A Procure-to-pay process outlines how a company requests, acquires and pays for the resources it needs to conduct its business.
Procure-to-pay software is designed to make tracking vendors, purchasing, and cash flow as simple as possible. Designing this process is one of the most important steps before operations can take place.
- Define Needs – The first step involves identifying the goods and services that are needed for business and designing them into the procurement plan.
- Requisition & Approval – A formal purchase requisition document is created that identifies the approval procedure. Internal decision makers then validate or deny the requisition after evaluating the budget and needs.
- Vendor Selection – An RFP or ‘Request for Proposal’ is sent out detailing the project requirements and available funding. Preferred vendors are selected after research and bid evaluation.
- Purchase Order – This form details any specific vendor requirements, order amount, and delivery information. Once completed, the PO is sent to the vendor.
- Receive, Expedite & Log – After the PO is issued, timelines, deliveries, and delays are tracked and logged into inventory & procurement systems
- Invoice reconciliation – The invoice is compared with the original purchase order to ensure that materials were delivered as requested and costs are correctly charged.
- Payment – The invoice is approved by the necessary parties and payments are made to the vendor. The final step is logging the entry to the business’ accounting system.
What Is Possible With A Procure-to-Pay System?
Procure-to-pay software allows us to automate many of the steps in the process so as to optimize turnaround time for purchase orders, implement better controls for billing, and enable faster payment.
Within the system, you can rank vendors in terms of preference and available services, to help support automatic or suggested assignment to vendors based on availability or restrictions.
Once goods are received and logged, the system can automatically reconcile invoices and send approval notifications, and payments to the necessary parties. Invoices can be approved based on the company’s hierarchy and set within the system’s workflow to directly send verification requests to the approver.
No longer do approvals need to be the bottleneck holding up the processing of an order.
Additionally, one advantage of the system is that it allows you to capture and electronically store invoices and POs in one central location. This allows easy access to order details whenever needed.
This also reduces the time spent processing invoices which leads to faster payment. Moreover, the analytics capabilities can help businesses manage their expenses with greater ease and see the effect of purchase on their budget.
What Does This Mean For Your Business?
Although procure-to-pay software has expanded into many industries, there are still many companies that conduct certain steps on paper. Simply filling out thousands of purchase orders and administering the process by hand can get very time-consuming.
Inefficiencies in procurement can cost businesses significant amounts of time and money as they deal with transaction issues, delays in purchases, and constant back-and-forth communication.
Furthermore, there are many unforeseen events that can affect the supply chain and hence the procurement process. Political strife, economic downturns, natural disasters all can play a role in changing prices and availability of certain goods and services.
Imagine having to manually fulfill the steps of the procurement process, for which the demand increases exponentially as business scales.
Now imagine that you need to manually optimize these processes when volatility in the market or a natural disaster strikes.
It can easily become overwhelming.
Why Should You Automate Your Procure-To-Pay Process?
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. Software also offers security against theft and fraud because transactions and approval chains become much easier to track.
Additionally, by switching from paper and spreadsheets to robust software, you get better analytics of the different procurement stages. This allows you to see more clearly where the bottlenecks are.
The software bears the burden, reduces the likelihood of error, and operates at supreme efficiency.
Preventing miscommunication is also of high priority in the procurement process. One error can cause a huge backlog in the supply chain, delays in delivery, and ultimately – unhappy customers.
By keeping the supply chain organized and communication clear, businesses can reduce the number of errors from manual processes.
Hence, many companies are switching to customized software and automating their procurement to unload that burden. Now companies can send out purchase orders and get them completed much quicker and respond to customer needs more effectively.
Moreover, the extra time and labor resources can be spent on other strategic tasks that drive company growth.
If you are managing your procurement process on spreadsheets, you may want to check out our article on the 7 reasons to ditch your spreadsheets.
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