To ensure profitability and success, organizations undertake procurement processes that help boost efficiency in their operations. In order to operate or manufacture products and services, companies either produce these raw materials and input goods in house or resort to external procurement and purchase it from external third party suppliers and vendors. Procurement to pay or P2P, as it is commonly referred, involves the process of acquiring and managing the raw materials and input goods that are essential to manufacture the final product. A procure to pay process is a seamless process right from the point of order to the point of payment, assisted by technology. Purchase to pay processes entail a transactional flow of data regarding order placement, order fulfillment, and payment between a supplier and the buyer.
Procure to pay processes automate the purchase process, production, and operations by improving efficiency and price control. The automated software allows the purchaser to acquire raw materials at the pre-defined purchase limits and ensure compliance with the pre-determined budgets. A typical procure to pay process entails requirement planning, vendor selection, obtaining purchase requests, order placement, invoice generation, and vendor payment.
Key to A Successful Procure to Pay Process – Financial Agility
The key to a successful procure to pay process is “financial agility,” as it helps organizations to optimize their purchase cycle, reduce operational risks, and increase control over efficient cash management. There are several factors that ensure financial agility within an organization; they are as follows:
- Organizations can become financially agile by integrating supplier base and implementing user-friendly tools, thereby reducing supply overhead costs and facilitating touchless transactions
- Seamless integration with the Enterprise Resource Planning (ERP) system, thereby automating process flows and business operations to ensure high visibility and data control
To achieve this agility in finance and to optimize procure to pay processes, procurement managers must implement a digital infrastructure to ensure quick business processes. Additionally, businesses must adopt electronic procurement (e-procurement) to improve organizational efficiency and minimize errors. Companies can also explore new technologies like Robotic Process Automation (RPA) and blockchain technology, thereby ensuring a seamless and streamlined procurement cycle.
Digitalization of Procure to Pay Process
Organizations are moving towards touchless, digital, and streamlined procure to pay process to increase spend visibility and drive profitability. Procurement managers are also focusing on migrating to cloud-based P2P processes for invoice processing and are leveraging mobile technology to gain access to real-time invoice data through mobile devices. Additionally, procurement managers are turning to big data and analytics to have a better visibility of cash management and gain actionable insights that support strategic decision making. A digital procure to pay process has the potential to automate the entire procurement cycle right from order placement to reporting. These digital P2P solutions offer tools to improve visibility, control, and spend management. Digitization in procurement helps the purchase managers to ensure efficient administration, spend control, achieve process efficiency, and facilitates stakeholder collaboration by improving reporting. A digital procure to pay process allows the procurement manager to easily purchase raw materials and shortens delivery cycle time; thereby, reducing processing costs and other overheads. A digital procure to pay system provides the following benefits to procurement managers,
E-Procurement – Transforming The Purchase Function
By adopting e-procurement tools, organizations drive efficiency, minimize errors and eliminate data redundancy in procurement processes. Digital procurement ensures reliable and efficient completion of day-to-day tasks. Companies that adopt cloud-based procurement technology witness a rise in the number of orders over a span of five years, caused by increased efficiency and better customer relationship management. E-procurement entails electronic data interchange, allowing organizations to enhance agility and gain supply chain synergies and adapt operations to changing market dynamics. These tools provide web procurement tools that automatically identify, track, and plan the resource requirements of the organizations and perform procurement functions such as taking quotes and bids.
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RPA and Block Chain Technology Improving the Procure to Pay Process
Organizations must adopt technology to improve process efficiency and drive profitability. In traditional procurement processes, there are several glitches that increase costs and create process inefficiencies. Until now, businesses followed a tedious invoicing process due to the absence of standardization. The manual purchase order process resulted in organizations following inefficient business practices and data discrepancies; thereby, delaying management approval.
However, robotic process automation and blockchain technology have transformed the landscape of procure to pay process. Robotic Process Automation (RPA) rationalizes invoice processing as robots manage receipt and allocation of invoices. It enables robust monitoring of data through cognitive intelligence to gain actionable insights and study the changing patterns and trends. RPA allows procurement managers to scrutinize data and provides access to standardized portals for storing and updating vendor information, which subsequently ensures quick turnaround time and reduces the process cycle.
On the other hand, blockchain technology drives higher value, eliminates redundant data, reduces transaction errors, and provides access to a wide supplier network. The impact of blockchain technology is higher at end processes that includes payment and invoice processing. A blockchain technology expedites vendor inquiries, supports transparent and real time database access; thereby, streamlining invoice processing and ensuring efficient reconciliation process.
To know more about agile procure to pay process and its impact on your organization