Procure-to-Pay (P2P) is a process that involves several steps for a company to purchase goods or services from a supplier.
Here is the basic flow of the Procure-to-Pay process:
- Need identification: The process begins when a department within a company identifies a need for goods or services. The department sends a purchase requisition to the procurement department.
- Vendor selection: The procurement department selects a vendor based on the requirements of the purchase requisition. The procurement department may also negotiate prices and payment terms with the vendor.
- Purchase order: The procurement department creates a purchase order, which includes the details of the purchase, such as the items to be purchased, quantity, delivery date, and price. The purchase order is sent to the vendor.
- Goods receipt: Once the vendor delivers the goods or services, the receiving department receives the goods or services and confirms the delivery. The receiving department creates a goods receipt note (GRN) to acknowledge the receipt of goods.
- Invoice receipt: The vendor sends an invoice to the accounts payable department, which matches the invoice with the purchase order and GRN. If everything matches, the invoice is approved for payment.
- Payment: The accounts payable department pays the vendor according to the agreed-upon payment terms. Payment can be made through various methods such as electronic transfers or checks.
- Reconciliation: The accounts payable department reconciles the payments made with the invoices received to ensure accuracy and prevent any discrepancies.
- Reporting and analysis: The company analyzes its spending patterns, vendor performance, and other relevant data to identify opportunities for cost savings and process improvement.
By following these steps, the Procure-to-Pay process ensures that a company purchases goods or services efficiently and effectively, while also managing its spending and relationships with vendors.