.
The second approach could be to look at your purchasing policy and see if you can simplify the purchasing process so that the number of steps can be reduced in the approval process.
For example, as per the current process, all orders need to go to a Director for approval.
Can you change the process, such that more requisitions can be approved by Sr. managers?
That will drive accountability and reduce the time it takes for a requisition to be approved.
This is just one example, but this is how you should be thinking for each item in your list and prioritize it based on the cost and time it will take to implement.
Having common ownership of the process enables easier review of the process and make it easier to identify areas for improvement.
There are multiple ways to address the common ownership
a) You can have both A/P and procurement reporting to the same leadership, that way you can share common resources especially around the processing of documents, whether it is a Purchase order or an Invoice.
There is, of course, a SOX issue here because the best practice is that the employees who have access to purchase orders shouldn’t have access to Invoices.
However, in our experience, we have seen multiple companies successfully implement this model.
For example, with proper approval controls, you can restrict only the review of the process to certain individuals so that they can review and key in the data but they aren’t able to approve any orders or invoices in the system.
This approach makes sense not just from a resource utilization perspective but also reduces overall investment in technology cost. Instead of investing in individual technologies, now the team can invest in one common platform.
b) if a common reporting structure is not possible for procurement and Accounts payables then the alternate approach is to have a common process owner. The person could have a dotted line reporting to both procurement and Accounts Payable.
The goal here is to have one person looking at the end to end process and working with both process owners to optimize the process.
Needless to say that automation is key when it comes to optimizing the process.
Can you do this without technology?
Of course, you can in theory, in practice however, you have limited resources. Companies find it challenging even to conduct an audit of their process, forget about resources to optimize the process.
So if you have resources to manually optimize the processes, go for it,
Otherwise, look at technology to automate the process. We will cover this topic in depth in a later section.
Procure to pay optimization is a continuous process. It is not one and done for the following reasons
a ) The procure to pay process evolves over time. That might be because of the introduction of new products which have different complexity.
It could also be because your vendor base is changing and they are requiring changes to procure to pay process.
b) You could start with wrong assumptions
When it comes to optimization of the process, you have to continuously evolve your strategy to optimize the process.
For example, let’s say your goal is to reduce the time it takes to process the invoices received from suppliers.
You realize that it is taking time because the purchase order information is not available on the invoice. So you went ahead and implemented a No PO, No Pay policy for your suppliers.
What you might have not realized is that most of your stakeholders don’t create purchase orders today. So this approach is not going to work.
Hence you need to first focus on ensuring that the stakeholders are creating purchase orders.
This is just an example, but when you start on your optimization journey, you would need to continuously evaluate whether your initial hypothesis is working or not and if not, change the approach or strategy.
With that said, how to speed up the optimization of Procure to pay process?
As we mentioned earlier, you can look at putting more resources on this initiative which is not a scalable model or you can try to cobble together a piece of technology using your current ERP system and other internal system solutions.
You can build your own solution but then you have the responsibility to continuously work on evolving the solution and it doesn’t have best practices built-in from 100’s of other organizations.
We recommend that you evaluate procure-to-pay technologies that can accelerate the pace of the process optimization.
Let’s look at some of the points where technology can help play a role
As we said earlier, you can build your own solution but it takes time to put together that solution. You have to write requirements, work with IT to get an assessment of the time it will take, and then of course once it is ready, test to ensure that there are no bugs in the new system.
Compare this to putting together a must-have list, evaluating available solutions in the markets, doing a pilot to ensure that the product meets your requirements, and then launch the system.
As you might have noticed the second approach is much faster and with this approach, you don’t have the hassle of continuous upgrades and testing every change which is done in the system.
Any procure to pay technology is more reliable over any manual process you would establish.
The challenge with manual processes is that they are not scalable and especially when individuals leave the organization, you have to start over with the transition of the process to a new person.
More often than not, companies start with a manual process because it is quick but they soon realize that the process is not scalable and then they start over to redefine the process and automate the process.
For example, you want to ensure that spend is reviewed before a purchase order is issued. So you have a person review every purchase order which goes out of the door and since you don’t have a technology solution it is hard to differentiate what you should be reviewing and what you shouldn’t be reviewing.
With procure to pay technology you can create a completely touchless process if the purchase order meets certain criteria.
When you compare the long term total cost of ownership of the system, procure to pay technology would still be cheaper as compared to a homegrown system.
Let’s look at what all is involved in the long term cost of ownership internal system and who does what in each scenario
If you are considering homegrown vs external vendor technology, You can easily compare the cost over 3 years and see which one is cheaper over the long term.
There are many variations on how you can implement procure to pay technology. You could implement an end to end solution which automates the entire process from purchasing to invoicing or could you look at just automating the purchasing process only.
So which procure to pay use case is right for you?
Let’s look at the different use cases first and then we would give you some decision criteria to help you decide which use case makes sense for you.
In our opinion, there are four major use cases for
This use case is the most simple use case for procure to pay automation. Let’s say you currently creating manual requisitions which are sent for approval through emails with attached excel files.
And you want to automate the process so that you can gain efficiency in your approval process. In that case, you can implement just the requisition module to automate the requisition process.
Your purchase orders still need to created in your accounting system manually.
This use case only makes sense when you have a very low volume of purchase orders. Because if you have a high volume then you need more resources to create purchase orders manually in the accounting/ERP system
Purchasing use includes the requisition process and automated PO submission to the supplier. This use case has the additional step of integrating the procurement system with your back end system.
This might take additional time but that automates the whole process and once the requisition is approved, the rest of the process is completely touchless.
This use case includes an end to end automation of the procure to pay process. This not only includes automation of the requisition process but also includes receipts, invoicing, and sometimes payments to the suppliers.
It does take more time for implementation but it does help you to fully realize the efficiencies of an automated procure to pay process.
More details on this use case including integration, check end to end purchase to pay use case.
This use is applicable in cases where your existing invoicing system is not very robust and it makes sense to do end to end automation.
We have worked with companies that have already outsourced their invoice processing to third parties. These third parties are responsible for working with suppliers on onboarding them to a portal or other integration scenarios.
The invoices are then submitted through a third party and that third party then sends the invoice to your systems.
The use is very similar to end to end scenario. The procure to pay process works exactly in the same fashion as the above use cases with one difference – the invoices come through a feed in the procure to pay system. The procure to pay system is then responsible for matching the invoices and then sending the invoices to the downstream system.
The simple answer is that you should aim for an end to end process automation. However, there are other considerations for selecting the right use for you
All said and done, implementing a procure to pay system includes change management. It is not just changing the processes but also change in user behavior.
If you are a small company, then this change is straightforward because there are limited people and limited processes or systems to change.
However, if you a midsize to a large company, do an audit of your process and make sure that all stakeholders are on board for the process and system reengineering.
Are you looking for quick wins or are can you wait for the end of end automation?
For example, you just took over the procurement department and you looking to quickly gain some efficiencies in the process. In that case, it makes perfect sense to automate the requisition to PO process and see immediate improvements in your procurement process.
Cost is another factor for consideration, a simple use case like requisition would be much cheaper as compared to entire procure to pay automation.
So depending upon on your budget you can choose a use case.
Procure to pay process automation is not just about increasing efficiencies of the process but also about reducing overall cost.
Companies who have best in class procure to pay system and processes have tremendous advantages over their peers. They have better cost savings, better engagement with employees, and better visibility into their Spend.
To gauge the full potential of the hidden cash in your procure to pay process, start with a complete audit of the process, talk to your counterparts on their willingness to change, and then select use cases for procure to pay transformation.
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