Procurement forms an integral part of the majority of businesses.
It plays a major role in how your business operates, and what your bottom line looks like.
Following the right procure-to-pay best practices is necessary for better business performance.
If not properly managed, procurement can be time-consuming and confusing.
The good news is that procurement doesn’t have to be difficult at all. With the right digital tools and processes, you can streamline procurement and make sure it adds value to your business.
Follow this guide to help you understand the procure-to-pay best practices.
Procure-to-pay covers the entire process of purchasing goods or services for an organization.
It involves requisitioning, purchasing, managing invoices, and making payments. In other words, every step it takes to obtain new goods or services is covered by procure-to-pay.
If you follow the right procure-to-pay best practices to streamline your procurement process, your business can save money, minimize compliance issues, and make operations more efficient.
In order to apply procure-to-pay best practices, you need to understand exactly how the process works.
While the procure-to-pay process may differ between businesses, here are the general steps that the process involves:
The first step in procurement is to identify the demand for new goods or services.
This entails the organization conducting internal demand identification and determining whether new goods and services are even required. In case a valid need is identified, this step would include deciding what items are required along with their specifications, quality, and quantity.
Internal approvals might be required to approve demand and proceed.
A purchase request is created which covers the official request for procurement of new items after internal demand has been established.
The purchase request needs to be approved by the buying party’s relevant departments such as the procurement team, accounting team etc. to ensure that the demand is valid and the budget is available.
Once a purchase request is approved by relevant personnel in an organization, a Request for Quotation or RFQ in case of goods and Request for Proposal or RFP in case of services is created to float to potential suppliers.
A RFQ or RFP lists all goods or services that need to be procured along with item-specific notes and exact quantities. In addition to these, terms and conditions are clearly stated and general notes and instructions are included.
This entails the organization identifying potential vendors to fulfill order requests. These suppliers may have worked with the buyer previously and already an established relationship with the buyer.
The buyer can also invite new suppliers to submit their quotations against the floated requisition.
Once all offers against floated requisitions have been received, the buyer evaluates each offer on their price terms and other conditions. Offers are compared in a product by product and supplier by supplier fashion.
The most suitable vendor is chosen to meet the demands of the organization.
Choosing vendors should be based on factors like available budget, scope of the requisition, supplier reliability and ability to meet the required quantity within the defined time frame.
Following approval of the purchase requisition, a purchase order is created and sent to the selected vendor.
Once both parties have agreed on the price and additional terms and conditions including delivery and payment terms, a purchase order is sent to the vendor who will need to fulfill the request for goods or services.
The process of purchase order approval may involve multiple levels of approvals, and looks different across different companies.
The next step is for the vendor to issue the goods or services to the buyer.
The purchaser needs to inspect these goods or services and ensure that they have arrived in good condition and confirm that the received quantity matches the ordered quantity.
The vendor sends their invoice to the purchasing organization.
The invoice needs to be properly checked and approved to ensure that they are accurate and free of errors. At this step, three-way matching is conducted to ensure that the buyer has been billed for what they ordered and they have received exactly what they have ordered and are satisfied with the items delivered.
Finally, payment is issued to the vendor from the Accounts Payable department.
The paid invoice needs to be properly recorded in the organization's accounting system.
While the procure-to-pay process may seem straightforward, each step involves its own challenges.
It’s important to use the right tools and procure-to-pay best practices to ensure that each step is executed accurately and efficiently.
To help prevent procure-to-pay from getting confusing or messy, here are a few procure-to-pay best practices to follow:
One of the most important elements of procure-to-pay is having the right vendors on board.
As soon as a company finds a suitable supplier, it's critical that they maintain a positive relationship with them.
If you keep the vendor happy, they will want to continue working with your organization over the long run.
This could have many benefits for both the vendor and buyer. Of course, the vendor can also enjoy long-term sales from your business.
With a strong relationship, you can benefit by getting better service and an easier procurement process.
In order to maintain a productive relationship with the vendor, ensure to make payments on time, provide easy access to vendor portals, communicate efficiently, and make it easy for them to work with you.
This needs to work both ways, so ensure you also monitor the performance of your vendor and document your experiences with them.
Once orders are fulfilled, ask yourselves these questions:
Measuring these metrics through your procure-to-pay system will help you better understand the relationship you have with vendors and whether it's working for your organization.
With strong supplier relationships in place, procure-to-pay will become a far more streamlined process.
Transparency is one of the most important procure-to-pay best practices.
If vendors and suppliers are not always on the same page, or there is miscommunication, every step of the procure-to-pay process can be negatively affected.
By maintaining total visibility in the procure-to-pay process, there will be less need for back and forth communications.
You’ll also be able to gain more useful insight into your procurement spending.
One of the best practices on procure-to-pay is to use a solution with a self-service portal. This lets vendors easily track the status of their invoices when they want, keeping them in the loop and avoiding any confusion.
This eliminates the need for time-consuming communications, and it keeps everyone up-to-date at all times.
You can save a lot of time by streamlining your workflows with automation.
One of the most important procure-to-pay best practices is to automate manual processes that require copious amounts of time and focus.
This includes automating requisition approvals, quotation submissions, invoice processing, or 3-way matching. Switching to automation will make procure-to-pay far less complex and tedious.
It will also result in greater accuracy across your workflows.
Automation can help you eliminate late payments, manage invoices more efficiently, and improve the flow of information at each step in the process.
Organizations should be using a single platform to manage and automate the entire procure-to-pay process from end to end.
A common problem in procurement is maintaining control over spending.
Maverick spend is the term used for when you buy from suppliers and don’t follow the pre-established procurement policy.
Taking full control over this kind of off-contract spending involves a number of steps, and can be tricky to follow without full transparency.
The most effective solution is to use self-service procurement solutions that make sure employees only purchase from vendors who are under contract.
These systems make it easy to find the exact vendor you need. They save time and maintain the correct procurement approach with each purchase.
This is the best way to control off-contract spending and ensure a standardized, easy-to-follow procurement process is utilized.
Keeping all of your procure-to-pay data in one place will streamline the procurement process in a big way.
All relevant data should be easily accessible. It’s also important to avoid data silos to keep the procurement process moving along swiftly.
The best way to do this is to integrate your procure-to-pay system with your enterprise resource planning (ERP) system.
This integration will make all procurement documents easy to access while destroying any data silos.
Integrating procure-to-pay data with your ERP doesn’t only streamline purchasing, but also provides more visibility over your spending.
Using the right procure-to-pay software will eliminate delays, errors, and improve visibility for both parties.
With Proqura, businesses can streamline the end-to-end procure-to-pay process from one place.
Proqura offers a single innovative solution to manage each step more efficiently.
You can eliminate manual paperwork, spreadsheets, and email threads.
From sourcing to making payments, each process is covered by a single platform.
This is the easiest way to digitize procurement to help your business save time, improve accuracy, and avoid wasteful spending.
With centralized purchasing and access to real-time insights, you’ll gain complete visibility into how your company operates.
This results in a far more optimized end-to-end procurement process.
With the right procure-to-pay best practices, procurement becomes easy and efficient.
Following these steps and using the right digital tools can make an enormous difference to the way your business operates.
You’ll save time, save money, improve supplier relationships, and have more control over your spending.
Procurement is one of the most important parts of running any business. Get it right, and your operations will be far more successful.
