Procure-to-Pay Process: What it is, Benefits, and Steps Involved

The procure-to-pay process doesn’t mean the procurement process. It is a subset of procurement that integrates purchasing and accounts payable.

Traditionally, the procurement process is scattered across the business, and the procurement team needs help to gain visibility or control. The employees purchase from different vendors, the approval process is chaotic and delayed, the stakeholders are stuck in email threads to review the expenses, and the procurement team struggles to get an overview of the organization’s needs.

Procuring the best goods and services becomes problematic since the team is left with open information loops. As a result, it spends more time optimizing the procurement cost and improving the bottom line.

What is the Procure-to-Pay Process?

The procure-to-pay process streamlines the scattered procurement parts to combine purchases and payments. Instead of a process spread across different software, the procurement process shifts to a centralized platform.

The employees get a dedicated platform to raise purchase requests and obtain approvals. The platform notifies stakeholders, such as managers, legal teams, finance teams, IT teams, and other relevant decision-makers to review and approve the proposals. As a result, the procurement team seamlessly moves to the vendor evaluation and negotiation stage without worrying about approvals or delays. The finance team efficiently handles accounts payable since the purchase and payment process is integrated.

So, while earlier, the purchases were handled solely by the procurement team and payments solely by the finance teams, the procure-to-pay process gives both teams an overview of the process from start to finish. In this post, we will discuss how this procure-to-pay process helps you optimize your procurement function and improve your bottom line.

Why Do You Need a Procure-to-Pay Process?

The procure-to-pay process is not just for your finance team or procurement team. It helps the entire organization to gain resources efficiently. Here are eight ways that demonstrate how moving to a streamlined process benefits you:

1. Visibility

All the relevant stakeholders get visibility into the process and the status. Be it the employee, managers, finance team, legal team, IT team, or procurement team — each one can track the progress without delving into multiple email threads. Additionally, teams get insights that help procurement teams optimize costs with data-driven decision-making.

2. Compliance and Control

You can implement advanced controls, such as customized approval workflows and spending budgets, without micromanaging the teams. You can successfully enforce internal control over financial reporting without creating unnecessary team resentment. 

So, for instance, if any expenses or purchases beyond $50,000 require additional approval from the legal and IT team, you can easily configure those controls within the approval workflow.

3. Streamline Workflows

The traditional process demands the employees to go from one office to another or spend days on email and Slack conversations before the managers give the green signal. At times, approval of a critical stakeholder is missed, causing delays and disrupting the workflow.

With the procure-to-pay process, you can create custom workflows depending on the purchase category, department, amount, etc. This accelerates workflow, and all the relevant stakeholders get notified right away.

4. Centralized Management

The procure-to-pay process integrates purchases and payments to bring all the critical information on a single dashboard. As a result, any discrepancies in the procurement process are identified in minutes. The entire procedure accelerates the real-time visibility of each stage.

5. Reconciliation

A centralized management system makes collecting and storing documents easy; additionally, since it integrates purchases and payments, the information syncs across accounting systems and ERPs.

During the audit season, this becomes a blessing where the finance team doesn’t have to chase teams for complete records. Also, it becomes easier to store and lock all the transactions and share these records with external parties.

6. Risk Management

The procurement operation is prone to financial, operational, and reputational risks. With the procure-to-pay process, teams can efficiently manage the vendors, purchase requests, approvals, and payments on a centralized platform in real time. It reduces the risk of fraud, ensures policy compliance, and provides visibility into spending patterns without burdening any team.

7. Insights

You can easily see the inside out of your procurement process, whether you want to know how much the marketing team spends or which vendor costs you the most. It makes it more convenient to reduce procurement costs and optimize purchases to improve the bottom line. Also, as all the information is centralized, there are no gaps or missing loopholes, providing complete transparency of your expenses.

8. Invoice Management

The procure-to-pay process ensures that all the invoices are captured and extracted into a centralized platform. This facilitates two-way and three-way matching without causing delays. Moreover, the reconciliation process becomes easy as all the records are systematically recorded.

