Procure-to-Pay: How a Modern Solution Can Drive Cost Savings and Efficiency

Did you know that companies implementing a modern Procure-to-Pay solution can reduce their procurement costs by up to 30 percent? The reason: Procure-to-Pay (P2P) is a value-adding process that covers the entire procurement cycle from ordering to payment. In this article, you'll learn exactly what Procure-to-Pay is, how it works, and what benefits a digital solution like Agicap can offer your business.

Definition: What is Procure-to-Pay?

Procure-to-Pay (P2P), also known as Purchase-to-Pay, refers to an integrated process within procurement that encompasses all steps from identifying a need to the final payment to suppliers.

The P2P process includes several phases:

• Needs identification: The process begins with identifying a need for goods or services. This can occur across various departments within the company that require specific materials or services.
• Ordering: After identifying the need, a purchase order is created and approved. This is then sent to suppliers. In modern P2P systems, this step often occurs electronically, significantly reducing processing time.
• Order processing: Suppliers receive the order and begin fulfillment. This step involves providing the ordered goods or services within the agreed timeframes.
• Goods receipt and inspection: Upon receiving the goods or services, an inspection is carried out to ensure the delivery meets the requirements and specifications. This step is crucial to ensure that only properly delivered and specified items are paid for.
• Invoicing: Suppliers issue an invoice for the delivered goods or services. The company reviews this invoice and reconciles it with the purchase order and goods receipt.
• Payment: After successful verification of the invoice, payment is made to the suppliers. This can take varying lengths of time depending on payment terms and agreements.

Why Use a Modern P2P System?

The "2023 Procurement Value Measurement Study" by the Hackett Group shows that inflation and recession were the biggest economic challenges of 2023. These issues also affect procurement organisations, which face the task of reducing costs and maximising the value of their processes. In this context, cost savings and value measurement are crucial factors for your success.

A modern Procure-to-Pay system (P2P system) provides the necessary infrastructure to meet these challenges. Through automation and improved transparency, a P2P system enhances financial sustainability and secures long-term profits. This demonstrates that P2P systems contribute significantly to overcoming economic disruption successfully.

How Does Procure-to-Pay (Purchase-to-Pay) Work?

The Procure-to-Pay process involves several key phases that interlock to effectively and transparently manage the entire procurement cycle. Each phase plays a clear role, as goods and services must be paid for on time through a functioning cash flow to ensure seamless procurement.

Cloud-based P2P applications, e-procurement, and digital source-to-pay solutions provide the infrastructure to comprehensively manage the procurement process across the entire company. We'll explain the individual steps in detail:

1. Needs Identification

Analysis of needs: Identify required goods or services across various departments.

Approval: Ensure the need is approved by management to avoid unnecessary expenditure.

2. Supplier Selection and Ordering

Supplier selection: Evaluate and select suitable suppliers based on criteria such as price, quality, and delivery time.

Ordering: Create and transmit the order to selected suppliers. In modern P2P systems, this typically occurs via e-procurement platforms that automate and accelerate the process.

3. Goods Receipt and Inspection

Goods receipt: Receive the ordered goods or services.

Quality inspection: Verify that the delivery meets specifications. This is crucial to ensure that only flawless products are paid for.

4. Invoice Reconciliation and Verification

Invoice reconciliation: Compare the received invoice with the purchase order and goods receipt.

Approval: Release the invoice for payment after all details have been verified.

5. Payment

Payment approval: Authorise the payment through financial management.

Payment execution: Carry out the payment to suppliers according to agreed payment terms.

Benefits of a Procure-to-Pay Solution

The digitalisation of the P2P process brings numerous advantages. By implementing Procure-to-Pay software, you primarily benefit from the following:

1. Reduction of manual tasks:

E-procurement software automates many manual tasks. This automation improves workflow and reduces errors.

2. Faster transactions:

Automated systems can process orders and payments more quickly, positively impacting process duration.

3. Real-time overview:

Digital solutions provide real-time data across the entire procurement process. This helps manage purchase requisitions and identifies issues promptly.

4. Improved decision-making:

Transparency, including access to detailed analyses and reports, aids in strategic planning and decision-making.

5. Spend optimisation:

Through accurate needs analysis and automated processes, companies can optimise their expenditure and achieve cost savings.

6. Error prevention:

Automated checks and payment reconciliations minimise the risk of errors and fraud.

7. Effective communication:

Digital platforms facilitate communication and collaboration with suppliers, leading to better business relationships.

8. Enhanced supplier relationships:

A well-functioning P2P system ensures timely payments, increasing supplier satisfaction.

Example: Procure-to-Pay with Agicap

A concrete example of successful implementation of a Procure-to-Pay system is Agicap. We offer a software solution specifically developed to optimise cash flow and liquidity management. By integrating Procure-to-Pay functions, the software enables seamless management of the entire procurement process.

Optimise Your Cash Management

Companies can more accurately control their expenses, automate payment processes, and create precise liquidity forecasts. Agicap's solution demonstrates how businesses can both save costs and improve their overall financial planning and control by digitalising their P2P process.

Agicap's Functions as a Procure-to-Pay Tool

Agicap offers a range of features that make it an attractive P2P application and could even be considered as a replacement for traditional P2P systems. Its specialisation in liquidity management, easy integration and use, as well as automated data aggregation make Agicap a powerful spend management software for businesses.

As a foundation for cash flow optimisation, it provides detailed real-time insights into the financial situation. The platform is user-friendly and can be seamlessly integrated into existing ERP and financial systems, facilitating implementation.

Agicap's flexibility and quick adaptability to a company's specific needs are particularly advantageous in rapidly changing markets, which have become increasingly common since the COVID-19 pandemic. Through real-time monitoring of financial flows and precise forecasts, Agicap helps companies plan their expenses and ensure they have sufficient liquidity to meet their obligations.

With these functions, Agicap complements traditional P2P systems by enabling more comprehensive control and optimisation of the entire procurement process while acting as modern forecasting software.

Additional Benefits of Agicap

• Comprehensive financial management: Complements P2P functions with strong liquidity management.
• Real-time monitoring and forecasts: Provides precise data for expense planning and ensuring liquidity.
• Improved decision-making: Offers up-to-date and accurate data for informed decisions.
• Cost control and efficiency improvement: Automates financial processes, reduces manual effort and error susceptibility.

Through these advantages, Agicap helps businesses optimise their costs and revenue management and effectively manage their liquidity. While traditional Procure-to-Pay systems cover the entire procurement process from order to payment, Agicap offers additional depth and precision in financial management.

Conclusion: Cost Savings Through a Modern Procurement Process

The future of the Procure-to-Pay process lies in the full integration of digital technologies. Companies that adopt modern P2P solutions early will secure a decisive competitive advantage.

While competitors continue to struggle with manual and inefficient processes, you can better utilise your resources, reduce operating costs, and strengthen supplier relationships by implementing a Procure-to-Pay solution like Agicap.

FAQ: Frequently Asked Questions about Procure-to-Pay and Procure-to-Pay Software

What is a Procure-to-Pay process?

A Procure-to-Pay process encompasses all steps from needs identification through ordering and goods receipt to invoice verification and payment.

What is S2P?

Source-to-Pay (S2P) is a comprehensive process that integrates supplier selection (sourcing) and the entire procurement and payment management.

What is meant by Purchase-to-Pay?

Purchase-to-Pay (P2P) is synonymous with Procure-to-Pay and describes the complete procurement cycle from ordering to payment.