The "Procure-to-Pay" (P2P) process refers to the chain of processes that manages purchasing and payment management in a company. This includes:
- identifying the need for raw materials or finished products,
- searching for suppliers,
- negotiating contracts,
- receiving products,
- verifying the quality and quantity of received products,
- and finally paying the suppliers.
Procure-to-Pay: what impact on cash management?
The P2P process has a significant impact on a company's cash management as it can influence how payments are made and the payment terms. It can be seen in the P2P’s 5 steps :
Identifying the needs
Searching for suppliers
Negotiating contracts
Receiving products
Paying the suppliers
Identifying the need for raw materials or finished products: the first step is to identify the raw materials, finished products or services needed for production or sales. This can be done using supply chain management software or demand management systems.
Searching for suppliers: once the needs are identified, it is necessary to find suppliers who can provide the necessary products or raw materials. This can be done using buyer-supplier matchmaking sites, professional networks, etc.
Negotiating contracts: once the company has found potential suppliers, it can negotiate the terms of the supply contracts with them. It is important to negotiate favorable payment terms for the company while also ensuring that the suppliers are satisfied.
Receiving products: when the products or raw materials are delivered, they must be checked to ensure they meet the ordered quality and quantity.
Paying the suppliers: once the products have been checked and accepted, it is time to pay the suppliers. If the company has negotiated favorable payment terms it may be able to spread the payments out over several months, which can help manage the Cash of the Company.
Therefore, the company can improve its Cash management by reducing costs, optimizing payment terms and improving relationships with suppliers..
What are the benefits to optimise the Procure-to-Pay (P2P)?
The P2P involves managing all aspects of purchasing products or raw materials, from identifying the need to paying the supplier. There are several benefits to optimising it:
- Improved efficiency: by automating and centralizing the purchasing process, the P2P process can reduce errors and duplication of effort, leading to improved efficiency.
- Also, cost savings by negotiating better terms with suppliers and streamlining the purchasing process, the P2P process can help the company save money.
- By streamlining communication and payment processes, the P2P process can help improve the company's relationships with its suppliers.
- By using a single system to manage the entire purchasing process, the P2P process can provide better visibility into the company's purchasing activities.
Optimizing the P2P process is key in managing your Cash. It can be done through automation.
Automating the Procure-to-Pay cycle can help the company improve its efficiency and productivity, reduce costs, have better visibility and tracking of its purchases and payments, improve its relationship with suppliers, and reduce the risk of fraud..
Why and how to automate the process?
There are different ways to automate the P2P process, using purchasing and payment management software or setting up automated work processes. Here are some steps that the company can follow to automate its P2P process:
Evaluate the company's needs
Choose a purchasing and payment management software
Set up automated work processes
Train the staff
Monitor and improve the process
Evaluate the company's needs: before starting to automate the P2P process, it is important to understand the company's needs and determine which tasks can be automated..
Choose a purchasing and payment management software: there are many purchasing and payment management software options on the market, which offer different features. It is important to choose a software that meets the needs of the Company.
Set up automated work processes: once the company has chosen a purchasing and payment management software, it can set up automated work processes for each step of the P2Pprocess. For example, it can configure the software to automatically send notifications to suppliers when an order is placed or when a payment is made.
Train the staff: it is important to train the staff on the use of the purchasing and payment management software and the new automated work processes.
Monitor and improve the process: once the P2P process is automated, the company must monitor and measure it to ensure it is running effectively. If improvements are needed, it can make adjustments to the software or automated work processes.
With its dual banking and accounting approach, theCashlab tool allows better visibility on the P2P process. First, by following Cash coming in and Cash going out with the banking transaction analysis. Then, by managing your WCR ratios and their potential improvements.
To know more, check out our Cash Management software here.
Written by Eléonore Berne, on 09/01/2023.
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