As you strive to grow your startup, you should always pounce on every opportunity to streamline processes and improve efficiency. And when it comes to streamlining processes, no area is riper for improvement than the procure-to-pay process. A well-executed P2P strategy can make all the difference when procuring the materials and components you need to build your products.
Sure, you might think, "Procurement is a necessary evil — but it's not something that can be fixed." But that's where you'd be wrong. Several best practices can dramatically improve your procure-to-pay process to ensure it’s as efficient and effective as possible.
Below is a detailed explanation of what P2P processes are and the best practices to embrace. So, if you're ready to learn how to take your procure-to-pay game to the next level, read on.
What Are P2P Processes?
P2P processes refer to all the events and actions a business undertakes when acquiring goods and services from vendors. These include the steps a company must complete to procure goods and pay suppliers.
While P2P processes can vary from company to company, they typically follow these steps:
- Purchase requisition
- Purchase order creation
- Selecting a supplier
- Receiving goods or services
- Matching invoices to the purchase order/requisition
- Invoice approval
- Paying suppliers
Although the steps in a P2P process might seem straightforward, there are often several bottlenecks that can severely impede efficiency and effectiveness, especially if you handle everything manually. That's why it's vital to transition from paper-based P2P processes to digital solutions that automate critical steps in the process.
Best Practices for Streamlining Your P2P Process
There are several best practices you can adopt to streamline your P2P process. These include:
Automate Using P2P Software
P2P automation involves using software to automate key steps in the procure-to-pay process. Robotic process automation will help you automate repetitive tasks in the procurement process. Choose procurement software that offers a wide range of features to streamline your process.
These features include requisition management, purchase order management, supplier management, and AP automation. Automation also involves using electronic invoices as they are processed faster and more accurately than paper invoices.
Ensure Transparency and Traceability of Your P2P Processes
Transparency means having visibility into every step of the process so you can identify bottlenecks and areas for improvement. To achieve this, consider using a digital procurement solution that offers a complete view of your procure-to-pay process. This will enable you to track spending, see which suppliers are performing well, and identify areas of the process that need improvement.
Traceability ensures that your procurement team complies with internal policies and external regulations. A digital solution will help you achieve this by providing a complete audit trail of every step in the process.
Foster Collaboration Between AP and Procurement
Traditionally, the accounts payable (AP) and procurement departments have been siloed. However, these two departments should work together to streamline the procure-to-pay process.
One way to foster collaboration is to use a digital solution that offers a shared platform for AP and procurement. The platform will enable both departments to view the same data and make decisions based on the same information.
You should also encourage communication between AP and procurement. Hold regular meetings to discuss process improvements, new technologies, and other topics of interest. By working together, you can improve the efficiency of your P2P process.
Prioritize Supplier Engagement
By engaging with your suppliers, you can improve the quality of their products and services. Additionally, supplier engagement will enable you to resolve issues quickly.
There are several ways to engage with your suppliers. One way is to use procurement software that offers supplier portals. These portals give suppliers a self-service platform to view purchase orders, invoices, and other data.
Another way to engage with your suppliers is to hold regular meetings. During these meetings, you can discuss process improvements, new technologies, and other topics of interest. Engaging with your suppliers will help you build strong relationships and improve the overall quality of your P2P process.
Measure and Improve Your P2P Process
Once you've implemented the best practices discussed above, it's essential to measure the performance of your P2P process. This best practice will help you identify areas of improvement and make changes to the process as needed.
There are several metrics you can use to measure the performance of your P2P process. One is the invoice processing time, which measures the time it takes to process an invoice from start to finish.
Another metric is payment terms' compliance, which measures the percentage of invoices paid on time. Finally, you can measure the number of errors in the P2P process. These include data entry errors, purchase order errors, and invoice errors.
Embrace Best Practices in Your P2P Processes
The procure-to-pay process is a critical part of any organization. Your supply chain and procurement processes will run more smoothly if you streamline your P2P processes using the above best practices. So, try them today and see how they can improve your organization's overall performance.