What is the Procure to Pay Process?
The procure to pay process is the coordinated action required for procuring goods and services in a timely and cost-effective manner. It involves steps such as requisitioning, purchasing, receiving, paying and accounting for goods and services in sequential order. Here are the key performance indicators vital for the procure to pay process.
Key Performance Indicators for the Procure to Pay Process
Companies need to have clear set norms mentioned in the contract with penalties to decrease the percentage of substandard products and improve compliance. For this, companies can measure the defect rate of products and rate their suppliers accordingly.
Companies can track the average time taken by a supplier to fulfill a certain order and calculate supplier lead time. Additionally, they can also determine purchase order cycle time and devise strategies to improve the efficiency of their procure to pay process.
Savings are one of the most important KPIs that companies aim to achieve. It considers cost per invoice and purchase order, spend under management, and procurement ROI. The cost to process purchasing documents or invoices involves a list of variables and is the most disputed KPI in the procure to pay process. The rest two factors are helpful in determining the cost-effectiveness of any organization.
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