Purchase-to-pay process: how do you optimize P2P within your organization?

In which ‘purchase–to–pay-phase‖ is your organization in?

First, let’s briefly discuss what the purchase–to–pay–process exactly is. ‘Purchase to pay’ represents an integrated system that covers all steps of the procurement process – from the purchase of goods and services to payment to suppliers.

Setting up and further optimization of the P2P process is not always easy. We find that organizations are in very different stages of setup and that the challenges vary greatly by industry. To give you a better idea of what is involved, we share some examples.

Construction: solid P2P foundation, but also unregistered procurement

In construction, ‘purchase to pay’ is a well-known term. Many construction companies have already set up the P2P process, often because the ERP provides sufficient capabilities to do order-driven purchasing. The problem many of them currently face is that not all procurement within this structured process falls.

As an example, if someone on the construction site adds extra screws or tarpaulins te against the rain, this is not always registered as an order in the ERP, so-called kramerij invoices. Often an employee grabs the phone to place the order – not the laptop. Very understandable. But this leaves the financial records with no purchase order afterwards. Figuring out “What was agreed upon?” and “Was it also delivered as agreed upon?” to process the invoice in a structured manner is then very labor intensive. This may only account for a small percentage of total procurement costs, but a financial administrator may spend up to 80% of their time handling these purchase invoices.

Education and care: much to be gained in P2P process

In the education and health care sectors, the shortcoming around stall invoices does not occur. Organizations operating in these industries have different challenges. Often with them, the P2P process is still set up in a limited way. And that can cause the necessary problems. Suppose an office worker’s monitor breaks. If no P2P process is in place, the aware employee will contact the IT department. The latter then enters into negotiations with the supplier. Before you know it, you are several days away. Meanwhile, the employee in question still does not have a new monitor!

Some organizations have solved this by creating framework agreements. For example, they work with an online portal, where the employee can order a new monitor himself – within certain contract agreements. This decentralized purchasing is recorded centrally in a system: the purchase order is available “under water” and can be matched. A good solution? Definitely! But in practice, it is quite a challenge for educational and healthcare organizations to set up the P2P process in this way.

Two needs: Timely detection of anomalies and aanconnect to the ordering needs of the organization

Although companies are in different stages of setting up the P2P process and face a variety of challenges, we observe two clear needs observed:

1. They want to set up procurement so that it matches practice in the best possible way, without losing control and grip.

The example about stall invoices already made it clear that practice can be somewhat unruly. People are not always willing or able to do order-driven purchasing because it is simply too labor-intensive or not practical (when you are walking on the construction site, for example).

The need for different ordering options, while still maintaining sufficient control over whether purchases are made within price agreements, is great. This can be an ordering portal that automatically offers products to the right suppliers within the contract agreements, or simply over the phone, where by cleverly handling order confirmations and delivery notes, the administrative handling of purchasing can still be automated.

In doing so, of course, they don’t want to burden the finance department with more audit work. Again, where necessary, the systems can automatically verify that the invoice matches what was ordered and delivered.

2. They want to identify deviations in the procurement process in a timely manner

After you send a purchase order through your ERP system (or otherwise place an order), you typically receive an order confirmation. If it deviates, you want to know as soon as possible. Some organizations therefore have an employee who enters order confirmations full-time. Actually, that’s a shame because often only about 10 percent deviates. This employee may prefer to devote his or her time to tasks that offer more challenges and job happiness. Because this repetitive work is fine to leave to a good automation solution.

With a good recognition system read the order confirmation. The software reads the document and matches by numbers, delivery date and location. Are the data correct? Then the order confirmation will be processed automatically. Is there no match? Only then will you get a signal so you can take timely action.

Because you bring the checkpoint forward, you deal with any discrepancies early. And by automating processing, you also spend much less time on monotonous, repetitive work. By the time the invoice arrives, handling that document is really only a formality. If you use reliable recognition software, you won’t even have to look at it!