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Insights / Procure to Pay / 6 Basic Procure-to-Pay Problems

6 Basic Procure-to-Pay Problems

August 14, 2019 | 4 min read

By looking at common P2P problems, we can come up with solutions.

By looking at common P2P problems, we can come up with solutions.

The procure to pay (P2P) process has always been problematic. Enthusiastic procurement professionals get hung up on frustrating problems or “friction” in the supply chain side of the procure to pay cycle. As the epicenter of spend control, it’s the area to watch closely or risk wasting resources that impact the bottom line.

Research from IT contractors at the Tungsten Network found that for businesses with over 100 employees, there are more difficulties managing the procurement department. In a survey of 422 businesses, the study reported 125 hours wasted on friction issues per week per business. Modern e-Procurement software is racing to address the problems and put money (almost $172,000 in annual expenses) back in your organization’s pocket. Let’s take a look at 6 basic procure to pay problems and how P2P network technology solves them.

1. Three-Way Matching

Accounts payable (AP) does three-way matching to process invoices for goods and services. This process matches the original invoice from the supplier, the internal purchase order (PO) from the procurement department, and the receiving report to decide if a payment should be made. This scrutinizes the quantity, price per unit, and purchase terms to prevent loss due to carelessness or fraud.

Traditionally, this work requires holding three physical documents side-by-side. Friction comes from the time it takes to track down documents and literally look at them. Once matched, problems down the line are blind. The buck stops with supervisors rather than procurement officer approvals.

A cloud-based procure to pay solution eliminates friction by digitizing the process. Documents are available in electronic format to clients and servers at remote locations. Approvals are accountable via e-signatures and timestamps. Advanced solutions include optical character recognition (OCR) which standardizes the details of all three documents so the computer can “read” forms. It means your AP team can work smarter instead of harder.

2. Supplier Enquiries

Another source to pay friction issue is disorganized payment scheduling. Inquiries from suppliers about when they will get paid are constantly trickling in. Left too long, they turn into threats. This forces procurement department professionals into a difficult position as both a payment chaser and people-pleaser.

With digitization, supplier inquiries dry up. Procure to pay systems software provides email and SMS notifications to keep AP on-time with payments. Shared calendars and transparent workflows make it easy to pinpoint stoppage and get things moving.

3. Paper and Non-PO Invoices

As mentioned, digitization solves a lot of friction. Despite sticking to approved purchasing catalogs, sometimes it’s necessary to buy goods through paper invoices and non-PO based invoices. This takes us back to the problem of tracking down documents.

With a procure to pay solution, it’s easy to implement a “no PO, no pay” policy. Vendor invoices can be scanned individually or in batches to a centralized system. Smart sorting pushes digital invoices into PO conversion. Non-standard vendors go into the system correctly and peripheral spending that might fall through the cracks gets eliminated.

4. Lack of Automations

Compliance is another source of procurement friction. Regulations force procurement entities to be meticulous in the face of bureaucracy. This leads to non-contracted spend or ad-hoc purchases in urgent cases where spend preapproval doesn’t fit the timeline. Procure to pay systems automations help by structuring timelines to move faster. Approval workflows cut the process down from a multiple-day process to mere minutes. Electronic purchase requisitions become POs in seconds. E-invoicing is instantaneous. The technology of automation cuts down on massive time waste friction.

5. On-Boarding Suppliers

Enabling suppliers to integrate is a difficulty in human-led on-boarding. Buyers don’t have the big-picture view to leverage a new vendor for multi-product and volume orders. With procure to pay software, the computer system is integrated. Your ERP system data is fed to the P2P solution, which is able to identify hidden cost savings. The computer reviews new vendors against supplier population master data. This means vendor relations are optimized immediately, leading to longer and more sustainable partnerships.

6. Unifying Systems and Processes

You may be noticing a trend. Data sharing is a crucial aspect of P2P software efficiency. When platforms “talk” to each other, it puts everybody on the same page. Sourcing, procurement, and AP can work in parallel instead of in silos. Every process across the system is transparent and unified.

By providing solutions to these 6 basic procure to pay problems, e-Procurement technology is breaking down silos and eliminating P2P friction. If your organization has experienced any of the problems mentioned, it’s time to look into going digital. It’s time to reclaim those 125 hours per week that you’ve been losing.

Learn more about digital procure to pay software on the ProcurePort website today.