Procure to Pay Process: End-to-End Guide

ControlHub
January 25, 2023

Most businesses have an easy procurement process when they first begin. After all, you don’t have a lot of people to carry out each process, from purchase requisition to sourcing and supplier payment. Unfortunately, an ad-hoc approach to purchasing makes it difficult to keep fiscal discipline over time, and maverick spend can become a serious problem.

When you’re the leader of a startup, it’s hard to know how and when to modernize procurement. After all, you’ll probably change how your procurement team operates. In addition, some people might not be happy with the new process for various reasons. In this article, we’ll give a bird’s eye view of the procure-to-pay process and how it can benefit your enterprise through cost savings and better supply chain management.

Procurement Strategy

Perhaps the largest change you’ll need to make when modernizing your procurement process is crafting a strategy. After all, when you need to purchase something there’s a good chance you will see a variety of products and services, many of which can do the job equally well. However, you have to think about the pro’s and con’s for your supply chain, your corporate values, pricing, and other factors when choosing a supplier.

We call this process strategic sourcing.

In a nutshell, strategic sourcing involves thinking about what is most important for your company and how it should affect your purchasing decisions. For instance, you might decide to always use the least expensive supplier that provides suitable goods for your business. These standards can change based on your product or business need: you might not need premium office supplies, but high-tech equipment often requires high-performance components.

Another example of a sourcing strategy is to choose the most environmentally conscious supplier that you can, such as components made in factories that run on solar panels. Again, you always choose goods that meet your engineering or operational needs.

But, how can we as high-tech startup executives form a good procurement strategy? Most experts give seven steps and best practices for implementing a sound strategy:

  • Identify and categorize your spending: In other words, how much money do you spend, and what do you spend it on? Categories will include things like “components,” “shipping,” and “office supplies.”
  • Determine your procurement strategy: Besides your business needs, what are your supplier selection criteria? These days, a lot of companies want to reduce risk in their supply chain because, if something doesn’t arrive on time, it can disrupt their business.
  • Perform a market analysis to identify suppliers: Which companies provide the type of goods that you need?
  • Ask your potential suppliers to bid on your project: Find out what your potential suppliers can provide, and at what price. 
  • Choose the best supplier, then proceed with procurement process: This includes your procurement team issuing a purchase order, receiving goods, and invoice processing.
  • Monitor supplier performance: Ensure that each supplier provides goods and services that are up to your company’s standards, and on time. Otherwise, you might need a new solution for that item.
  • Manage relationships with suppliers: One if the best practices of the purchasing process is to forge relationships with your suppliers. This way, you’ll be more likely to count on them long term.

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Procurement vs Sourcing

One of the biggest questions people have about the procure to pay process is the difference between procurement and sourcing. A lot of beginning entrepreneurs and business owners think of these two terms in similar ways, because both of them supposedly end with the purchase of products or services. However, this notion doesn’t really capture the distinction. Instead, anyone who wants to modernize their purchasing needs to know the difference.

What is procurement?

Within the context of business, procurement is the entire process of purchasing goods and services. It starts with a purchase requisition, expense approval, purchase order issuance, receiving goods, paying your supplier, and more. In other words, the term “procurement” encompasses the entire P2P process. 

However, an important part of purchasing is always following best practices. For instance, you want to ensure that your company spends the right amount of money on goods, honors the designated P2P process, and keeps the payment process transparent. In addition, companies must ensure that they have the right amount of inventory, both of parts or supplies and finished products, for their operations. Neither a shortage nor a surplus are good for business. A careful procurement process can minimize these risks.

What is sourcing?

Sourcing is a part of the P2P process that doesn’t need to happen every time you have a purchase requisition. Rather, you only need to source goods when you don’t yet have a supplier for that item, or when you need to find an alternative purchasing option.

Simply put, sourcing is the process of finding out where to buy goods and services. Sourcing is critical to the procurement process, but at the same time, if you have a supplier that performs adequately then you might only need to send over a purchase order to buy more. 

