How to optimize procure-to-pay processes?
Dated procurement solutions and practices are costly, ineffective and abhor flexibility. It has been observed that fragmented and siloed procurement software end up complicating procure to pay processes rather than making it efficient. A recent study by leading procurement insights report suggests that more than 70 % of businesses prefer to use manual processes or semi-digital tools to handle their procure to pay functions. The implications of using archaic methods to run procure to pay processes are catastrophic to the bottom lines of businesses. It is therefore important to optimize procure to pay processes by choosing the right solution for your business needs.
What is Procure to Pay process?
A procure to pay process involves integrated activities intended to execute fulfilment of goods and services in a time-bound fashion and at reasonable price points.
A procure to pay process flow, ideally, involves the following nine steps :
Step 1 - Identification of Needs
Step 2- Initiation of Requisitions
Step 3- Approval of Requisitions
Step 4- Creation of Purchase Orders
Step 5- Approval of Purchase Orders
Step 6- Goods Receipt
Step 7- Evaluation of Supplier Performance
Step 8 - Approval of Invoices
Step 9 - Payment to Vendors
Procure to Pay Optimization
The procure to pay process is associated with linking of procurement and accounts payable function accounting for every purchase, starting from the activity of requisition to the payment of invoice to the vendor. Procure to pay optimization involves revamping procurement functions with the help of technology to improve profitability and sustainability of the business.
Listed below are few indicative steps to guide you through procure to pay optimization journey :
- Digitization of data management to eliminate usage of paper and manual processes to allow human capital to work towards strategic business goals . All high volume and repetitive tasks should be automated for ushering in process efficiencies at scale.
- Strive towards achieving quantifiable gains in speed and efficiency by leveraging emerging technologies such as artificial intelligence and advanced analytics to get a holistic view of overall spend.
- Ensure timely payment of supplier invoices and accumulate gains by making the best use of discounts with early fees. Be open to tweak payment schedules to optimize cash flow as and when required.
- Integration of continuous process improvement philosophy in workflows to eliminate waste and optimize costs.
Optimization of procure to pay processes can help organizations in reducing their operational costs significantly and offer value in terms of sustainability, efficiency and better compliance.