Everything comes at a cost. From your Netflix subscription to the pen that keeps getting lost on your desk, every good or service has a value—which is why everything comes at a price. Companies must charge for the materials and services they use to create the final product, plus a little extra to ensure a return on investment of raw goods.
In the B2B world, this process is known as procure-to-pay. The procure-to-pay or purchase-to-pay cycle is the process in which businesses inquire, request, receive, and then pay for raw goods and services.
This procure-to-pay process involves numerous tedious steps to complete just one order. Your procurement specialist researches the best vendor and requests a quote. Based on the quote, there may be a negotiation phase for a better price or quantity. Once the details are agreed upon, the supplies and invoice are sent. Your finance department does their job to process the invoice and pay the vendor for the supplies sent. But imagine handling all of these steps manually for each vendor your business works with.
Some companies may also include three-way matching in the purchasing process to easily match the purchase order with the invoice and the receiving report. Procurement processes have come a long way since the Stone Age, but most companies are still not up to speed on modern procurement trends. Most centralized processes are a mix of manual steps and electronic systems. There are a few procure-to-pay problems some companies still need solutions for.
Most current procure-to-pay processes have limited visibility into what was previously purchased or ability to track spending in real-time. They suffer from maverick spend which negatively impacts the budget. Some organizations even suffer from departments spending over the budget. Of course, all of these procure-to-pay problems impact auditing, reporting, and processes. Others suffer from scattered processes that are a mix of centralized and decentralized and are throughout different departments.
Some companies are even plummeting their business by allowing each department to handle their purchasing processes. So which is best for the business?
If your company is trusting internal or homegrown tools or AP automation softwarethey may suit your needs perfectly for now, but there are a few concerns to keep in mind. Chances are if your business chooses to modify processes, it could take a great deal of time and resources to change the homegrown tool for your needs.
Customization and updates may also be very limited. Naturally, after years of change, the homegrown system becomes outdated and leads your business down a path of broken, inefficient procure-to-pay processes. On the other hand, cloud-based purchase order software gives companies better visibility and flexibility while leaving the heavy lifting of updates to the SaaS provider.
Cloud-based eProcurement allows companies to manage and streamline the procure-to-pay process in a centralized, cloud-based system. Today, eProcurement has the ability to manage purchase orders, invoices, expense reports, and payments from a centralized, cloud-based hub. With cloud-based eProcurement, companies have improved flexibility by accessing the SaaS anywhere with a network connection. PayStream Advisors explains the difference. This is related to things like PO count and the size of the supplier base.
It also has to do with the number of full-time employees FTEs working in the procurement department. So what works best? When it comes to implementing procurement software, most companies use a procurement solution that integrates with their accounting or ERP system.
SAP P2P Process
This is not efficient for smaller, scaling companies with evolving infrastructure needs, or enterprise organizations with multiple back-office systems and widespread purchasing processes. Your business should be able to easily handle vendor contracts, spend, and purchasing documents under one platform.
Scattered, manual, paper-based purchasing processes lead to less visibility into what has been ordered and the inability to analyze spend.
There are common procurement scams every organization should be aware of—especially SMBs. President of Doxey, Inc.To browse Academia. Skip to main content. Log In Sign Up. Sanjeev Thakur.
Procurement Process Cycle | Procure to Pay process
Enter purchase order When you enter a purchase order, accounts are created and stored with the purchase order distribution. The accounts will eventually be used as a basis for creating accounting that is sent to the general ledger. Creating a purchase order in and of itself generates no accounting that is sent to the general ledger. Receive When you process a receipt, no accounting is created for period end accruals.
Receipts that are accrued at period end will always be for a destination type of expense. Deliver and cost When you deliver a receipt to its final destination, no accounting is created. The expense will be recorded after matching to the purchase order, running the Payables Accounting process and subsequently running the Payables Transfer to General Ledger process.
Period end accrual If an invoice is not entered by period end, the Receipt Accruals - Period End process will generate accruals and transfer the accounting for them to the GL Interface.
Use the Journal Import program to create unposted journals. This journal is created with a reversal date in a subsequent period. The journal must be reversed so your receipt liability is not overstated. Reverse accrual in the general ledger In the subsequent period, reverse the prior period accrual. Invoice and match Entering an invoice and matching creates a debit to the Inventory AP Accrual account to clear the liability for the uninvoiced receipt you now have an invoice.