Keep in mind, the sourcing process usually uncovers multiple suppliers. This is when you go through a bidding process or make a selection based on your purchasing strategy. Especially for companies that need a lot of individual items each day, using a form of automation is often the best alternative for sourcing. That’s because computers sift through information much faster than humans, so you can find the best solution sooner.

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Procure to Pay Process Steps

Even in smaller companies, each purchase is a process. For instance, if you need a ream of paper and don’t have it shipped, someone will likely go to a store. But first, you’ll want to know where to buy it and not spend too much money. Then, the employee will drive to the store and put that spend on a company credit card or have the supplier send an invoice. However, the procurement process can be more complicated, especially for bulk purchases, big ticket items, or things with custom specifications. Here’s the complete P2P process:

  • Purchase requisition: This is simply a document that a manager will send to the procurement department, which requests that the company buy whatever’s on the requisition.
  • Approval of requisition: Each requisition must be approved before the order is placed with a supplier. Each company has a different approval process, sometimes including different management layers.
  • Purchase order: This is the legal agreement to buy certain goods for a specified price and delivered within a given time. Your accounts payable department will want to see a copy of it along with the invoice as part of the payment process.
  • Order delivery: Your supplier will ship your purchase to the designated address at the specified time.
  • Invoice processing: The accounts payable department will match the supplier’s invoice with the purchase order, including verification of the quantities and prices of goods.
  • Order payment: Finally, the supplier gets paid using the agreed-upon method.

As you can see, there’s a lot of paperwork involved with the procurement process. While smaller businesses have relatively few invoices, they add up fast as a company grows. Luckily, it’s easy to manage payment processing and other tasks if you use automation.

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Invoice Management

A natural part of procurement is getting a lot of invoices. Every time you purchase something, whether you use a purchase order or a corporate charge account, your supplier will submit a bill. However, in some cases where the money is paid upfront (like a trip to the office supply store), you’ll get a receipt instead of an invoice.

Unfortunately, whether it’s an invoice or a receipt your accounts payable department will need to record the expense. That’s because every department has a spend limit, and you need to track who ordered what and when. That’s where invoice management comes in.

Invoice management is the process wherein accounts payable takes a purchase order, ensures that everything was delivered, and matches the purchase to a bill. Then, they make payment for each purchase. Finally, they’ll issue a check, bank draft, or other payment to the supplier, and debit the appropriate budget line item.

Along the way, there may be several levels of approval. For small purchases, the payment process may only involve an “OK” from the AP manager. However, larger purchases may need more sign offs before a check is issued. These procedures are part of the best practices that help avoid improper payments and fraud.

As you can imagine, this is a lot of work. Especially if your company uses a paper system, it’s easy to see how a supplier can wait weeks to get paid. In turn, companies that don’t pay on time have trouble with supplier relations and other complications like denied service. However, with quality AP automation, this process can move along much faster. Having each invoice paid quickly is beneficial to both your company and your suppliers.

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Procure to Pay Best Practices

Part of making sure that your business remains profitable is buying only what you need, and buying it at a price that doesn’t break the bank. In addition, it’s critical to avoid maverick spend, paying too much, and fraud. Luckily, if you know the basic steps in the P2P process, it’s relatively easy to implement best practices.

  • Use a purchase requisition to kick off the process. This way, you have an easy way for each manager to get approval for each purchase. In addition, you can verify that the company needs those goods before the buying process continues.
  • Issue a purchase order to your supplier. Purchase orders allow your accounts payable department to verify that there’s a valid contract for all goods. These documents also help ensure that both you and the supplier are on the same page.
  • Have shipping and receiving verify that goods have arrived as quickly as possible. Then, enter the invoice into the AP automation system to start the payment process.
  • Carefully match purchase orders and invoices to avoid errors and efficiently address any deficiencies.
  • Implement a clear payment approval process so that there are adequate checks and balances. Ensure the process is efficient enough that suppliers get paid soon after delivery without sacrificing accountability.
  • Pay your suppliers using the agreed-upon method. Be sure to verify that any automation used has the right payment information pre-loaded and update as necessary.

