Ultimate Guide to a perfect procure to pay process

What is a procure-to-pay process?

The procurement-to-payment procedure is a planned and integrated effort to satisfy a demand for goods or services in an expedient and reasonable way at a fair cost. The procurement process is a distinct set of activities that begins with need identification and continues to invoice approval and vendor payments. In a strict sequence, steps in a procure-to-pay cycle must be carried out.

Procure to Pay Cycle

Step 1: Needs should be identified.

The first step in a procure-to-pay process is for cross-functional stakeholders to collaborate with the company's management and IT organization on defining business demands. After a genuine need has been identified, procurement staff create high-level specifications for goods/products and service terms of reference (TOR).

Step 2: Create requisitions

A purchase requisition is created after finalizing the specifications, TOR, and SOW. After verifying that all necessary administrative criteria have been satisfied, a requestor delivers the completed purchase requisition form to the purchasing department. Requests for any sort of procurement may be submitted, including standard purchases and subcontracts.

Step 3: Purchase requisition approval

Department heads or procurement officers then examine submitted purchase requisitions. After analyzing the necessity, verifying the available funds, and validating the purchase requisition form, approvers may either approve or reject a request. Incomplete purchasing requests are returned to the originator for correction and resubmission.

Step 4: Create a PO/spot buy

A spot buy is an order placed for goods/products with certain characteristics, such as unmanaged category buys, one-time unique purchases, or low-value commodities. Purchase orders are generated from authorized purchase requisitions if these criteria are met.

Step 5: Purchase order approval

Purchase orders are now subjected to an approval loop in order to confirm specifications' validity and accuracy. Purchase orders that have been authorized are then sent to suppliers. Vendors may either accept, reject, or start a negotiation after looking at the order. When an officer approves a purchase order, a legally enforceable agreement is formed.

Step 6: Goods receipt

When the buyer receives the shipment, he or she examines it to ensure that it meets the contract conditions. Based on the purchasing agreement or purchase order standards, the receipt of the goods is either approved or denied.

Step 7: Supplier performance

The supplier performance is evaluated based on the data obtained in the previous step. The following variables are considered: quality, on-time delivery, customer service, contract compliance, adaptability, and overall cost of ownership (TCO). Non-performance is noted in prior rosters and information systems for future reference.

Step 8: Invoice approval

Once a purchase order is authorized, a three-way match between the purchase order, vendor invoice, and goods receipt is performed. If no issues are discovered, the invoice is approved and sent to the finance team for payment disbursement. In case of mistakes, the invoice is returned to the vendor with an explanation for rejection.

Step 9: Vendor payment

The procurement department will then process payments consistent with the contract terms once they have received an accepted invoice. Contract modifications, as well as reviews of liquidated financial security, will be considered. Advance, partially completed, progressing, final, and holdback/retention payments are examples of payment types made to a vendor.

Accounts Payable

Accounts payable entails paying supplier invoices on time and accounting for transactions, as part of the accounts payable procedure. The purchasing business will need to check that vendor payment details are current as part of this process, as well as take steps to prevent accounts payable fraud.

How can procure-to-pay software help you save time and money on your purchases?

According to a Gartner study, by 2025, more than 50% of businesses in the world will have a cloud-based procure-to-pay suite in place. Cloud-based procurement solutions like as Kissflow are gaining traction as organizations learn about the advantages and cost savings that come with using procurement software.

The acquisition management software solution for supply chains, Procure-to-pay, combines purchase orders, receipts for purchases, and invoices in a single interface. The process may be streamlined with buy automation, which can lower costs while increasing compliance and mitigate risk.