Purchase-to-Pay

What Is Purchase-to-Pay?

Purchase-to-pay is an integrated system that completely automates the goods and services purchasing process for a business. The system earned its name since it handles all parts of acquisition from the purchase of goods to the payment of the vendor. The key benefits to purchase-to-pay are productivity, cost savings, and increased financial and procurement visibility.

Understanding Purchase-to-Pay

The purchase-to-pay system starts with requisitioning, proceeds to procurement, and finishes with payment. Requisitioning is the course of formally requesting a service, thing, or product with a purchase request form. Procurement happens when the goods or services are received. The system closes when payment is made.

Purchase-to-pay looks to advance the purchasing system, in this manner helping the organization through better financial controls and efficiency. This streamlined, integrated system saves costs and reduces risk. A normal purchase-to-pay system incorporates five stages and requirements for completion:

Catalogs: Catalogs from preferred providers are the main requirement in a purchase-to-pay system.
Purchase requisitions: Once a product has been chosen from a catalog, the buyer sends a purchase requisition to the suitable manager.
Purchase order workflow: A purchase order is created once the purchase requisition is approved by the manager.
Invoicing: This is a critical part of a purchase-to-pay system since manual processing of invoices is a gigantically laborious and tedious interaction. Automated invoice processing sets aside time and cash and incorporates a reconciliation feature that matches purchase orders to invoices.
Payment: Once an invoice is approved for payment, a file is created in the organization's accounts payable system. The approved invoice brings about payment to the provider toward the finish of the period for which the provider has extended credit.

Purchase-to-pay systems are not expected to speed up the payment cycle. While this would be an excellent objective, the reality is that it wouldn't be a priority for most companies on the grounds that paying bills faster would influence the timing of their own cash flows. Rather, the goal of a purchase-to-pay system is to further develop productivity and financial controls since finance divisions have ideal purchasing data readily available.

Fast Fact

Purchase-to-pay systems are automated processes that reduce labor costs and increase exactness.

Best practices for purchase-to-pay systems incorporate strong technology that utilizes a single point of contact, like a provider portal, reduced complexity in catalogs and buying channels, and support from top management. It can give key data on how much is being spent, what products or services are being received, and delivery times.

Features

Purchase-to-pay is a complete purchase system for businesses from the purchase of goods to vendor payment.
Purchase-to-pay isn't intended to speed-up vendor payment since this isn't in that frame of mind of companies who need to hold on to their cash as far as might be feasible.
Purchase-to-pay is additionally called P2P, secure to-pay, eProcurement, or req-to-check.
The purchase-to-pay process is automated, saves costs, and reduces risk.
Purchase-to-pay systems are intended to further develop proficiency and financial controls.