The procure-to-pay process, or P2P process, is a crucial business process compared to others. Everything that your company buys is under its purview, from office supplies and IT services to the raw materials needed for manufacturing. However, because they haven’t yet invested in procure-to-pay optimisation, many organisations can miss out on the value and savings that are concealed within the P2P process.
Of course, having a plan of action is necessary to get the best results. It’s critical to achieve procure-to-pay improvement, develop best practices, and use procure-to-pay software integrated business solutions to help you reach your goals if you want to save costs, increase productivity, and turn procurement into a value creation dynamo for your company.
Procure-to-Pay Optimisation
Procurement and accounts payable (AP) are linked through the procure-to-pay process, which, as you may already be aware, handles each stage of a purchase from buy request to payment of the last vendor invoice.
Historically, the P2P process was solely concerned with cost reductions; procurement teams prioritised the lowest costs to save money immediately rather than long-term strategic advantages that result in lasting value, like favourable terms or benefits from process changes.
However, a growing number of businesses are realising now how beneficial digital transformation can be and how much they can depend on it. Additionally, for procurement teams, this entails employing technology to assess the payables and procurement procedures involved at every stage of the procedure, then streamlining and optimising them for savings and value.
Procure-to-pay optimisation, in its most practical form, is just the process of streamlining every procurement step inside the larger P2P process. To assist you in this endeavour, an integrated procure-to-pay software solution.
Centralised and digitised data management, eliminated paper wherever possible, and eliminated human error so that employees could concentrate on high-level objectives rather than menial duties like data entry.
Utilise automation, advanced analytics, and artificial intelligence to achieve notable increases in speed, accuracy, and efficiency.
Find and seize opportunities to improve transparency and control over spending, eliminating issues like invoice fraud and maverick spending
Using efficient data management and real-time analysis, we can enable better decision-making and more precise and comprehensive financial reporting and predictions.
Assisting in the construction of a robust, adaptable, and resilient supply chain that can prosper in prosperous times and guarantee business continuity in the event of impending disruptions.
Resolve and settle supplier bills promptly, taking advantage of early payment discounts or modifying payment terms as needed to maintain cash flow.
Ensure that every dollar spent yields a substantial return on investment (ROI), and reevaluate procurement to create value while reducing waste and total cost of ownership (TCO).
Key performance indicators (KPIs) for the accounts payable and procurement processes should be tracked, assessed, and adjusted. By incorporating continuous improvement into your workflows, you can be sure you’re constantly obtaining the best value, efficiency, and savings.
Companies that implement these innovations reap significant short—and long-term rewards. In 2017, McKinsey & Company, a research organisation, discovered that utilising digital transformation in procurement led to significant value advantages through increased sustainability, enhanced efficiency, and stronger vendor and internal practice compliance.
Furthermore, a 2018 Hackett Group study discovered that by utilising process automation and other digital transformation tools, the typical procurement organisation may reduce its operational expenses by as much as 45%.
Bringing P2P Optimisation into Practice for Your Company
It’s not as hard as you would believe to reap the benefits of a well-optimised peer-to-peer workflow. If you adhere to a few basic best practices, you’ll be ready to start making savings and adding value.
Conduct a P2P Audit
You must first ascertain your current situation before you can optimise. Conduct an audit of the procure-to-pay process to identify critical data, such as:
- Purchase order processing cycle time and average cost.
- The median expense and duration of invoice processing cycles.
- Percentage of suppliers who accept electronic invoicing as well as the percentage of paper invoices received.
- Total amount of exceptions resulting from mistakes, repeated transactions, etc.
- Recurring obstacles in vital approval processes.
- Handing issues by category (e.g., do poor vendors frequently cause production-critical items to be delayed, logistical.
- Internal controls and established workflows need to be improved.
Pay Attention To The Areas That Most Require Development
You can prioritise the optimisation of those areas once you’ve determined which ones require the greatest assistance (for example, a large volume of invoice exceptions, specific managers or teams that frequently hold up approvals, high average PO processing expenses, etc.). Giving the “squeaky wheels,” some oil can also result in quantifiable gains that you can use to boost organisational buy-in and facilitate the expansion of digital transformation throughout divisions, business units, and your entire company.
Automate, Optimise and Streamline
Removing people from low-value, laborious jobs lets your team members apply their creativity and abilities to strategic endeavours like forecasting and supplier relationship building, which generates value right away. Using multiple orders of magnitude to enhance speed and accuracy offers instant savings.
However, that is only the start.
Process automation is the key to continual improvement. It allows for automatic performance reviews and iteration-specific modifications using procure-to-pay software-integrated business solutions. Therefore, as automated processes improve themselves and produce a plethora of data that can be mined for actionable insights, you will see savings and value increase over time in addition to the immediate gains that are provided.
Final Thoughts:
Using a procurement-to-pay software solution to improve your procure-to-pay procedure is an investment in the profitability, expansion, and competitive edge of your business both now and in the future. You can assist your company in taking major steps towards complete digital transformation and ensure that you’re getting the highest return on investment, minimising the total cost of ownership, and creating value and savings for your organisation by assessing, optimising, and improving your P2P process.