Essentially, the best way to streamline your purchasing system is to have clear, yet simple, steps that everyone follows. If it sounds like this is a lot of steps, consider using automation. This way, the computer will handle most of the paperwork as each step receives human approval.

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Key Benefits of Procure to Pay (P2P) for Businesses


Lets be honest: all of these procedures sound terribly complicated and cumbersome. However, there are many reasons why procure to pay is in your business’ best interests. These benefits will become more valuable as your business grows and finances get more complicated. 

What is procure to pay, though? Procure to pay is the entire process of purchasing goods and services, beginning with a needs assessment and ending with supplier payment. Ideally, it’s a highly-disciplined process that uses automation to ensure every dime spent is necessary.

Procure to pay keeps everyone honest and maintains adequate inventory

If you need an approval for each step of the purchasing process, it’s much less likely that someone will make improper payments, or order something that isn’t needed. One of the best aspects of the PTP process is that it helps you get the right supplies, at the right time, and at the right price.

Procure to pay helps with tax preparation

Taxes are complicated even in the friendliest jurisdictions. When you follow best practices, you’ll have a paper trail that gives the accountants ready and accurate numbers come tax time. This is especially true if you use procurement software.

Procure to pay helps you maximize value for your spend

Finally, if you want an answer to what is procure to pay, the second one is “a system to maximize your value for money.” In other words, the process makes sure that your staff makes each purchase in a way that maximizes profitability. That’s because it helps eliminate random purchases by making sure that your business needs everything it buys.

You get accurate financial statements 

Accuracy isn’t only needed for tax authorities. Rather, investors and bankers like to know that your business is financially sound, and that they follow best practices. Many businesses fail because they don’t have an effective P2P process, or because they pay too much for supplies. For this reason, it’s critical that you have evidence that your business is financially stable in order to secure investment or loans.

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Risk Management in the procure to pay process

Procurement risk management is part of any balanced procurement program. As the saying goes, “nothing is sure but death and taxes.” And while tax preparation is built into the P2P process, especially with automation, we must also deal with the “death” part of the saying. In this case, “death” refers to serious business risks.

But what hazards are we trying to avoid with procurement risk management? Honestly, anything that can threaten our corporate wellbeing, from supply chain malaise to regulatory pitfalls and pricing pressures. Luckily, automation and other techniques help us manage these challenges efficiently. 

Supply chains can be fragile

If recent events have taught us nothing else, it’s that companies need to secure their supply chains. Whether it’s long-term factory shutdowns, transportation shortages, or even political events, there’s a lot that can come between us and the supplies we need. Sometimes, these challenges are unexpected.

Luckily, this risk is relatively easy to mitigate with procurement software. High quality software has a sourcing component, so if a shipment of machine parts gets stuck on a container ship for months, the program can suggest temporary suppliers. Or just as good, have a second supplier that you already have a relationship with for when the time comes.

Regulatory compliance can be a challenge

These days, governments are putting more pressure than ever on companies to have a record of everything. This can include where you bought a particular machine part, to ensuring you have all the details of a critical equipment purchase. Especially if you need to document a loss or easily figure the manufacturing cost of a product unit, payment records are critical for success.

Costs? They just keep going up

It almost goes without saying that products and services cost a lot more this year than they did two years ago, and part of procurement risk management is keeping ahead of the trends. Ideally, you’ll negotiate long-term contracts with suppliers of goods that you buy all the time. This way, you can lock in lower prices during volatile market conditions, and in turn, help to secure your profits from rising costs.

