Procure-to-pay is a crucial yet complex process that is key to a company’s performance. With that, there are several challenges that are important to overcome. Some of the common P2P challenges businesses face include the following.
Collaboration Between Procurement and Finance
For efficient procure-to-pay operations, finance and procurement teams must be in sync with each other.
Siloed systems and tedious manual processes in procurement can create bottlenecks and throw off communication, leading to delays in several parts of the P2P process.
P2P software can break down silos between procurement and finance teams, streamline communication and workflows, and help teams collaborate faster and more efficiently.
Tracking Supplier Performance
Ensuring that suppliers are providing high-quality goods and services is crucial to business success and risk mitigation, but many companies struggle with tracking supplier performance.
Again, this is a case where misaligned, manual, and siloed systems make creating and tracking performance records difficult.
Software like Planergy has built-in tools for evaluating and scoring suppliers based on quantitative information on KPIs.
These performance-tracking metrics can be combined with qualitative data, like that provided by supplier scorecards, to enable companies to make informed decisions on which suppliers to choose in real time.
You can also track realized cost savings on any contracts negotiated with suppliers to ensure you are getting best value and ROI.
They also help reveal which suppliers you should be investing in for better long-term relationships.
Managing Budgets and Controlling Spend
Business budgeting and spend management are crucial to the procure-to-pay process.
Teams need to request purchases within their allocated budget. Managers and procurement teams need to make sure that they isn’t any overspending or exceeding of budgets. Without proper tracking, this can get messy.
The spend management tools in P2P software give internal teams real-time visibility into their budgets and spending.
Lack of visibility into spending is a big challenge when purchasing data is a big challenge when spend management is decentralized. Getting everything tracked in one place gives spend visibility and automates the analysis of spend to identify savings opportunities.
They can see how much they have left for the month, how much they’re projected to spend at their current rate, and what areas are costing them the most.
Ensuring Payments Are Always Correct
All too often, and not necessarily on purpose, vendors will send invoices for the incorrect amount. What’s billed doesn’t always match what was ordered on the PO.
Accounts payable teams must catch this before sending payment but with purchase documents in different systems, spreadsheets, or stacks of paper, this can be challenging.
3-way matching, where AP teams match the invoice, purchase order, and receipt to ensure that payments are correct, can solve this.
But to be efficient, these documents need to be ready and not difficult to find. Again, P2P software can help by linking POs, invoices, and order receipts all within one centralized system.
Additionally, Planergy offers automated 3-way matching so this process can be done automatically with discrepancies highlighted so you can manage by exception.
Processing Invoices on Time
A common problem in the P2P cycle is an organization’s ability to process invoices on time.
Not just within the payment terms, but also early enough to capture early payment discounts or avoid invoice late fees. Ensuring invoices are processed in a timely manner gives better visibility of planned outgoing payments to better manage cash flow.
Again, when siloed systems, spreadsheets, or papers are used to keep track of invoices and match them to their corresponding PO, payments are going to be slower.
P2P automation incorporates AP Automation software to speed up and automate tedious parts of invoice processing, such as 3-way matching, and ensure that you’re not only paying on time but capturing deals.
Also, vendor relationships will be more cordial when you’re consistently paying on time and increase the likelihood that you can negotiate more favorable contract terms in the future.
Enforcing Internal Controls
Operations and procurement teams should enforce purchasing internal controls through the P2P process. While finance need to ensure accounts payable internal controls are adhered to.
This might mean only buying from pre-approved vendors, making purchases through a guided buying system, or purchasing from suppliers that don’t violate the company’s ESG (environmental, social, and governance) strategy for procurement.
Disjointed systems and paper processes cannot be easily controlled. So just like the other challenges above, this is more difficult without a unified software system.
P2P software can automate internal controls enforcement through mandatory rules and approval flows that purchases and invoices must go through. This can eliminate rogue spending and ensure that policies are always enforced through the centralized system.