Purchase To Pay
Purchase To Pay (P2P) is the term used to describe using internet based technology to pay for goods and services. It is the process of enabling buyers and suppliers in the electronic marketplace to take advantage of technology such as eProcurement and eInvoicing to make the buying and supplying processes more cost and time efficient.
eProcurement moves the emphasis from a dedicated procurement or requisition department to the users. Online catalogues are used to find the required goods and services, which can then be purchased quickly and easily. For more complicated or non-standard purchases, there may be the option to be redirected (punch out) to the supplier’s ecommerce website in order to ensure that the products chosen meet the requirements, and that all required components are ordered.
By optimising the Purchase To Pay process, businesses can experience significant operational and strategic benefits, such as a reduction in processing costs and time, as well as the risk of fraud. There is also less chance of paying invoices twice. Paper and electronic invoices can be matched and processed much quicker and more accurately with an effective Purchase To Pay procedure.
Buyers should take advantage of any early payment discounts offered by suppliers. Many suppliers offer a 2% discount for buyers who pay an invoice within 10 days. This equates to a 2% return for a 20 day investment, and so encourages buyers to pay early. Paying early also increases suppliers’ cash flow and reduces the Days Sales Outstanding (DSO) figure, (the number of days between a sale and payment being received for that sale). The reality is that many companies, both buyers and suppliers, are not in a position to offer or take advantage of these early settlement terms. This means that there are billions if not trillions of pounds, waiting to be paid to suppliers. An improved Purchase To Pay system can help improve the cash flow, and ensure that buyers pay their invoices in a timely manner. This also means that they are using less of their allowed credit, and so will be inclined to spend more, which is beneficial to both buyers and suppliers.
An effective Purchase To Pay system relies on efficient invoice management, so that there are minimal delays in raising, processing and approving invoices. eInvoicing also helps to reduce the delays, as invoices are sent and paid electronically, which removes the delays experienced by the post and waiting for cheques to clear. Productivity is increased as the number of invoices processed can be increased dramatically without the need for additional staff. Reporting becomes straightforward, and can produce the information required quickly and effectively. Audit trails show the actions performed, so in the event of a discrepancy, steps can be accurately traced.
Successful Purchase To Pay systems are often capable of reducing processing costs by up to 50%. Savings are made thanks to the reduction in the number of duplicate invoices and duplicate payments, whilst the risk of paying the wrong supplier or the wrong amount is also reduced. Lost or misfiled invoices become a thing of the past, as they are stored electronically. This also reduces the storage implications associated with paper invoices and purchase orders. Staff can be used in a more effective way, now that they need to spend less time performing data entry and physically sending out invoices and purchase orders.
eProcurement, eInvoicing and electronic trading provide highly impressive cost and time savings for both buyers and suppliers. Improved payment and invoicing processes allow companies to take advantage of the electronic marketplace and improve their turnover and cash flow. With over 2 700 customers and 40 000 end users of their eProcurement solutions, see how ProcServce can help you improve your Purchase To Pay process.
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