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    The document discusses the procure-to-pay process which involves purchasing goods and services. It describes the key steps as requisition, vendor selection, purchase order, receiving goods, invoice receipt, invoice reconciliation, and accounts payable. Maintaining efficient relationships with vendors is important for the process.

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    PTP SOP Download

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    The document discusses the procure-to-pay process which involves purchasing goods and services. It describes the key steps as requisition, vendor selection, purchase order, receiving goods, invoice receipt, invoice reconciliation, and accounts payable. Maintaining efficient relationships with vendors is important for the process.

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    The document discusses the procure-to-pay process which involves purchasing goods and services. It describes the key steps as requisition, vendor selection, purchase order, receiving goods, invoice receipt, invoice reconciliation, and accounts payable. Maintaining efficient relationships with vendors is important for the process.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views8 pages

    PTP SOP Download

    Uploaded by

    mmranadu
    The document discusses the procure-to-pay process which involves purchasing goods and services. It describes the key steps as requisition, vendor selection, purchase order, receiving goods, invoice receipt, invoice reconciliation, and accounts payable. Maintaining efficient relationships with vendors is important for the process.

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    The Procure-to-Pay Process Flow

    Explained

    What Is The Procure-to-Pay Process?


    In simple terms, the Procure-to-Pay process is how an organization purchases the
    raw materials and services needed to do business. For most businesses, defining
    the process begins long before making individual transactions.

    Are you a procurement professional looking to make the most of your company’s
    purchasing and payments when pursuing an optimal return on investment (ROI)?
    If so, you need a well-developed Procure-to-Pay (P2P) process—the approach an
    organization uses to purchase the goods and services needed for doing business.
    Also known as the purchase-to-pay process or Procure-to-Pay cycle, it brings
    together the procurement function with the accounts payable department. This
    process is foundational to the financial health and overall competitive strength of
    a business—especially those seeking to build value while reducing costs. For
    companies of all sizes, defining the P2P process is essential to, and begins long
    before, making transactions.
    Every retailer, manufacturer, or service provider needs an efficient method to
    manage purchasing, cash flow, build vendor relationships, and maximize buying
    power. One of the most practical and powerful ways to optimize the P2P process
    (and build a better bottom line) is through the development of a strong
    procurement plan, supported by a Procure-to-Pay software system.

    The Procurement Plan


    Prior to making transactions, every business should have a procurement plan in
    place to define purchasing—and strong support from accounts payable to ensure
    prompt, cost-effective payments for the goods and services acquired. The plan
    should include detailed identification and pricing information for the goods and
    services needed. Each department, as well as each category of goods and
    services, receives a detailed budget, timeline, and preferred terms. Optimally,
    goods arrive when they are needed and not before, to minimize costly storage and
    maintenance.

    The procurement plan outlines the process of obtaining goods and services, with
    contingencies that will help prevent delays, production shutdowns, or needless
    waste. Some materials can be well defined and automatically ordered when a
    threshold is reached; for example, when a construction company is building a
    house, a new order of wood screws can be automatically triggered when supply
    reaches a specified low.

    For other items, buyers will need to submit a requisition order for approval. The
    procurement plan defines the purchase order approval process for each type of
    requisition, and establishes workflows to minimize delays, waste, and
    inefficiencies. For example, with an automated procurement solution like
    PLANERGY to manage e-procurement and AP, the system sends automatic alerts
    to approvers when a requisition is filed, and the document can be automatically
    routed to the next approver (or alerts sent to others) if the requisition is delayed
    for any reason.

    The procurement plan is also used to establish a list of both standard and
    preferred vendors. Suppliers offering the best price, quality, and most reliable
    service are designated as preferred, while those with less stellar performance
    histories serve as second-tier or contingency vendors. By mapping out a supply
    chain, including contingencies, that also details the best possible vendor for each
    category, procurement teams insulate their companies against delays and
    disasters.

    Every retailer, manufacturer, or service provider needs an efficient method to


    manage purchasing, cash flow, build vendor relationships, and maximize buying
    power.

    Procurement Process Functions And


    Responsibilities
    With a procurement plan in place, the supply chain issues are minimized, and so
    is the work to maintain deliveries. Terms are already negotiated with vendors, a
    master price list is on file, and protocols are defined. But before diving into the
    particulars of the P2P process, it’s important to develop or deepen one’s
    understanding of how procurement works in tandem with its partner, the
    accounts payable department, to organize and execute all phases of the procure-
    to-pay process.

    Procure-to-Pay Process Flow


    While it may originate in procurement, the procure-to-pay process is also integral
    to, and an essential part of, the accounts payable process. From the original PO to
    the payment of the final invoice, both procurement and accounts payable team
    members have a vested interest in ensuring every process is well-optimized for
    savings, efficiency, and building value.

    In fact, the P2P process itself can be broken into three primary phases, set in a
    repeating loop that, ideally speaking, improves with every iteration:

    The Purchase Order Process, during which:


    Purchase requisitions are created and approved.
    Vendors are evaluated and selected.
    Purchase orders are issued for the required goods and services.
    The Receiving Process, during which:
    Goods and services are received or executed.
    For goods, receiving documents are reviewed and logged.
    The Invoice Approval Process, during which:
    Invoices are received and invoice processing completed.
    Invoices are reconciled and cross-checked with the original PO
    and goods receipts or receiving documents (three-way matching).
    Errors are recorded and corrected.
    Approved invoices are paid.