Some suppliers are just too risky

Finally, in an environment where consumers are more socially and environmentally conscious than ever, it’s critical to make sure that your suppliers are palatable to the general public. For instance, a lot of people would take exception to your buying solar cells from a factory that doesn’t care about worker safety or human rights. Increasingly, consumers demand that companies monitor their indirect spend for bad actors, too. With a careful procurement process, you can avoid many of these pitfalls.

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Procure to pay software

With all the demands on procurement teams these days, it’s unsurprising that there are lots of automation tools. After all, doing all these processes manually requires a ton of time. Worse, manual processes (or even using Excel with a bookkeeping application) makes it too easy to miss something. These “misses” can include invoices that don’t match with a PO, maverick spend, and paying too much for something because an employee didn’t see the best deals. 

Luckily, procure to pay software can help you and your team stay on top of your business’ cashflow and supply chains. They also save you money with reduced clerical costs, faster approvals, and other operational efficiencies. Here’s what to look for in a top-notch P2P software suite:

  • Budget tracking: No matter how many departments or line items you have in the company budget, it’s important to track it. And, the faster you track each department’s spend, the less likely you are to accidentally exceed a line item. Automation software should track each department budget as purchase orders are issued, and as invoices get paid. This way, your procurement team will know at a glance if a department is on track.
  • Integrated sourcing: Ideally, your purchasing software will have supplier catalogues built in once a supplier has been approved. In addition, the tool should have sourcing capabilities for when you get a purchase requisition for something different, or when a preferred supplier can’t deliver the goods on time. Being able to pivot quickly during uncertain times can make the difference between success and failure.
  • Approval workflows: Nobody wants to wait a long time while the purchase requisition gets approved, or during contract negotiations. Luckily, if your software has approval workflows you’ll enjoy faster clearance without compromising best practices or accountability.
  • Purchase order issuance and tracking: Once you get approval to spend money on supplies, your P2P software should issue the purchase order for default vendors automatically. And if you need to pick a different supplier for whatever reason, the program should issue a PO as quickly as possible. Once those orders are made, the software should track it through delivery, accounts payable, and budget charging.
  • Cash management tools: One of the best ways to balance the need to sometimes purchase things quickly and keeping everyone accountable is virtual credit cards and prepaid cards. For instance, if the office copy machine breaks down suddenly, the affected department needs to get it fixed right away. In these situations, you can issue a payment card that lets the floor manager pay the repair tech. Not only does the card have a limit, but it traces back to the manager-and their department budget.
  • Financial software integrations: If you want to minimize errors and labor within your accounts payable department, choose software with bookkeeping integrations. This way, most information will automatically be exported to the other program and the information will be there when it’s needed.

Remember, if your procurement solution has all of these features, your overall purchasing process will run more smoothly. That’s because having everything in one place reduces confusion, minimizes clerical work, and streamlines your business processes.

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Must-Have Integrations for hardware-centric, procurement-heavy startups and mid-size companies.

McMaster-Carr

Who’s McMaster?

McMaster-Carr is one of the top 3 sources for industrial parts and pieces, providing a vast array of products for all types of industries. From nuts and bolts, to pipes, valves and power tools, to even playground equipment, McMaster-Carr is a one-stop-shop for all your industrial needs. 

With warehouses located across the United States, McMaster-Carr is able to provide customers with quick and reliable shipping regardless of the size of their order. Whether you're a small business or a large manufacturer, McMaster-Carr is the perfect choice for all your industrial supplies. 

What’s Punchout?

A Punchout catalog is an effective and efficient way of integrating an eCommerce site with a company's existing procurement system. By connecting the two systems, employees can easily shop for products on the eCommerce site and have the purchase seamlessly added to their company's procurement system. This eliminates the need for manual entering of data and provides a more streamlined process.

The integration of the Punchout catalog also provides a number of other benefits, such as improved accuracy of the procurement process, cost savings in time and money, and improved customer service. As a result, companies that embrace this technology are able to streamline their procurement process, increase efficiency and reduce costs.