So, whether you receive an invoice via email, WhatsApp, or physical copy, you can easily add it to the system without risking losing an invoice.

What are the Stages in the Procure-to-Pay Process?

The traditional procurement process has over nine steps strewed across different platforms. These include identifying goods and services, purchase requests, vendor selection, negotiation, purchase orders, inspection of the goods received, three-way matching, approvals, and payment and reconciliation.

While the procure-to-pay process doesn’t alter these stages, it integrates them for a streamlined workflow. So, earlier, if the approvals took days or weeks, keeping employees and the procurement team on hold, now it only takes a few minutes or hours. You centralize the procurement process and save money and time.

Here are five key stages in the procure-to-pay process:

1. Purchase Request

Employees no longer need to travel from one office to another, seeking approvals manually from managers. The streamlined procure-to-pay process gives employees a centralized dashboard to raise requests and specify their needs. It helps the procurement team to understand what the employee needs as well as examine the purchase details. Moreover, the stakeholders can quickly approve or reject the requests from the dedicated platform.

Administrators add customized approval flows to enforce internal policies. They create trigger-based approval workflows based on the expense amount, category, and department to accommodate intricate hierarchies.

For instance, they have the option to create separate workflows for expenses below $5000 and those exceeding a certain budget. Similarly, they can add specific stakeholders to the custom workflows for minimum friction and delay. 

2. Purchase Order

While the vendor evaluation, selection, and negotiation happen on dedicated ERPs, the procure-to-pay process enables you to bring all this information on a consolidated platform. You maintain a synced and consistent database to make purchases faster and more secure.

Pluto integrates with your ERPs and allows you to maintain a centralized vendor database. You can add the vendor directly to the platform and systematically record information. You can add a field in your approval workflow to determine whether the employees are purchasing from a vendor list or a new vendor.

A systematic list helps you consolidate expenses and optimize costs. Moreover, ordering becomes more accessible with a unified platform for raising and approving purchase requests and maintaining an ERP-synced vendor database.

3, Invoice Management

Traditionally, vendors send invoices to a dedicated email or an address. The employees send them for approval and payment. It takes days to clear the expenses. Additionally, the accounting team spends considerable time and energy on maintaining records.

The procure-to-pay strategy reduces this effort and streamlines the procedure. It captures and extracts the invoice from the emails and attaches to a dedicated purchase request and order. This helps the teams match the purchase order, invoice and goods received note (GRN) without juggling multiple platforms.

It pulls all the information with optical character recognition (OCR) technology, reducing manual data entry. Since this platform syncs with the accounting system, the accounting team spends minimal time on data entry.

4. Payment Processing

Processing payments becomes a task when the finance team has to chase employees for invoices and wait for approvals and verification. The procure-to-pay technique centralizes the entire process, giving real-time visibility and helping finance teams make timely payments. 

Moreover, with Pluto, you can integrate your procurement software with the payment gateways to ease the payment process further. Also, you get better Forex rates than banks, helping you save more money. Overall, with the approvals and invoices streamlined, payment processing becomes easy.

5. Reconciliation

Reconciliation is the hardest part, even when you perform the data entry and data sync monthly. You risk losing documentation and creating gaps in the records.

The procure-to-pay process consolidates the entire procurement cycle to bring all the critical information on a single platform. There are minimal gaps; records are up-to-date due to real-time tracking and recording.

With Pluto, you can integrate with platforms like MS Dynamics, Oracle Netsuite, QuickBooks, etc. So, with your ERPs and accounting software synced, you can easily record all the transactions digitally and securely.

Pluto further enables you to lock the transactions to avoid fraud once approved. Moreover, you can create view-only access for your records to simplify auditing for external parties.

Improve Your Bottom Line With the Right Procure-To-Pay Solution

Overall, the procure-to-pay process helps you automate your procurement process without changing your approach too much. You just need to find the right solution that assists your procurement process. 

We discussed more about this in our procure-to-pay solutions post, where you will find what procure-to-pay software does and how to pick the right one.