Why You Need to Automate Your Procure-to-Pay Process

Procure-to-Pay

Without procurement automation, your business is stuck relying on manual processes and siloed information while fighting fruitlessly to reduce waste in your organization. After all, no cost-cutting solution can hold a light to automation’s cost reduction abilities. And one of the easiest ways to take advantage of those benefits is by automating your procure-to-pay process. 

This guide will walk you through how to transform purchasing in your organization into a strategic, cost-saving asset. 

What Is a Procure-to-Pay Process?

Your organization’s procure-to-pay process outlines how your company requests, acquires and pays for the resources and services it needs to conduct business. Specifically, it covers how your business approves purchases, chooses vendors, conducts QA, and pays invoices. 

Procure-to-pay software makes tracking vendors, conducting purchasing, and managing cash flow as simple as possible. These systems automate many processes and workflows in your procurement process. 

By streamlining these systems with automation, you’ll reduce costs and waste by eliminating manual processes. You’ll also dramatically reduce human error from manual data entry. 

Done correctly, and you’ll take steps toward transforming your procurement process into a strategic asset for your organization.

What Are the Procure-to-Pay Steps?

  1. Define Needs: Identify the goods and services needed for your organization and determine how they fit into your overall business strategy.
  2. Requisition & Approval: Create a purchase requisition document to identify the approval procedure. Internal decision-makers will validate or deny the requisition after evaluating the budget and needs.
  3. Vendor Selection: Send out an RFP or “Request for Proposal”, detailing the project requirements and available funding. Research vendors, evaluate bids and select preferred vendors.
  4. Purchase Order: Fill out vendor-specific requirements, order amount, and delivery information before sending it to the vendor. 
  5. Receive, Expedite & Log: Track and log timelines, deliveries, and delays into the inventory & procurement systems.
  6. Invoice Reconciliation: Compare the invoice with the original purchase order to ensure the delivery of the requested materials and correct charges.
  7. Payment: Approve the voice and pay the vendor. Afterward, log the payment into the organization’s accounting system.

What Is Possible With Procure-to-Pay Automation?

Procure-to-pay software automates many of the steps in the process, reducing costs while increasing efficiency. Because many of the processes are automated, they move freely from stage to stage in your procurement system without the need for human intervention.

Each procurement automation system differs. You need to make sure that the system you choose supports your business needs.

 Still, most procure to pay systems will automate these functions:

  1. Request for Proposals (RFP): Staff can submit their requests directly to a manager for approval.
  2. Approvals: Guidelines can be established so that if the request falls within the parameters, approval is granted. Exceptions can be flagged for manual approval.
  3. Vendor Management: Communicate with vendors via an online portal, rank them on preference or services, and sort quickly by availability and other restrictions.
  4. Reconciliation: Collect invoices, QA deliverables, and issue payment.
  5. Reporting: Real-time data can be displayed in clear dashboarding.

In short, if there is a workflow or process connected to your procure-to-pay system, there is most likely a feature to automate it. If not, one can be easily built using low code.

Why Should You Automate Your Procure-To-Pay Process?

Automating for the sake of automating is a waste. In fact, with all the hype out there about digitization (that somehow manages to skip over the challenges of integration), you need to be careful. Still, there are plenty of benefits that make automating your procure-to-pay process a no-brainer. Here are five of them.

1. Reduced Costs

Procure-to-pay automation produces real savings. At the lowest level, you save on paper and ink from printing invoices. At a high level, you reduce labor costs, duplicate payments, and late fees with invoice automation.

2. Risk Reduction

Poke Yoke (also known as error prevention) is inherent in automation. Manually transferring data between systems and spreadsheets opens the door for cataclysmic mistakes. However, with a streamlined procure-to-pay system, you can move data between systems effortlessly. You can also keep that information far more secure than you ever could in a spreadsheet.

3. Improved Budgeting

Procurement automation establishes guardrails your team must follow to make purchases. The guardrails for approvals prevent maverick spending and reduce tail spend. They also give purchasing managers better data, empowering them to improve budgeting across departments. 

Additionally, digital procure-to-pay solutions provide real-time insights into current spending. This means you’re far less likely to overspend. As a result, you won’t have to worry about going into the red and having to take out emergency loans to cover costs.

4. Faster Invoicing

Because everything is digital with procure-to-pay systems, invoices move through your platform effortlessly. Purchase managers can quickly verify purchases, goods, and services. And they can quickly issue payments and send records to accounting. 

No more bottlenecks.

Plus, your organization may even be able to take advantage of early payment discounts in some instances.

5. Better Vendor Relationships

Vendors love getting paid faster. But that isn’t the only reason your vendor relationships will bloom with procure-to-pay automation. Self-service vendor portals allow vendors to keep their vital information current. It also provides a centralized platform for clear communication. Finally, it gives you greater insights, so you can expand relationships with vendors over time.

6. Increased Speed to Order

Businesses need to embrace speed in order to ensure that supply chain volatility does not negatively impact the end customer. Automated Procure-to-Pay software saves time and labor resources that would otherwise need to be spent calculating and acting on the constant, rapid changes in the supply chain. 

What to Avoid with Procure to Pay Automation

While the benefits of procure-to-pay automation are clear, there are some downsides and risks. The biggest risk is to invest in a procure-to-pay solution that doesn’t fit your business needs. The cost of onboarding, testing, and deploying a new system means that whatever procurement upgrade you conduct, you’ll likely need to stick with it for at least 5 – 7 years.

To prevent this from happening, you research various procure-to-pay solutions. Ask vendors about the total cost of the platform. And see if the features meet your specific needs. 

Alternatively, you can build a custom procure-to-pay solution using low code. Low code streamlines the app development process, giving you affordable applications that fit your exact business needs. Plus, they’re SaaS solutions. So, cost scales with use.

What Does P2P Automation Mean For Your Business?

Although procure-to-pay software has expanded into many industries, sadly there are still many companies that rely on manual processes. Using things like spreadsheets and paper documents puts your business at unnecessary risk while preventing your procurement process from achieving strategic significance.

Luckily, you can break free from these manual systems with procure-to-pay automation. That means no more filling out “literally” thousands of purchase orders and processing them manually. No more endless back-and-forth trying to get purchase orders approved. Reduce maverick and tail spend. And no more compiling weak data from various spreadsheets. 

With procure-to-pay automation, you’ll reduce delays in your purchases, keep your vendors happy with on-time payments, and give your team more time. Best of all, you’ll transform your procurement process into the agile system it needs to be to keep your business competitive in our constantly changing marketplace.

There are many unforeseen events that can affect the supply chain, and hence, your procurement process. Political strife, economic downturns, natural disasters all can play a role in changing prices and availability of certain goods and services.

Now. Imagine navigating those unforeseen events with ease thanks to a lean, agile procure-to-pay system. Demand may shift. Your supply chain may tremble. But your organization will have the power to adapt to change and keep your supply chain secure.

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Kevin Shuler

Kevin Shuler

Kevin Shuler is the CEO of Quandary Consulting Group, a team of tech consultants that specialize in business transformation. They use integrations and automations to scale systems so businesses can continue to be successful.