The entire credit is to the AP Liability account that defaults from the supplier site if the invoice unit price is the same as the purchase order line unit price. Any difference is charged to the Invoice Price Variance account. For items with destination type of Expense, the Invoice Price Variance account will be the same as the charge account. The AP Liability account is cleared when a payment is processed. Description Dr. Receiving of Inventory can be made through Purchasing Responsibility as well as Inventory Responsibility.
Material Account xxxxx Receiving Inventory Account xxxxx When the Inventory is delivered in the Stores this account will be hit in the Inventory Organization click on the others button and then select the Inventory Information and then choose the Costing Information tab and this account will be defined in the Valuation Account region named as Material.Processes in procure to pay cycle may differ from company to company but the process more or less remains the same.
Here I provide the exhaustive list of various steps involved in Procure to Pay cycle. This document normally contains description of material, quantity, approx cost, material requirement date, preferred or Standard vendor etc. At this stage, the supervisor may return the PR to the originator for modification or can approve it.
Inventory controller shall review the PR and shall check the Open Purchase orders POany other scheduled or planned delivery for the material. If there is any planned delivery or any existing open PO then Inventory controller can return the PR or request the user department to revise the quantity of the material.
After the approval of Inventory controller, the approved PR is available to the Procurement department. Procurement: After final authorization of PR, it is available to Buyer.
Buyer shall check for any existing Annual Rate Contract or any other contract for the material. If any contract exists then a Call-Off shall be generated and shall be sent to the supplier. In case no contract exists then the Buyer shall initiate supplier search and floating enquiries.
RFQ normally contains Description, Technical Specifications of the material, quantity of the material, term and conditions, delivery date of the material, date of submission of the RFQ,Quality standards, Validity of the suppliers offer, etc. Normally, vendors are instructed to send their quotation in a sealed envelope, mentioning only RFQ reference no on it.
Quotations are normally opened and signed by 2 or more persons of the department. Technical Evaluation of Quotations : Quotations are sent to technical department for technical evaluations of the quotations.
Here, technical department shall shortlist the quotationsa based on the technical specifications. Receipt of Commercial Quotations: Once the Technical Evaluation is over, the buyer shall send the advice to shortlisted suppliers for commercial quotations, After receiving the commercial quotations, these shall be opened by two people.
Quotation comparison statement is prepared by the buyer to compare all the quotations of the supplies and suppliers are short listed for negotiations. Negotiation : Short listed suppliers are invited for negotiations. In negotiation buyer can negotiate with the supplier for :. Selection of the Vendor : After negotiations with all the selected vendors revised quotations are prepared and vendor is finalized for award of contract based on the weightage to the commecial, technical parameters, previous performance of the vendor, delivery dates of the material, etc.
Award of Contract : After the vendor is finalized LOI can be sent to him and he may be asked to deposit security or bank guaranty before signing the agreement.
Purchase Order : The buyer shall raise the call offs against contracts Fixed or Blanket. If the value of the PO is more than that of his approval limit he shall forward it to his supervisor for approval else he shall approve and send the purchase order to the supplier. PO acknowledgement : After receiving the PO the supplier send the acknowledgement to buyer and buyer records the acknowledgement. If any ERP is being used for procurement functions then supplier can remotely download purchase orders and can acknowledge the PO.
Advance Shipment Note : The supplier sends the Advance Shipment to buyer as soon as he ships the material to the buying organization. Goods Receipt : When the goods are received at the warehouse of buyer organization, the receiving staff checks the delivery note, PO no etc and acknowledges the receipt of material. After the material is received the same is checked for quantity in case of discrepancy the same is reported to the vendor.
After the quantity verification the material is kept at inspection locations and material inspector is called for inspection of material. If material is rejected by the inspector the same is sent back to the vendor or the vendor is asked for the rectification at the site. The sound material is moved to respective warehouse locations. If the buying organization is using ERP then stock account gets debited and liability account gets credited. Invoice Recording : Vendor send the invoice to accounts department of buying organization for claiming payment.
