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Automation of the purchase-to-pay process │ F&P

Expert: Dipl. Oek. Sascha Stockfisch
Automatisierung des Purchase-to-Pay-Prozesses

The purchase-to-pay (P2P) process is of crucial importance in companies, especially in the area of purchasing. Through automation, companies can not only increase their efficiency, but also improve transparency and minimise potential sources of error. In this article, we will take a closer look at what the purchase-to-pay process involves, what steps it includes and what challenges are associated with it. We will also explain the benefits of digitalising and automating this process and present suitable technological solutions.

What is the purchase-to-pay process?

The purchase-to-pay process, also known as the procure-to-pay process, describes the entire process from the identification of requirements to the payment of goods and services in a company. It encompasses all activities related to purchasing, from the notification of requirements and ordering to invoice processing and payment. The P2P process plays a decisive role in the smooth handling of a company’s procurement and payment cycle.

Successful management and control: The importance of the P2P process

The purchase-to-pay process affects various departments and hierarchical levels within a company, including purchasing, logistics, accounting and finance. A manually performed P2P process is time-consuming and error-prone. By automating the process, companies can increase efficiency, reduce costs and achieve better control over the entire procurement and payment cycle.
Overall, the purchase-to-pay process plays a crucial role in the effective management of procurement and payment activities. Optimising this process contributes to transparency and compliance, which in turn strengthens overall performance and creates competitive advantages.

From enquiry to payment – the steps in the purchase-to-pay process

The P2P process consists of several steps that interlock seamlessly to ensure an efficient procurement and payment process. Typically, the following steps are included in the purchase-to-pay process:

1. demand notification and demand identification
The process begins with the identification of the need for goods or services. Employees usually report their needs to their superiors, who initiate the process.

2. comparison of offers and ordering
Once the requirement has been determined, the offers from various suppliers are compared. Thanks to modern supplier management, companies can select reliable suppliers with the best conditions. As soon as the ideal supplier has been found, the order is placed.

3. receipt of goods and invoicing
Once the order has been dispatched by the supplier, the goods arrive at the company. Employees check the delivery and compare it with the order data. The supplier then issues an invoice for the services rendered.

4. invoice verification and release
The incoming invoice is compared with the order and the goods actually delivered. Prices, quantities and agreed conditions must be checked. After a successful review, the invoice is forwarded for approval.

5. Payment and accounting
As soon as the invoice has been approved, payment is made to the supplier in accordance with the agreed payment terms. At the same time, the relevant accounting entries must be created in order to properly document the payment process.

The pitfalls of the purchase-to-pay process: challenges and obstacles

The purchase-to-pay process is a complex challenge that is made more difficult by various factors. Companies are faced with long lead times, media disruptions between process steps, a lack of transparency, extra work for employees and inadequate liquidity planning.

These difficulties can have a negative impact on a company’s efficiency and profitability. Long lead times in P2P can lead to delays in procurement, disrupting the production chain and potentially causing a loss of revenue. Communication problems and loss of information due to media disruptions between the various process steps make it more difficult to ensure transparency and traceability in the process.

In addition, a lack of clarity in the purchase-to-pay process can lead to data inconsistencies, which in turn can cause ordering and invoicing errors. Employees may need additional time to complete or clarify missing information, leading to inefficient processes and resource commitment. The loss of discounts due to late payments can cause additional costs and affect the supplier relationship.

Insufficient liquidity planning due to unexpected expenses in the purchase-to-pay process can cause financial bottlenecks and jeopardise financial stability. It is therefore crucial to recognise these challenges and implement effective solutions to increase the efficiency and profitability of the purchase-to-pay process.

Benefits of automating the purchase-to-pay process

An automated purchase-to-pay process is useful for overcoming the various challenges and realising numerous benefits, such as

1. Increased efficiency

Automation reduces manual activities and speeds up a large number of processes. Employees save time on administrative tasks and can focus more on more strategic tasks.

2. More transparency and control

Thanks to automated P2P processes, companies gain a comprehensive overview of the entire procurement and payment cycle. This leads to better control, faster response times and improved de-escalation options in the event of conflicts.

3. Reduction of errors and risks

The use of intelligent algorithms minimises human error in data entry and processing. This allows deviations to be recognised quickly and rectified in good time.

4. Cost savings

An automated purchase-to-pay process leads to cost savings as fewer manual labour hours are required. The optimisation of payment terms also allows the company to take advantage of discounts, resulting in additional savings.

5. Improved supplier relationships

The relationship with suppliers also benefits from automated processes. Standardised communication channels and faster payments help to build a trusting and long-term partnership.

