What procure to pay (P2P) is and how to automate it

Procure to pay (P2P) is the set of steps a company follows from the moment it needs something until it pays the supplier. It connects two departments that often work separately: purchasing and accounts payable.

The stages of the cycle

1. Need and requisition: someone requests a material or a service.
2. Purchase order: purchasing approves it and sends it to the supplier with quantities and prices.
3. Receipt: the warehouse records what arrives, with its delivery note.
4. Invoice: the supplier invoices what was delivered.
5. Matching: the invoice is matched to the order and the delivery note (three-way match).
6. Approval and posting: the validated invoice is posted to the ERP.
7. Payment: it is paid on its due date.

Procure to pay vs source to pay

Source to pay (S2P) is broader: before the order it adds finding and selecting suppliers, negotiation and contracts. P2P starts once you know who you’re buying from. For a mid-sized manufacturer, the bottleneck is usually in the second half of P2P: from receipt to payment.

Where the time goes

• Invoices that arrive by email and are keyed into the ERP by hand.
• Line-by-line checking of invoice, order and delivery note.
• Exceptions (prices, quantities, partial deliveries) resolved by email.
• Approvals waiting for someone to get back from a trip.
• Duplicates that only show up in bank reconciliation.

Metrics worth tracking

• Cost per invoice processed: team hours per invoice multiplied by their cost.
• Cycle time: days from invoice arrival to approval.
• First-pass match rate: share of invoices that match with no intervention.
• Exceptions by supplier: which suppliers create the most work.
• Duplicate or incorrect payments found after paying.

How to automate the accounts payable side

You don’t need to change ERP or roll out a full procurement suite to get started. The highest-return part is usually automating the capture of invoices and delivery notes, the match against the order and the routing of exceptions, leaving only validated invoices in the ERP. That’s what Finaro does.