Procure to Pay Automation: The Ultimate Guide

Procure to Pay Automation

Procure-to-pay (P2P) can almost be thought of as ‘the business of doing business.’ 

In order to serve your customers, you need to identify various vendors and suppliers that can help you get the job done, and of course compensate them for goods or services. This process is also known as “purchase-to-pay” or “req to check.”

It sounds simple enough. But for anybody who’s actually been involved in the actually P2P process, we know there are a ton of steps involved, which of course means: 

  • Lots of procedures 
  • Lots of collaboration
  • Lots of things can can go awry, including fraud

If you’re swimming in overdue invoices, upset vendors, and tension between coworkers, there’s a light at the end of this tunnel. 

Procure-to-pay automation utilizes technology to help you organize, automate, and control the litany of tasks involved in the P2P process. 

In this post, we’ll illustrate the possibilities of automating the entire P2P process—all the way from procurement to accounts payable (AP). Specifically, we’ll lay out an end-to-end workflow that shows the specific technology options, how those tools integrate, and how data will securely flow from one end of the process to the other.

What Is Procure-to-Pay Automation?

Procure-to-pay automation is a system designed to add efficiency to the processes of vendor evaluation, selection, and payment with the help of technology. P2P automation seeks to use software to eliminate manual tasks, streamline collaboration between departments, and save money through increased accuracy and reduced labor. 

Everyone involved with any sort of business planning is familiar with both procurement and accounts payable, but the two functions are not always in alignment.

The procurement department handles the vendors, the AP department pays the bills. They can be often located in different areas of the office building and can use different systems to execute their work. Therefore if you want to look at ways to automate certain tasks, it’s important to look at the entire procure-to-pay process as a shared goal between procurement and AP teams. And once you start to do that while implementing P2P automation, your organization can enjoy all sorts of benefits such as: 

  • Reduced errors and fraud
  • Enhanced supply chain management
  • Better visibility into business operations
  • Improved compliance with regulatory bodies

Combine the benefits above and you end up with not only more efficient processes and cost reductions, but a new tool to help guide your strategic planning initiatives. 

As with all digital automation, first you need to identify and organize all steps in the P2P process.   

5 Key Steps in P2P Process

We know that every organization is unique and their P2P process may look slightly different, but generally speaking, there are five important steps in the process: 

1. Vendor Selection

The vendor research and selection process is usually done with a predetermined list of vendors or existing relationships. If there isn’t a suitable vendor, sometimes the next step of Purchase Requisition will be the first step.

2. Purchase Requisition

The purchase requisition also referred to as req for short, is the internal process to obtain approval and place an order for a product or service the company needs. This is done through a formal document from the department of the requester. 

3. Purchase Order

The next step is to create a legal document that contains specific requirements and quantities for the vendor, formally called a purchase order or PO for short. Typically, the PO is created within an organization’s enterprise resource planning (ERP) software. 

4. Process Invoices

According to the terms, the vendor will then send the organization an invoice which often comes with the product/service, either via the mail or electronically. When the invoice arrives at the organization, the accounts payable department will verify the invoice with its supporting documentation such as delivery receipts, PO, and any other required paperwork. In the manual P2P process, this often means sending emails to the receiving department to confirm delivery, chasing invoices that may have arrived in any department, and using two screens to match the PO to the invoice. These documents are then passed through the organization for approval.

5. Payment

Once the invoice is approved, a payment will be issued to the vendor and the procure-to-pay process is complete. 

While there may be some variation in the details, most P2P processes look similar to the one described above—nothing new here. But when you add automation into the mix, that’s where it gets interesting. 

Here’s How Procure-to-Pay Processes Look After Automation

Here’s how you can implement procure-to-pay automation into key P2P processes. 

Here’s How Procure-to-Pay Processes Look After Automation

1. Automated & Efficient Purchase Req Processes

P2P automation means working with an ERP or financial software to streamline workflows for the creation and approval of the purchase requisition. Once the approver receives notification in the financial software that a purchase requisition has been made, they simply review then approve or deny the request. 

2. Informed Vendor Selections

P2P automation requires you to have a digital, centralized database of goods and services along with the vendors that supply them. Through an ERP or financial software, automation enables real-time access to orders, delivery, pricing, and performance of vendors to make the vendor selection process easy and informed. Notifications are sent immediately within the financial system for faster decisions. The whole process is tracked and visible so that anyone involved can see exactly where the process stands, which mitigates accounts payable fraud.