6. Time savings

Automated steps save time. This allows orders to be processed more quickly and invoices to be paid promptly. Shorter delivery times are also an advantage.

7. Compliance and adherence to guidelines

With the help of automated workflows and checks, companies can ensure that all processes and transactions comply with internal guidelines and external regulations. This reduces the risk of fines and reputational damage due to non-adherence to compliance standards.

8. Data analyses and reporting

With a programme-controlled purchase-to-pay process, extensive data can be generated that can be used for analyses and reporting. Sound data creates a basis for better decision-making and long-term planning.

9. Scalability

The automation of the P2P process enables companies to scale easily. Processes can be adapted as required as business activity grows or the number of transactions increases. Scalability makes it easier to react flexibly to changes and support company growth.

Technological solutions for the automation of the purchase-to-pay process

Technological solutions for the automation of the purchase-to-pay process include various software tools and platforms. These provide support to make the entire process more efficient and transparent. Common technological solutions include e-procurement systems, e-invoicing platforms, electronic catalogues, electronic order processing systems and vendor management software.

E-procurement systems

E-procurement systems make it possible to handle the entire procurement process online, from determining requirements, supplier enquiries and comparing offers through to ordering and invoice verification. These systems automate the procurement process and ensure more efficient and transparent processing.

E-invoicing platforms

E-invoicing platforms enable electronic invoicing and processing in order to reduce manual effort and the susceptibility to errors. With automated invoice receipt and issue, companies can save time and money and speed up payment processing.

Electronic catalogues

The use of electronic catalogues simplifies the procurement process by providing all relevant information and prices in one central location. Employees can order directly from the catalogue, which speeds up the ordering process and makes it easier to comply with purchasing guidelines.

Electronic order processing systems

Electronic order fulfilment systems simplify and automate the order approval and release process by implementing predefined approval workflows. These allow orders to be processed more quickly and ensure transparency and control over expenditure.

Vendor management software

Vendor management software supports the management of supplier relationships, from the selection and evaluation of suppliers to contract management and performance monitoring. By automating vendor management, supplier relationships can be optimised and risks minimised.

Overall, technological solutions for automating the purchase-to-pay process offer numerous benefits such as increased efficiency, cost savings, transparency and compliance. Companies that rely on these tools can optimise their procurement processes and increase their competitiveness.

Tips for choosing the right tool to automate the purchase-to-pay process

1. Firstly, identify your specific requirements and goals for automating the purchase-to-pay process. Consider which processes should be automated and which functions and features your tool absolutely must offer.
2. Carry out a thorough market analysis and compare the various tools available. Pay attention to functionality, user-friendliness, integration options, costs and support.
3. Consider the scalability of the tool and whether it can support future requirements and growth. Ensure that the tool is flexible enough to adapt to changing business requirements.
4. Consider the integration of the tool into your existing systems and processes. Ensure that the tool can interact seamlessly with your ERP system, accounting and procurement systems and other relevant tools and applications.
5. Get references and experiences from other companies already using the tool. Read reviews and testimonials to get an objective picture of the tool’s performance and reliability.
6. Consider the training needs and support that the tool offers. Make sure that your employees can be adequately trained on it and that reliable support is available.
7. Test the tool before making a final decision to ensure that it meets your requirements and expectations. Carry out a pilot phase to check the functionality and performance of the tool in your specific working environment.
8. Working with an experienced business consultancy can help you select a suitable solution for your automated purchase-to-pay process. Seek professional assistance in identifying your specific requirements and goals, conducting a market analysis and planning for integration into your existing systems. Business consultants can also assist with assessing training needs and support or conducting tests and pilot phases. This will ensure that you select the best possible automation solution for your organisation.

Conclusion

The purchase-to-pay process is the backbone of successful business operations, especially in purchasing. Automating the purchase-to-pay process offers companies numerous benefits, including increased efficiency, improved transparency, reduction of errors and risks, cost savings and better supplier relationships. By digitising and automating this process, companies can increase their competitiveness and create a solid foundation for future growth. It is therefore advisable to analyse the purchase-to-pay process and consider how it can be optimised through the use of modern technologies. When selecting these tools, a thorough analysis, a clear definition of requirements and comprehensive integration into existing systems are crucial. The path to automating the purchase-to-pay process requires not only the right tools, but also a strategic approach and smart planning. Overall, automating the purchase-to-pay process is not only a step towards efficiency, but also a strategic investment in the future viability of a company.

Dipl. Oek. Sascha Stockfisch

Senior Partner

+49 40 8000 845 92 stockfisch@fup-ag.com
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