How to integrate your company’s Procurement Process with McMaster-Carr?

ControlHub is revolutionizing the way hardware companies purchase their goods, making it easier and more intuitive than ever before. Through the use of ControlHub's purchasing software, hardware companies can quickly and easily access Mc-Master PunchOut, streamlining their entire purchasing process. 

With this software, companies can save time and money by automating the purchasing process and making it more efficient. Additionally, they can easily access a variety of catalogs, ensuring that they get the best possible deal on the products they need.

ControlHub is revolutionizing the hardware purchasing process and making it easier than ever before for companies to get the products they need quickly and efficiently so they can get back to building.

With McMaster PunchOut, hardware companies can:

  • Access a wide range of hardware products from McMaster-Carr
  • Get real-time pricing and availability
  • Place orders directly from their ControlHub account

→ Click here to see how the McMaster and ControlHub integration work

Digi-Key

Who’s DigiKey?

Digi-Key is a renowned global distributor of electronic components, boasting an impressive 1 million products in stock from over 2,300 suppliers. Serving as a source for board-level items, they are an ideal destination for semiconductors, passives, interconnects, electromechanical, power, batteries, and sensors. 

In addition to their extensive selection, Digi-Key's competitive prices, quick delivery and helpful customer service make them a top choice for engineers at companies of all sizes.

How to integrate your company’s Procurement Process with Digi-Key?

Hardware companies can simplify their purchasing processes by utilizing ControlHub, a user-friendly software that gives them direct access to the DigiKey PunchOut Catalog. Doing so allows them to streamline their purchasing procedures, saving them time and money.

Additionally, the software provides users with a host of useful features, such as the ability to search products quickly with its intuitive search solutions, create purchase orders with one click, track and manage orders, and much more. 

Ultimately, ControlHub makes it possible for hardware companies to optimize their purchasing processes and gain greater control over their spending.

With DigiKey PunchOut, hardware companies can:

  • Access a wide range of hardware products from Digi-Key
  • Get real-time pricing and availability
  • Place orders directly from their ControlHub account

→ Click here to see how the Digi-Key and ControlHub integration work

Mouser

Who’s Mouser?

Mouser Electronics is an established leader in the design and manufacturing of electronic components, semiconductors and other related products. Their wide selection of components is used across numerous industries, ranging from automotive to aerospace to consumer electronics, among many others. 

They have established a global network of suppliers and partners to ensure their customers get the highest quality components while still receiving competitive prices.

Furthermore, they are continuously innovating and investing in the latest technology to make sure they stay ahead of the competition and provide the best possible products and services to their customers. 

How to integrate your company’s Procurement Process with Mouser?

ControlHub, the most intuitive purchasing software for hardware companies, provides an automated means of accessing the Mouser PunchOut Catalog to streamline their purchasing processes. This software simplifies the procurement process, making it faster and more accurate by providing a single sign-on, direct access to the PunchOut catalog, and automated order synchronization.

ControlHub not only simplifies the purchasing process, but it also provides powerful management capabilities. It offers a central management system to create, monitor, and modify purchase orders; it also provides enhanced visibility into the purchasing process, including real-time updates on the status of orders and delivery completion. 

In addition, this software simplifies administrative tasks, like the reconciliation and tracking of supplier invoices, and provides robust analytics for better insights into the organization's purchasing and inventory operations. 

Overall, ControlHub is the ideal solution for hardware companies looking to streamline and automate their purchasing processes. This intuitive software eliminates manual processes and errors, allowing businesses to optimize their purchasing procedures and increase efficiency, while providing detailed analytics to make better decisions. With its direct access to the Mouser PunchOut Catalog, ControlHub gives hardware companies the ultimate control over their purchasing operations.

