Throughout the course of daily business operations, your company may determine it needs to acquire some goods, materials, or services to continue normal operations. Regardless of the nature of these goods or services, most companies will take advantage of the procure-to-pay or P2P process (not to be confused with “peer to peer” lending where individuals get loans from other individuals) to acquire them.
The process can certainly seem confusing but is actually quite straightforward. The procure-to-pay process can be broken down into a few key points. In simple terms, it begins with understanding the market, finding suppliers, onboarding them, setting up contracts and credit terms, receiving the goods/services they’re supplying, and eventually paying out their invoice. It’s an incredibly manual process, so automating some aspects of it. and implementing P2P software at your organization is an effective means of getting the most out of the process. Here are a few ways automating P2P processes with software can make your P2P process run more smoothly:
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Full Visibility Of Spend Management
Managing your company spend and seeing everything at a glance are all essential components of P2P. That’s why it’s best to consider P2P software as an extension of your existing enterprise management system. It can be integrated into the ERP to provide many of the same benefits of a more robust spender management tool while simplifying the procurement process.
It actually speeds up processing considerably while simultaneously helping compile essential reports on procurement and spending. When it comes to spending analysis, it’s all about automated reporting capabilities. Procurement professionals need to have access to as much data as possible to make important decisions.
If a software solution has built-inbuilt tools to capture relevant data throughout the entire purchasing cycle, it becomes much simpler to pinpoint or find errors and correct them. It’s always wise to remember that any system is only as good as the input it receives, so be sure to consider software that has the ability to capture real-time data covering potential savings, supplier spend and prevent maverick spending.
This is an especially crucial point, as maverick spend – whether intentional or not – is a serious problem that can occur along the procurement process. Let’s say you set up a PO for some material purchase, and your employees decide to use company credit cards to pay for it.
They may accidentally or intentionally purchase from a non-preferred vendor, causing trouble for the accounting side of the P2P equation. Procurement software can help mitigate or attenuate these types of issues, ultimately giving you not just full visibility over your spend/spend risk but also giving you total agency over control.
Reduce Invoice Costs
In an increasingly connected world, it may seem like a bit of a shock to realize that 57% of businesses still process invoices manually. With invoice processing being such an integral part of P2P processes, reducing cost per invoice is a prudent business move. Consider this: manual invoice processing can get relatively expensive.
The average cost to manually process an invoice is surprisingly high. Manual invoice processing can easily run $15/invoice. Automated processing can reduce the cost significantly to less than $5/invoice. P2P solutions address this through increased automation, error checking, and database cross-checking, ultimately resulting in less fraud or fewer delayed payments.
While P2P and accounts payable are separate entities, AP is still part of the process. Both departments can benefit from letting the software address some of the finer details (like multi-level validation and error checking) of the invoicing half of the P2P process.
Improve Relationships With Vendors
Investing in robust procure-to-pay software and integrating it into your enterprise management offers more than the immediate benefits for your own business. It can foster better relationships with vendors and employees too. Easy to use software with a low barrier to entry gets employees trained faster and puts the brakes on intensive training.
The same logic applies to suppliers and vendors. If the software is easy to use and integrate into existing processes, it’s easier to onboard and pay them on time. Ideally, you want a high level of communication and a superb relationship between your organization and its suppliers. Moreover, supply chains can be complex and time-sensitive.
How do you functionally work with suppliers in such a fast-moving environment?
P2P digitization and automation engage suppliers in the procurement process and helps improve supplier selection. Regulatory compliance isn’t an issue either, as the software helps businesses ensure they’re following the letter of the law as precisely as possible. Suppliers also want to be paid promptly.
It’s no secret one of the most significant supplier pain points lies in waiting too long to receive payment. Paying them on time is the most effective means of improving the relationship, and it’s something you won’t have to worry much about with the right software solution. It’s a mutually beneficial situation for everyone.
The organization gains access to a list of current products, services, and reputable suppliers, and the suppliers themselves get paid on a decent schedule. And since everything is essentially digitized and archived, all of the information about a given purchase order or supplier is readily available via archived reports in the P2P software’s database.
More Powerful Oversight Of Requisitions And Payments
On the front half of the P2P process (the procurement phase), you need to have some level of oversight when making purchases or contracting services. On the other half of the process, overseeing your invoice payments is just as critical. Procurement software can be an effective guide along the procurement process. With integration into an existing enterprise management system, your team has the power and agency to oversee both sides of the P2P process and update data swiftly across the data cloud.
Leverage Data For Future Business Decisions
One key role every manager plays from time to time is making crucial decisions using data as a guide. As we mentioned earlier, P2P software compiles and archives data covering everything from supplier details to PO’s and invoices. With all of the data readily available, managers can analyze and make adjustments on the fly.
Using the software as a guide, your company can seamlessly connect sourcing to buying and payment with few obstacles in between. Managers can easily assess and leverage accumulated data at each step of the spending process to make crucial future decisions. At the end of the day, a software solution is a strategic, prudent solution that can give your organization an edge in an increasingly competitive business environment.