3. Automated PO Workflows & Integrated Systems

Upon approval, a PO is created. The PO and the requisition form (along with all the vendor info) are all in the same financial system, usually an ERP. With P2P automation, an API integration can sync your AP software with your ERP and pull open POs for matching covered in the next step. 

4. Streamlined Invoice Processing & Approvals

With AP Automation, the invoice arrives from the vendor to the automated accounts payable system. The data is then automatically captured into a centralized system. If your AP Automation platform is integrated with the ERP, the AP Automation software can automatically pull supporting documents, like a PO from the ERP. AP Automation provides control and visibility over invoice processing where all invoice actions are tracked, including invoice communications, and auditable.

After verifying the invoice, AP can route the invoice for approval to the appropriate parties to review and approve the invoice. With all the context necessary provided on the centralized invoice, approvers can ask any outstanding questions in the AP Automation system or approve the invoice. Either outcome, both situations create for faster invoice decisions. 

5. Processing Payments

Upon approval of the invoice, the last thing to do is release for payment. Some AP Automation platforms will let you choose how you want to process payments while others force you to use their payment solution. If the payment is processed through the AP Automation platform or your ERP system, payment agnostic AP platforms will automatically push the approved invoice into your system, or push payment information into the system. This depends how your organization decided to process payment, which is a perk given the payment freedom from some AP Automation platforms

As you can see, the process itself isn’t that different, but the tasks that are required to get things from one step to the next are. Procure-to-pay automation is your key to deal with the overwhelming amount of data created in the process, increasing visibility and oversight, and identifying and eliminating bottlenecks in the workflow. 

Now that you have an idea of how an automated procure-to-pay process might look, here’s how you can bring it to life with the right software and systems. 

Software to Automate your P2P Process

Software to Automate your P2P Process

When it comes to choosing the right software to automate your P2P process, the first thing you need to realize is that it’s not a binary situation—there is no one perfect platform for everyone and everything. 

Instead, what you’ll need to do is break down your overall P2P process and find manual tasks that you can automate. Most P2P processes have three main parts: 

  1. Procurement
  2. Invoice Processing
  3. Payment

The majority of procurement tasks will likely take place in an ERP, so you can start there. Look for any bottlenecks, sources of frustration from your team, or errors that seem to occur way too often. We suggest looking into solutions that provide you the flexibility to work the way your organization works, all the while integrating with its systems. Break down each task involved and see if there is any room for improvement: 

  • How are you evaluating and selecting vendors?
  • How long does a purchase requisition take on average? How often are they approved?
  • Is it easy to create accurate purchase orders? 
  • How long does invoice processing take? How about invoice approvals?

The other thing to evaluate inside your ERP is how efficient is the tool? Technology has progressed significantly in the last several years, so ensuring your solution can handle the pace of the modern office environment is a must. 

Invoice processing is a crucial step in procure-to-pay automation—if vendors aren’t getting paid on time, they’re not likely to continue working with your organization. 

But as anyone who works in accounts payable knows, there are lots of tasks related to invoice processing that are tedious, time-consuming, and error prone. Things like data entry, invoice approvals, three-way matching—there are so many topics that we’ve covered in-depth on our blog that we even have an entire section for invoice management with a focus on automation. 

Of course, the P2P process isn’t complete until you’ve issued the payment to the vendor. The key tasks where automation can help here are enhancing the payment approvals workflow, issuing electronic payments, and updating your accounting system, and AP Automation system if paid outside. 

So the question is: 

Should you tackle these three areas of your procure-to-pay process all at once with a single tool? 

Maybe, but for many organizations, no single tool will provide the flexibility to effectively manage all three areas of P2P. This is why we suggest diving into each area, finding out where your processes are broken, and start looking for automation solutions to streamline those workflows. 

Stampli has been named to the G2 Grid Leader Quadrant again for Summer 2020, in the Best AP Automation Software. Invoice management is our focus, but we’ve specifically designed our platform to work cohesively across procure-to-pay automation. We offer seamless integrations with popular ERPs, accounting systems, and provide your organization with payment freedom which aligns to your unique P2P process.  

If you’d like to see how Stampli fits into your procure-to-pay automation plans, feel free to chat with one of our AP Heroes!

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