With Mouser PunchOut, hardware companies can:

  • Access a wide range of hardware products from Mouser
  • Get real-time pricing and availability
  • Place orders directly from their ControlHub account

→ Click here to see how the Mouser and ControlHub integration work

Amazon

If you are a fast-moving startup that wants to take advantage of purchasing automation, integrating your company's procurement process with Amazon PunchOut via ControlHub is the way to go. Using this intuitive software, businesses can access the Amazon PunchOut Catalog with ease, allowing them to streamline their purchasing processes and eliminate the need for manual data entry and tracking. 

In the long run, a faster and more efficient purchasing process can result in cost savings for your company. With ControlHub, you can request, approve, and track purchase orders in real-time and leverage advanced analytics to make better purchasing decisions, allowing you to save time and resources in the process. 

How to integrate your company’s Procurement Process with Amazon?

By using ControlHub, the most intuitive purchasing software for hardware companies, these companies can automatically access Amazon PunchOut Catalog to streamline their purchasing processes.

With Amazon PunchOut, hardware companies can:

  • Access a wide range of hardware products from Amazon
  • Get real-time pricing and availability
  • Place orders directly from their ControlHub account

→ Click here to see how the Amazon and ControlHub integration work 

5 KPIs for the purchasing manager

Like many other things in business, purchasing is a very metrics-heavy discipline. One reason for this is the amount of money involved: paying too much money for goods and services can threaten your business’ profitability. Likewise, spending the least possible money on everything exposes your business to unnecessary risk, whether that’s from regulatory challenges, supply chain snarls, or poor product reliability.

With that in mind, here is a KPI for purchasing department list that can help you minimize risk and maximize profit.

Getting the most value for the company’s money

Price versus value is an age-old question: if you spend too much on something, you can threaten your company’s profit margins. This problem can be especially acute when there are supply shortages, or when there’s a lot of inflationary pressure. Nobody likes to raise prices, but it’s sometimes necessary. By buying the right goods at the right price, your purchasing manager can reduce the overall risk of price increases and defend the company’s profit margins.

Obtaining high-quality goods

Next in our KPIs for purchasing manager is the necessity of getting the highest quality goods for the price. Managers shouldn’t pay a premium for something just because it comes from a “name brand” factory or they like the sales team. Instead, they need to ensure that every purchase gets the best quality for the company spend. This increases profitability and, in many cases, the quality of finished goods sold to consumers.

Achieving a high level of contract performance

When a supplier doesn’t “come through” for your company by delivering the contracted goods on time, or regularly sending defective goods, it compromises your operations. A purchasing manager must ensure that suppliers fulfill their contracts when at all possible by setting clear expectations.

Forging positive supplier relationships

One if the best ways to ensure your company gets the right supplies at the right price is through supplier relations. Your purchasing manager should foster a win-win relationship with suppliers so that your company gets great customer service and priority treatment when it matters most.

Completes the procurement process with optimal efficiency

Finally, our KPI for purchasing department ends with efficiency. No company is well served with a cumbersome purchasing process that makes it difficult to obtain goods and services in a timely fashion. Therefore, the purchasing manager must ensure that the process protects company interests while also moving fast enough to maintain supply chains and operational efficiency.

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P2P transformation Guide

One of the biggest challenges that businesses face in procurement is keeping track of purchases and invoices. This isn’t surprising when you consider that there’s a lot of paperwork and countless moving parts. Luckily, modern technology can make your life easier through a P2P transformation. In sum, the procure to pay transformation is a change from manual or semi-manual purchasing processes to using an integrated purchasing automation and accounts payable system like ControlHub.

Legacy companies often wonder why the shift is necessary, since they’ve used old school methods for years. Likewise, early-stage startups don’t always have the resources for AP automation yet and therefore start with older methods.

A P2P transformation to newer automation tools saves time and money for both types of company. Legacy companies will find that new automation methods save them time and money, both through reduced labor costs and direct expenses like unnecessary purchases or lost invoices. For startups, the shift becomes necessary as soon as the number of individual transactions and employee head counts increase.