    Removing manual processes throughout Procure-to-Pay will result in better


    process efficiency and cost savings. Having explored the connection between the
    primary phases, let’s take a closer look at the P2P process, start to finish:

    Procure-to-Pay Flowchart

    1. Requisition Order Placed


    Requisition orders are a formal request for goods or services. In cases
    where every item can be defined in advance, most requisitions are defined
    and built in to the procurement plan. Even the most carefully defined
    plans, however, can need additional materials due to spoilage, unforeseen
    events, scope creep from clients, or new ideas to make improvements on
    the original plan. Well-crafted procurement plan budgets have a cushion
    built in for just such circumstances, and requisition orders can be
    submitted later in the process if necessary.
    2. Vendor Selection
    For new orders, the vendor selection process may need to be brought into
    play. Working from a short list of vendors, the procurement department
    sends a request for proposal (RFP) outlining the requirements.

    Suppliers return a bid on the job, detailing turnaround time, price, and
    pertinent material specifications.

    During the process of choosing suppliers, negotiations take place. In


    addition to quality, cost and delivery schedules, the procurement
    department will explore potential advantages such as:

    Year-over-year price reduction


    Quantity discounts
    Future improvement in quality
    Freight and insurance costs
    Compliance requirements must also be considered. The industry may have
    federal standards to meet, and the company may have a social conscious
    agenda endemic to company culture.

    Corporate social responsibility is a rising concern among consumers, and


    businesses are expected to meet certain standards of sourcing in order to
    please their customer base—and avoid needless risk exposure. For
    example, many companies have committed to fair labor and
    environmental standards vendors must be able to meet to avoid consumer
    backlash.

    Once negotiations with all the short-listed vendors are completed and the
    most advantageous deal is identified, a supplier is chosen according to the
    selection criteria outlined in the procurement plan and a purchase order
    is issued.

    3. Purchase Order (PO) Issued


    Once the requisition order is approved, a detailed order form with
    amounts and delivery requirements is submitted. The PO is sent to the
    appropriate vendor for fulfillment.
    4. Receiving Documents Logged
    The vendor delivers the goods or services and the relevant receiving
    document is entered, with line items verified to ensure that everything
    ordered is delivered.

    5. Invoice Received
    The vendor submits an invoice, which is entered into the system.
    Automated systems often support electronic invoicing (eInvoicing)
    through the use of vendor portals.

    6. Invoice Reconciliation
    The invoice is reconciled against the PO and relevant documents from the
    receiving process. In automated systems, the three-way matching process
    compares the purchase order and receiving document with the invoice to
    confirm that the goods were delivered as ordered and billed accordingly.
    Line items that do not match are flagged and reported for investigation.

    7. Accounts Payable
    Invoices approved for payment are routed to AP. Payments are made, and
    the accounting system is updated.

    Maintaining an Efficient Procure-to-Pay


    System
    During the course of a project or calendar period, many things can change, and
    keeping the P2P system in optimal working order requires attention to detail.
    Ideally, the procurement and accounts payable teams maintain constant contact
    with vendors, fostering good working relationships that inspire vendors to
    negotiate in good faith with customers who pay their bills on time and fulfill their
    commitments.

    Anything from natural disasters to political events can cause raw material prices
    to rise or fall, affecting every link in the supply chain. This makes both supply
    chain management and supplier relationship management as high a priority as
    process efficiency and data management for procurement and AP professionals
    who want to achieve truly strategic sourcing while keeping costs low across the
    entire purchasing process.

    Ultimately, however, the true benefit of a comprehensive procure-to-pay solution


    lies in its ability to foster open communication and create total transactional
    transparency between the procurement and accounts payable departments. For
    example:

    Centralized data management, automatic routing, alerts, and


    contingencies streamline the purchase order and invoicing cycles,
    ensuring automatic three-way matching.
    Integration with your existing enterprise resource planning system (ERP
    system) and accounting software brings all your data together in one
    place for leveled, mobile-friendly access for all stakeholders.
    Artificial intelligence and process automation eliminate human error,
    speed workflows, and free staff to focus their time and talent on high-
    value tasks while retaining the ability to investigate and correct issues as
    needed.
    Vendor management is vastly improved through:
    Total data transparency, real-time reporting, and centralized
    contract management.
    A closed buying environment that locks out maverick spend,
    invoice fraud, duplicate/late payments, and late fees while
    allowing for the capture of more early-payment discounts.
    Cultivation of enduring and strategic supplier relationships that
    allow businesses to forge powerful partnerships with their best
    suppliers while trimming bloat from their supply chain by
    eliminating under-performers.

    When both of the key players have the tools they need to analyze and optimize
    spend, vendor management, and workflow efficiency, they can forge a P2P
    process that is truly a source of both savings and value for their organizations.
    What’s your goal today?
    1. Use PLANERGY to manage purchasing and accounts
    payable
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    management, process automation in purchasing and finance, and reducing
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    2. Download our guide “Preparing Your AP Department For


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