P2P, B2C, B2B, and AP are just a few of the many acronyms that individuals just starting to research procurement and procurement technology may be exposed to and need to learn more about. As businesses move back to normal operations, these acronyms become important as the purchasing team begins to see opportunities to automate processes that have been historically manual and were revealed to have limitations when business was virtual.
Over the next few blog posts, we’ll go “back to basics” for those of you who may be starting research or perhaps just entering the area of procurement. We’ll discuss a few common terminologies and processes in procurement and where BuyerQuest fits.
Arguably the broadest topic would be Procure-to-Pay or P2P.
What is the Procure-to-Pay Cycle?
The Procure-to-pay cycle represents those processes associated with the acquisition of goods or services for the business. It encompasses the steps and controls needed to make the purchase.
The procure-to-pay cycle typically involves five key steps.
- The employee selects the good or service and creates an initial requisition, typically from an approved vendor.
- That requisition is then sent to the appropriate manager(s) for review and approval of the requisition.
- Once the requisition has been approved, a purchase order is created and sent to the corresponding vendor (supplier).
- The supplier will ship the item to the user and also send an invoice for the amount that was shipped. Either the initial requisitioner or another approved employee will receive the items, and
- Finally, the Accounts Payable team will match the vendor invoice to the receipt and the original purchase order. If all three match together, the invoice will be paid.
Why is Procure-to-Pay Important?
The procure-to-pay cycle is critical to acquiring goods and services for the business to continue operations. It is also an area, that when executed properly, can drive savings on those goods and services.
Buying for the business is not the sole responsibility of the purchasing, or Procurement, department. Most departments need to make purchases for materials, parts, or services that are necessary to achieve their departmental goals. Procurement, while not the buyer, still plays the important roles of negotiating the best rates with suppliers and ensuring purchases go through the proper approvals and workflows.
In manual environments or environments where the purchasing technology is complex, users often find ways to acquire the product or service they need outside of the approved purchasing process. Off-contract purchases are generally a higher cost. This “maverick spending” directly impacts Procurement’s savings efforts and makes it difficult for Procurement to realize their corporate savings goals.
A successful business needs a well-defined procure-to-pay process with technology that supports the process, includes the appropriate approvals workflows, and encourages users to buy within the technology.
How Does BuyerQuest’s Procure-to-Pay Technology Help?
Procure-to-pay systems manage the creation and approval of a requisition, the purchasing communication (purchase orders sent to vendors), receiving, and the payment (settlement) for goods and services, typically through an invoice. These technologies automate and streamline the buying process for efficiency and compliance.
Unfortunately, many procure-to-pay technologies can be difficult for casual users, with cumbersome steps or complex methods to find the right product. BuyerQuest is different.
The BuyerQuest platform is designed to encourage user adoption. By developing our technology much like a consumer-based website, users find interacting and buying in BuyerQuest similar to buying at home. A simple, intuitive search makes it easy to find and purchase the right product from an approved vendor, with all the approvals and workflows. BuyerQuest streamlines the payment process, eliminating cumbersome, manual steps.
For organizations with a large number of users making purchases from a large number of vendors, it is highly recommended that a procure-to-pay software solution, like BuyerQuest, be used so that the procurement process can be executed efficiently with repeatability and auditability.