CA Neha Garg
OVERVIEW
The Procure to Pay process (P2P) remains one of the most complex business processes, often spanning across multiple systems and operations. Despite the level of automation, including enterprise resource planning (ERP) implementations, P2P remains an area prone to fraud, money leakage, and inefficiencies. Since it is one of the most critical business processes which involves huge cash flows, visibility into the entire life-cycle of a transaction from vendor selection to the final invoice generation and payments with adjustments becomes a challenge for the business
It is critical to have insights into these metrics for businesses, which can be achieved by incorporating data from source systems such as SAP, Oracle, etc., using technology driven analytical tools to highlight exceptions, outliers, and trends which helps clients improve and at times, reinvent their processes, enforcing accurate decision making and driving efficiency
STEPS OF P2P PROCESS
Despite the availability of technology that can drastically reduce the man-hours spent in collating and analysing the P2P data and inefficiencies plaguing accounts payable, few companies have addressed account payable transformation like other processes essential to the business while others still use the approach of manual transaction monitoring
CHALLENGES OF PROCURE TO PAY
♦ Non purchase order invoice
♦ Lack of automation
♦ High quantity of paper invoice received
♦ Late payment or unpaid invoices
♦ Problem in segregation of duties
TYPES OF INDICATORS OF P2P
A. Finance Indicator
♦ There is large non-PO order
♦ Payment terms are mismatched
B. Fraud indicator
♦ Duplicate vendor invoices are there
♦ Employees secretly work as vendor
C. Operational indicator
♦ Presence of price variation
♦ Payment without POD (pay on delivery)
D. Compliance indicator
♦ No segregation of duties
♦ Invoices are without GRN (goods received notes)
STEPS TO BE TAKEN TO MITIGATE THE RISK OF P2P
♦ E- Payments of bills
♦ E-Invoicing of purchase orders
♦ Document management by authorised personal
♦ Automated matching of process involved
♦ Automated workflow approval from appropriate authority.
The successful companies who master robust Procure-to-Pay (P2P) process do look at ways to use technology and other means to create a better experience for employees while finding ways to save money.
They also treat Procure-to-Pay (P2P) as the transactional process, meaning they use valuable human resources to conduct a process which can be automated with some work. Top performing firms ensure that Procurement’s hard work gets realised at the moment of truth: driving cost reduction, spend management, sourcing, new production introduction, and service innovation
The thinking point here is this: what we have to do to free procurement professionals from the lower-value Procure-to-Pay (P2P) activities and support them to focus on introducing new products and services. My other suggestions would be:
- Ensure all processes are tied back to a good “system of record”
- Optimize working capital to support both Days Payable Outstanding (DPO) requirements while also aggressively taking early payment discounts
Last but not the least: Implementing enabling procure-to-pay (P2P) software is just one aspect of the overall procurement process. The procurement community must also focus on rationalising your supply base, appropriately training people, and creating a better supplier relationship
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