This invoice is entered in to the system, After the entry of invoice in the system, supplier account gets credited and liability account gets debited. Payment to Supplier : After the supplier account gets credited the payment is released to the vendor. In short : Procure to Pay is the process of obtaining and managing all raw materials needed for manufacturing.Or see our complete list of local country numbers.
Manage your purchase orders more efficiently and find new ways to save money. With our centralized ERP software, you can realize your full purchasing power, negotiate better contracts, and more. Streamline spend analysis, source-to-contract, and procure-to-pay processes by gaining a degree view into supplier relationships, performance, and risks. Pinpoint opportunities for savings and manage the contract lifecycle efficiently on a platform that can keep up with change and adapt to your needs.
Fine-tune invoicing and payables by automating data extraction to eliminate errors and duplication, accelerate invoice processing, and streamline payables. Monitor and analyze procure-to-pay and source-to-contract processes.
Download slices of relevant data to conduct analysis with your favorite applications. Follow global best business practices that account for supply chain regulations, accounting laws, and manufacturing regulations in over 40 countries. Contact Us Call us at. Contact Us E-mail us with comments, questions or feedback.
Home Products. Contact Us. Procure-to-Pay Software. Maximize cost savings across procurement with improved procure-to-pay processes and data. On-premise deployment Integrated procurement and resource planning Unified sourcing and contract management Increased transparency across end-to-end outbound logistics. Contact us. Key Benefits. Previous Next. Simplify basic procure-to-pay processes — from requisitioning to e-invoicing.
Control procurement spend by optimizing inventory levels and consolidating shipments. Boost customer and supplier satisfaction by supporting better supply chain practices. Key Capabilities. Previous Next Operational procurement Streamline spend analysis, source-to-contract, and procure-to-pay processes by gaining a degree view into supplier relationships, performance, and risks. Sourcing and Contract Management Pinpoint opportunities for savings and manage the contract lifecycle efficiently on a platform that can keep up with change and adapt to your needs.
Invoice and payables management Fine-tune invoicing and payables by automating data extraction to eliminate errors and duplication, accelerate invoice processing, and streamline payables.
Procurement analytics Monitor and analyze procure-to-pay and source-to-contract processes. Globalization Follow global best business practices that account for supply chain regulations, accounting laws, and manufacturing regulations in over 40 countries.
Africa and Middle East. Call me now.A few bullets points on each process will be of immense help. Generation of Material requirement: Material requirement can be generated through Sales dept or individual user department. Purchase Requisition: Once material requirement is identified then purchase requisition can be created. Vendor Selection: Once purchasing dept receives quotations from the vendor, it's time for vendor selection to find out the best suitable vendor for releasing purchase order.
During the vendor selection, several factors will be accounted i. Release of Purchase order : the purchase order will be released to the supplier for suppling material on predefined terms and conditions. Followup and monitoring: once purchase order is released the purchasing dept will monitor and followup for the supply. Notifications: The supplier will notify the purchasing dept time to time with the latest updates on supply.
Goods Receipt: On arrival of material, the warehouse people will receive the material and process for goods receipt note GRN. Invoicing: The accounting dept will receive the invoice from the vendor and compare with the purchase order and goods receipt note.
Please refer to link help. It is very informative dicument. Generally any P2P cycle to start with the Requirement arises in the Industry so it starts with for stock materials. This is the general flow of P2P for stock materials.
If we maintain source list vendor records we can compare the different vendors available at PR it self and thje steps 2,3,4 will not be there if we satisfy with the vendor prices available in the source list. Not what you're looking for? Search community questions. This question has been deleted. This question has been undeleted.
Former Member. Posted on Jan 16, at AM Views. Vishnu sunny SA.P2P Cycle or Procure to Pay Process
Add comment. Related questions. Sort by: Votes Newest Oldest. This answer has been deleted. This answer has been undeleted. Posted on Jan 16, at AM. Alert Moderator. You already have an active moderator alert for this content.Procure to Pay, also known as P2P, is the process of obtaining the raw materials needed for manufacturing a product or providing a service, and making payment for these. Every manufacturing concern or service provider needs to run this cycle efficiently if they are to continuously manage their cash flow, build goodwill with suppliers and make profits.
