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What is Procure to Pay?

May 27, 2022

Why is digitizing it important?

The Procure-to-Pay, also known as P2P, is a process in which a company purchases, receives, and pays for goods or services in a well-organized way. This process ranges from the identification of your company’s initial need for procurement of the goods or services to the final steps of approving the purchase invoice and paying the vendors.

Digitizing or automating your procurement process with a procure-to-pay app or software solution can reduce manual errors, speed up procurement processing time,  improve vendor relationships and strengthen compliance.

The Manual Procurement Process

Manual processes are still undoubtedly used by companies. According to Levvel Research 2020, 18% of organizations or companies still use manual processes. Companies grow but still continue using the same process when they started as small companies and were processing only a few invoices a month. 

18% of organizations still use manual process according to Levvel Research 2020

For this manual procurement process, there is a lot of room for errors. Invoices arrive without context, no one approves the purchase, there’s no one to hold accountable for any aspect of the purchase, and tracking of this mistake can either take days or no action at all.

Let me take you on a journey through a typical procure-to-pay process of an organization:

Step One: 

The Employee fills out a purchase request form and then submits it to their department head for approval.

Step Two: 

Scenario 1 - Department head approves the purchase request and creates a purchase order for the goods and services requested.

Scenario 2 - If the Department head rejects the request, they can go back to the employee and ask what changes need to be made for approval.

Step Three (if approved):

If the request needs to be approved by another person, aside from the department head, the purchase request to that person. If not, the request is sent to the procurement team to place an order to their preferred vendor.

Step Four: 

The order is received and the vendor fulfills the order. Once the order is fulfilled, the vendor sends an invoice, via email or courier, to the buyer.

Step Five:

The accounts payable department, or in most cases, an accounting staff member, must perform manual 3-way matching by going through the paper trail to verify that the items being invoiced have an approved purchase request, match the corresponding purchase order and have been received and, accepted correctly. Only after a successful 3-way match is achieved is the invoice approved for payment.

This entire process could take days or even weeks if one or more documents in the process are left underneath a pile of paper and forgotten, get routed incorrectly, or worse, go missing.

The Typical Procurement-to-Pay Journey

As you can see, a manual procurement process is prone to human errors, processing delays, and lack of transparency. 

The consequences of still using this manual process will ultimately damage a company's bottom line. To eliminate this, a company or organization needs to move away from this traditional approach and start embracing digital. A great way to do this is to use Aiah Procurement by scheduling a demo and starting your free account.

Why do you need to digitize your procure-to-pay process?

Decisions by the procurement department are of prime importance as they can impact the costs and resources of the company or organization. Procurement automation is the most effective way and efficient way to manage the procurement process, it helps:

  1. Streamline procurement workflows

The PR, PO, or invoice approvals are the typical delay in the procurement process. Automating these processes will reduce or cut down the processing time to 30%. That means the Purchase Requester gets needed items on time, Approvers will be straight off notified of the requests, Vendors or Suppliers will receive orders after the organization’s approval, and the procurement department will spend less time deciphering the history of the purchase and correcting errors.

  1. Reduce and save costs

Excessive paperwork is identified in a manual procurement process. Managing huge volumes of paper can be challenging for the Procurement Department. There is a higher chance that paper-based requests and invoices can be misplaced and damaged. Eliminating paper-based requisition or requests can save material costs and a bonus, helping save the environment. Aside from the material cost, procurement automation frees labor-intensive processes from the employees, so that they can focus on the most important activities like decision making and strategizing for their organization.

  1. 100% visibility

Procurement automation provides updates on occurring orders, contract statuses, purchase history, and vendor quotations. Also ensures that requests do not over-budget based on the set budget rules by the Admin or Department Head.

  1. Get actionable information

We still can’t deny that manual processes are prone to a lot of mistakes. These mistakes can take a long time to be resolved due to missing requests and invoice papers or human data errors. In procurement automation, you can easily track purchase requests and invoices. Also, it ensures that only approved items can be requested for purchase.

  1. Improves supplier relationships

The transparency and efficiency of handling vendors or suppliers increase relationships and inventory levels. This reduces compliance and supply chain risk

Let's Automate Your Procurement Process NOW