What is P2P? And How to Make Your Business P2P Seamless and Efficient.
The process between procurement and payment is often complicated. It involves purchase orders, invoices, tracking, budgets, order modifications, payment, and so on. P2P stands for this whole “procure-to-pay” or “purchase-to-pay” process.
P2P is the process a company goes through to obtain raw materials, utilities, or products from suppliers that allow them to offer their own goods or services. Because P2P is so important to your core business activities, it’s essential that you find a way to optimize this process. The more efficient your procurement and payment systems, the better your company will do.
With the appropriate software technology and management systems, you can make procure-to-pay a seamless, efficient process. Automating with software-as-a-service technology makes the entire P2P process run more smoothly. Plus, this type of optimization software results in lower processing costs, fewer errors, and faster turnaround times. In terms of ROI, efficient automation quickly pays for itself by saving your company money and improving core business processes.
Procure-to-pay or purchase-to-pay covers the entire process of requesting or requisitioning items and services. It also includes purchasing, receiving, accounting for, and paying for the goods or services that your company needs. That includes everything from the electric bill, to office pencils, to new computers, to raw materials for manufacturing.
Every company handles its P2P system differently. Depending on how large your company is, a single person or department might handle the entire process. For larger corporations, there’s typically a purchasing and accounts payable department, and possibly a receiving department as well.
Despite these differences, there is overlap in how companies handle the purchasing, receiving, accounting, and paying aspects of the procure-to-pay process. As such, establishing an efficient P2P system is going to have similar benefits for many different types and sizes of organizations in a wide variety of industries. Across the board, automation will be the fastest and most efficient way to improve your P2P system.
The P2P system starts with procurement; purchasing the goods and services your company needs. A modern, efficient automated procurement system provides a variety of benefits.
- Purchase Order Creation. Most automated purchasing software includes a purchase order system that allows for smooth, uniform creation of purchase orders.
- Punch-Out and Item Catalogs. It’s often a challenge to get employees to switch over to using an automated procurement system to place orders. Punch-out and item catalogs are two features that make the PO system as easy as shopping directly from the supplier.
- Buying Controls. Efficient P2P systems often include buying controls or automated review and approval systems that cross-reference purchase orders to set budgets established by the company. This can help businesses avoid overspending, catch purchasing errors, track purchases by department, or identify duplicate or unapproved purchase orders.
- Automated E-mail. Once your purchasing manager approves purchase orders, the software system sends POs directly to the supplier. This cuts down on the time between order and fulfillment and ensures that the vendor receives the correct order.
A robust purchasing system lets your employees create a goods received (GR) document to match with purchase orders when purchases arrive. Receiving adds a layer of spend control while also allowing management to track the timeliness of order fulfillment.
- Goods Received. You don’t have to do receiving for everything. There’s no point in creating a GR for utilities (to give just one example). But if you maintain inventory, purchase perishable items, or receive orders in multiple shipments, then receiving is essential.
- Enable 3-Way Matching. Creating a goods received document lets you check that the purchase order and invoice match what you receive at your company’s location. This makes inventory management easier and helps catch issues with orders more quickly.
Next, your company receives invoices for your goods and services. Automation is invaluable in the accounts payable process when you’re trying to create a more efficient system.
- Invoice Processing. Once you receive invoices from the supplier, an automation system can link them to any associated purchase orders or other documents related to the acquisition. This enables easy review and tracking.
- Automated Payment. You can set up the accounts payable system to completely automate processing for invoices that fall within your custom parameters. In most cases, the system processes, approves, and pays invoices automatically. Only exception invoices require manual processing.
- Audit Trail. Throughout the whole P2P process, each document is recorded through every step. The system also links documents in a way that is easy to access and trace. This will simplify any audit process and make retrieval of past order information easy.
- Improved Insight. A more accurate picture of company finances is another big advantage of AP automation software. Since the system logs all data related to invoices automatically and updates in real time, you’ll be able to monitor cash flow much more easily. You’ll also have easy access to all payables information through the electronic database.
Payments as a Service (PaaS) systems offer a flexible and efficient way for modern companies to handle payment disbursement. It’s a software system that outsources parts of the payments process to make both digital and paper check payments easier for your company.
- Faster Payments. While many companies process payments in batches, PaaS software makes it easy to pay invoices as they come in. This means faster turn-around times and no more late payments. And when you never fall behind on payments, that improves relationships with your vendors.
- Lower Costs. By using payments software, you’ll cut overhead costs and pay based on the number of transactions rather than a flat fee. Your company will also save money by avoiding late fees. You might even be able to negotiate early payment discounts with your suppliers and/or use cash-back charge cards.
- Improved Data Access. As with other Service as a Software systems, PaaS systems record information about your financial transactions automatically. By using this software (especially in combination with Purchasing and Accounts Payable software), you’ll have improved access to all the data surrounding your company’s financial transactions.
- Better Security. Digitizing your payment system using a reliable software company makes your payments more secure. These software companies comply with rigorous data security protocols, and they take care of updating digital security measures as needed. Improved insight into the payment system also makes it easier to prevent and catch fraud.
The NextProcess Difference
NextProcess can help you upgrade your P2P system to be more efficient, simpler, and easier to use. We offer consulting services to help identify and improve areas of inefficiency so that you can enjoy a more resourceful and successful business. Our technological tools for procurement, accounts payable, and payment disbursement management can streamline processes and transform the way you view P2P.
You can gain the advantages of NextProcess’ Software as a Service modules in any one of these three areas, or implement our software in all of them. The software modules work great on their own, and they’re even better together. Our software also integrates seamlessly with existing ERPs for a smooth, integrated P2P process. We’ve designed everything to make your life as easy as possible. Plus, we’ll be right there with you through the entire setup process to make sure your system is customized to exactly what your business needs. Contact us today to learn more or set up a free demo.