Procure to Pay Cycle flowchart Challenges of Procure to Pay and Their Business Impact Procure to Pay has considerable impact on the business since the process is spread across so many departments that encompass purchase, production and accounting. With the Procure to Pay process being fraught with the possibility of risk and inefficiency, which would have an adverse impact on the business in a competitive market, many companies are now finding ways of streamlining the procure-to-pay process.
Outsourcing key tasks in the Procure to Pay process allows managers to maintain tighter control over the system, and save cost by reducing manpower and closing down redundant and wasteful roles.
Selection of the right Finance and Accounting Outsourcing Services provider which has the experience, talent and technology for optimized invoice and purchase order data processing will enable the outsourcer organization to derive positive business results and the desired advantage in the market. Save my name, email, and website in this browser for the next time I comment.
Go to Invensis. Invensis Technologies. Challenges of Procure to Pay and Their Business Impact Procure to Pay, also known as P2P, is the process of obtaining the raw materials needed for manufacturing a product or providing a service, and making payment for these.
Steps of the Procure to Pay P2P Cycle: The process begins with planning what materials are required, when they are required, and the price that the company can afford to pay for them.
Then the company prepares a list of vendors that they think can provide the materials for them. The company asks each of the vendors to submit a quotation, which includes the price, terms of delivery, quality of materials, and any other information that they need for making their decision. This stage could also involve negotiating with the vendors for the best deal.
Once a vendor has been chosen, the buyers create a purchase requisition form that includes information such as the description of goods and services, department account number, signatures of the authorized managers, delivery instructions and quotation from the authorized vendor.
A formal purchase order is sent to the vendor to supply the goods along with instructions as to the conditions under which they have to be supplied. Once the company receives the goods from the supplier, the purchase department prepares a Goods Receipt.
SAP Procure to Pay Process
This is an important document which can later be used for reconciling if what the seller delivered was indeed what they asked for. The Goods Receipt is compared with the Purchase Order to validate if the two match. If there are any discrepancies, the buyer can contact the seller and post a complaint. Checks are made if the goods are suitable for use or not, if the correct quantity has been delivered, if all the goods meet the ordered specifications, and they are priced according to the terms of the purchase order.
If any goods are damaged then the buyers will have to contact the sellers and ask either for a replacement or a refund. Once the verification of the goods is done, the payment invoice is created and the necessary approvals from the project managers are obtained.
When the company makes the final payments to the vendor, the cycle comes to a close. There are many checks and balances put in place, and the authorizations of numerous managers are required. There are companies that conduct these operations manually and use extensive paperwork thus facing the risk of documentation errors and delays in processing. In some firms there is a lack of communication and cohesiveness between the various divisions, and even among the personnel working in the same unit.
The purchase department might place orders at a price beyond the budget of the finance department.
Invoices might inadvertently get written for goods that were rejected. Orders might be placed for raw materials that the production unit does not need. There could be delays in the documentation travelling across the various departments causing late payments, which might harm the buyer-vendor relationship.Every organization acquires material or services to complete its business needs.
The process of buying materials and obtaining services from vendors or dealers is called procurement. The steps required to procure material forms the procurement cycle. Every organization performs some common sequential steps to procure material in the right quantity at the right price.
This is the first step in a procurement cycle. It is the logical subdivision, where it is determined what material or services are required by the company, and which supplier can fulfill the requirement. A list of requirements is made and then it is approved by a senior authority within the organization.
After approval, a formal list is made that is known as the purchase order with one more level of approval which is sent to the vendor. Purchase order is the formal and final confirmation of the requirements that is sent to the vendor to supply material or services.
A purchase order includes important information such as name of the material with its corresponding plant, details of purchasing organization with its company code, name of vendor, and date of delivery. After processing the purchase order, the vendor delivers the material to the ordering party and this process is called Goods Receipt. It is the phase where the material is received by the ordering party and its condition and quality are verified.
Once the material is verified against the predefined quality, a goods receipt is posted.
Goods receipt can be posted by following the steps given below. Click on Save. Goods Receipt is now posted for the material. Invoice is received from the vendor after goods receipt, and then the invoice is verified by the ordering party. This is the phase where the vendor seller is paid from the company and reconciliation of the invoice and PO is accomplished. Invoice is now posted for the goods receipt. Previous Page. Next Page. Previous Page Print Page.