Even with advanced solutions available, many businesses still try to make do with their legacy systems – and manual tools –  when managing their procure-to pay process. Even if work is getting done, it is often prone to error, redundant, inefficient, and slow.

It’s really just a matter of time before countless issues arise and cause damage to a company’s procurement strategy, especially in light of the COVID-19 pandemic where companies need to be agile most of all.

So what does the procure-to-pay process entail? The procure-to-pay workflow is a coordinated set of actions based on the objective of acquiring goods and services at a reasonable cost and in a timely fashion. It begins with need identification and moves on to invoicing and payments. There are several steps, and they need to be executed in order.

Invariably, the procure-to-pay process is one component of supply chain management. Once the required goods or services are obtained, the supply chain department will make sure these goods or services reach the right destinations. Of course, a day in the life is never ordinary. Keep reading to learn more.

Market analysis

Most people will research a company’s goods or services before making a purchase. The same is true for the procurement-to-pay process. The initial step is to perform a market analysis. The goal is to get the best deal possible. In addition, the company’s budget is met.

Often, a procurement manager will look at how a fluctuating market may affect prices. Further, they will also review prices from a list of suppliers. After the comparisons, the procurement manager may send a request for quotation (RFQ) to help make the final decision.

Compliance checks

In the digital era, compliance is one of many areas a company must adhere to based on their industry and location. There are federal, state, local, and global regulations to follow. As a result, the procurement manager must ensure all contracts are in compliance with legal mandates. Moreover, the procurement manager must remain apprised of any legislation updates and revise company policies around procurement-to-pay when needed.

Compare the suppliers

Each supplier has their pros and cons. What’s most important is working with a supplier/s who can meet a majority of the company’s needs. A supplier usually isn’t signed on to a contract without a careful review. Plus, the supplier must demonstrate they can deliver the necessary goods and services as needed and that they are of the desired quality.

Get team members on the same page

Planning out schedules for employees is part of the process with the intent of meeting deadlines. Not to mention, any issues with goods or services need to be addressed immediately. Sometimes this means holding weekly, or daily, meetings to get the team and suppliers on the same page.

Determine the need

For starters, the initial step is to figure out a valid need and the associated business requirements. Then, the procurement team starts work on the terms of reference (TOR) and statements of work (SOW).

Create a formal purchase requisition

Once the TOR and SOW are completed, then the procurement team will fill out and submit the requisition form. The form can vary in procurement whether it be for consignments, purchases, or something else.

Obtain requisition approval

The procurement manager usually approves or rejects a purchase requisition based on whether it meets the need and budgetary guidelines. Not to mention, incomplete requisitions are automatically rejected. This is about focusing on best practices to ensure the company saves money without sacrificing on quality.

Complete a purchase order

The purchase order will be based on a negotiation around payment terms, price, and delivery time. A spot buy may also be executed for unique purchases or unmanaged category buys. The purchase orders will also come from the purchase requisitions.

Obtain another approval

As you can see, there are many approval procedures to go through during the procure-to-pay process. The purchase orders are reviewed for accuracy and legitimacy. Suppliers also have the option to reject, approve, or renegotiate. Usually, POs are sent electronically – they can be entered right into the supplier’s PO system. And once a PO is approved, then a legal contract ensues.

Apply a goods receipt

Now is the time to take stock of the goods or services. Were they delivered on schedule? Are they of the quality promised by the supplier? Do they comply with the contract? There may be other policies in place before creating the goods receipt. Additionally, the goods receipt can be rejected and the process restarts.

Rate the supplier

It is crucial to have reliable suppliers. Based on the goods receipt, performance can be assessed. Again, the procurement team will look for quality, budget, compliance, timely delivery, and several other factors. Any negative ratings will be stored for future reference.

Approve the invoice

Once a goods receipt is approved, a three-way match between the purchase order, the vendor invoice, and the goods receipt is performed. If there are no discrepancies found, the invoice is approved and forwarded to the finance team for payment disbursement. The goods or services are matched against the line items published on the invoice. In the case of inaccuracies, the invoice is rejected back to the vendor with a reason for rejection.

Send the payment

Once the invoice is approved, it is submitted to the accounting/finance department for approval. Payments are then sent based on the terms of the agreed-upon contract. Unquestionably, the payments will be made as one of these types: Final, advance, partial, installment, holdback. Other stipulations accounted for may occur, for instance, when a supplier offers a discount for payments made 10 days after a goods receipt.

Weekly or monthly responsibilities

Outside of the strict procure-to-pay workflow, procurement managers will consistently review purchase orders and potential suppliers for other needs. In fact, needs can evolve and demands will change – as we have seen directly during the COVID-19 crisis. Bid awards will also be created, subject to final approval. Sometimes, procurement managers may also handle the responsibility of creating bid specifications.

Analyze spend

Again, the procurement-to-pay workflow was designed to get the most cost-effective goods and services possible with the required quality. Therefore, the procurement manager will continuously monitor spend – searching for any potential areas of concern such as a supplier changing or raising their pricing structure. Keeping an eye on all purchases helps to conserve resources while meeting the company’s budget initiatives.

Final thought

As you can see, the procure-to-pay process requires a strict adherence to specific actions, guidelines, and regulations. The workflow is ripe for incremental improvement as the world becomes more digitized.

To ensure value development, and success in a post-pandemic world, innovative companies are transitioning to Procure-to-Pay software as a means for addressing inefficiencies and creating an agile environment. Are you ready to streamline your entire procurement-to-pay process? Experience the Premikati difference. Schedule your free demo today.

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