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How Procure-To-Pay Process Flow Works

How Procure-To-Pay Process Flow Works

All businesses require a reliable process for purchase management, spend analysis, cash flow control, and income maximization. To do so, the company needs to go through a series of steps collectively called the procure-to-pay process.

All businesses require a reliable process for purchase management, spend analysis, cash flow control, and income maximization. To do so, the company needs to go through a series of steps collectively called the procure-to-pay process.

It is a multi-step process that includes procurement, order management, and accounts payable. However, many are unsure what a procure-to-process flow is. If you’re one of them, keep reading. 

Procure-To-Pay Process Flow

The procure-to-pay process flow is usually broķen down into three primary steps that include purchase order management, document management, and invoice approval. Let’s briefly explore them one by one.

Purchase Order Management

The first step of PO management is placing purchase requisitions. Businesses often use built-in, pre-defined purchase requisitions for items that can be defined in advance. Of course, they need well-informed procurement plans that can protect them against spoilage, unpredictable accidents, and spontaneous ideas that can add to the materials that’ll be needed.

In addition, companies need to find the right vendor for new orders. After creating a shortlist of candidates, the procurement department lists all the requirements for the optimal supplier. Suppliers in turn place their bids, determine turnaround time, and the relevant material specs.

After a series of negotiations with all vendors on the shortlist, the optimal vendor will be selected based on the compliance requirements and the criteria listed in the procurement plan. Now, it’s time to issue and approve a purchase order form, detailing specific item lists and delivery requirements. Thereafter, the order is delegated to the vendor for fulfillment.

Document Management

This is the second step of the procure-to-pay process flow, which is more specifically related to receiving goods and implementing services. Moreover, this is the step to review and log all documents that relate to receiving goods.

After the selected vendor provides the products and the services, all the relevant documents are logged in the database and all item deliveries are verified one by one to make sure everything is delivered as planned.

Invoice Approval

The third step of the procure-to-pay process flow starts with receiving an invoice from the vendor and entering it into the system. Automated solutions handle this in a process known as e-invoicing.

Next, the system will check the invoice against the PO and other docs to make sure that item delivery and billing match. If any line item doesn’t match in terms of delivery and billing, it’s flagged and submitted for review.

Finally, all approved items that match are submitted by the finance department as an invoice to accounts payable. Once the payment is made and the transfer is verified, the accounting system will be updated accordingly.

Bottom Line

Procure-to-pay is one of the surefire ways to improve the bottom line as well as customer satisfaction and supplier relationships. With a reliable procure-to-pay solution, companies can minimize issues throughout the supply chain, find the right vendors, plus improve delivery time and accuracy.

Penny offers some of the most flexible and affordable procure-to-pay solutions able to be tailored to fit your budget and stage of operation. We offer all of the above benefits and more to help you maintain an optimal relationship with suppliers and customers. Please don’t hesitate to contact us. Our team of experts is ready to answer all of your questions.

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