Alternatives don’t work as well

Startups and legacy enterprises alike do have alternatives to full automation. However, they’re less effective than a full P2P transformation. Each alternative has different weaknesses that causes it to fall short of the ideal.

  • Email tracking: Some businesses track their purchases using email. In this process, a department manager will send an email to purchasing, who then emails for approvals, issues a purchase order, and tracks invoices through email. Essentially, AP automation is usually the only fully-modern part of this process.
  • Using an ERP: Enterprise resource planning systems are great for tracking orders, invoices, and approvals. But they fall short in sourcing. Therefore, companies using an ERP need to deploy a separate application for sourcing, or do most of that work manually. This is ultimately less efficient than a P2P transformation.
  • Piecemeal automation: It’s easy to automate individual processes with older systems. In particular, accounting and ordering software can implement checks and balances effectively. However, once again you have the opportunity for things to fall through the cracks as information is moved from one program to another. Not to mention the extra work involved with the transfers.
  • Outsourcing: Finally, many companies outsource their procurement. While this method will keep your company supplied regularly, there are many opportunities for communication breakdowns and information gaps. Plus, your company will be just another number to the supplier, rather than a place where they have connections.


As you can see, a full P2P transformation is usually the best option for companies. This is especially true for hardware-intensive startups, because manufacturing can be quite volatile and there are a lot of moving parts. With a fully integrated system, you can minimize the risks of miscommunication, maverick spend, and more.

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Procure-to-Pay Best Practices for Optimization

For hardware companies, there are a lot of purchasing decisions made every day. Part of this is the sheer volume of goods needed, but the need for supply chain stability also contributes to this trend. That’s one reason why your company needs to implement, then follow, procure to pay best practices.

By far, the easiest way to ensure your business runs smoothly and maximizes value for money spent is through procure to pay process optimization. This is true for several reasons:

  • It minimizes human error: When there are fewer manual processes, it’s much easier to follow procure to pay best practices and avoid errors. Then, when errors happen they’re easier to track down and correct.
  • You get better control over the process: When you have a set workflow in your software, the process goes more smoothly. At the same time, there are fewer opportunities for your staff to step outside the normal procedures.
  • Order lifecycle times are shorter: Not needing to track people down means that the process moves much faster. In addition, digital processing of each PO and invoice keeps procurement moving.
  • Standardization: When you use procure to pay best practices, there are fewer opportunities for process deviations. 
  • Better supply chain management: A first-class procurement system will alert you when it’s time to reorder supplies so they arrive on time. Likewise, you can see at a glance how much of something you should have on hand.
  • Automated data analysis, everything in one place: Opportunities to save money and budget realities are visible in real-time so you can take action when necessary. Likewise, you can proactively make changes in purchasing quantities or address irregularities. Either way, accounts payable will thank you.
  • Staff can focus on other things: You’ll be able to complete the entire procurement process and follow procure to pay best practices without a lot of work. Then, your staff can do other things-and you don’t need to hire as many purchasing specialists.

In other words, there are many reasons why it’s a good idea to switch from legacy purchasing methods to a modern P2P procurement suite. Tools like ControlHub save your company a lot of time and money, both in the short and long term.

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7 Steps to Effective Spend Management Strategy

In both business and household management, budgeting is an important part of making sure that our money gets spent in the best way possible. For businesses, the budgeting process includes profit as a goal, while individuals look for cash to put into a nest egg. But either way, the budget itself is one of the most basic spend management strategies out there. Likewise, both help keep us accountable for where each penny goes. However, spend management generally has seven different steps:

  • Document where money is going: This includes everything from rent and utilities to labor costs and inventory. Then, look for places where your business may be overspending or can realize savings, such as through negotiation with a landlord.
  • Create a centralized database of procurement information: This is arguably the biggest obstacle to effective spend management strategies for many different companies. To make a centralized database, gather all your purchasing data from all prior sources, including PO records, payment records, rental contracts, and bank statements, then load it into a single place. After you’ve done this, avoid using paper receipts and manage your contracts through automated software.
  • Ensure all your data is accurate: Cross check everything to find and correct errors. Also, ensure you don’t have any missing data, and replace if necessary.
  • Place your data into categories: In this case, break down your data based on what it can tell you, such as the prices of components for your key product.
  • Analyze your data: Hiring a data scientist or other competent professional, do a thorough analysis of your purchasing data to identify trends. This paves the way for your company to formulate spend management strategies.
  • Formulate and implement budget controls: After you review your data, determine whether or not your current budget controls are adequate. If not, determine what changes you need to make and then implement them.
  • Make predictions to reduce risks: In other words, guesstimate future conditions based on past data, and plan ahead. For example, you might find out that your supply chain is too long, so you can find suppliers who are closer to your location. 

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Source to pay process

For most of this article, we’ve been talking about the procure to pay process. On the other hand, source to pay is a different approach to procurement. Simply put, the source to pay process integrates the purchasing and accounts payable department. In other words, rather than procurement focusing on obtaining the goods and services within a budget, and letting the bean counters get involved late in the process, payment remains central to the discussion.

Generally speaking, the source to pay process has nine steps:

  • Documented demand: Before companies buy anything, there must be a need. At this stage, there’s either a purchase requisition or a similar triggering event, like a premises lease coming up for renewal. Document the need, and proceed to the next step.
  • Sourcing: Your software suite and human staffers find potential sources for each item needed, and determine which options meet operational needs.
  • Bidding process: Ask shortlisted suppliers to bid on your requisition, or ask for any information to make a selection.
  • Make your decision: Review the information suppliers send you, and select the one that’s most suitable for your needs. 
  • Negotiate the contract: Sometimes the supplier will offer the right terms for the right goods. If this doesn’t work out, you’ll need to negotiate for the best deal possible. Either way, be sure to hash out the final details.
  • Execute the contract: Have both sides sign the contract. This should include all stakeholders responsible for the purchase.
  • Send the contract to your purchasing department: At this point, the purchasing department will take over the process and it becomes procure to pay. They will issue purchase orders and process invoices.
  • Procurement checks the goods: Once the supplier delivers the goods, purchasing will make sure the goods are as ordered. Then, they’ll send the invoices through the AP automation for payment.
  • Accounts payable sends payment: Finally, the AP department will tender payment as specified in the purchase order and keep suppliers updated about the payment process.

As you can see, the source-to-pay system is a little different than the traditional P2P pathway. However, the steps are very similar, and both approaches ensure that your company gets what it needs.

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13 Stages of the Procurement Life cycle Explained

For most of us, procurement is something that seems to happen in a vacuum. We file a requisition or other request, and the goods show up at our doorstep. Or, as managers we sign off on a purchase then wait for everything to arrive. However, this doesn’t reflect the entire procurement life cycle. Rather, it’s only a part of the process

Experts define 13 distinct steps to the procurement life cycle: 

  • Definition of business needs: Simply, determine what your business needs to grow and thrive, including everything from rent to inventory.
  • Analyze the market: Determine what’s on the market that can meet these business needs.
  • Form a sourcing strategy: Decide how your business will get the best possible terms from suppliers.
  • Test the market: Ask that changes, if any, need to be made in your procurement process to reflect current market conditions.
  • Determine supplier selection criteria: Decide what are the most important selection criteria, in addition to an acceptable price or terms.
  • Decide which suppliers you’ll invite to bid on your business: Narrow down the options to the few best options so you can streamline the procurement life cycle.
  • Send invitations to the bidding process: You might use a request for proposal, request for information, or other suitable documents, along with a deadline for responses.
  • Evaluate supplier bids: Next, review the bids and other information sent by suppliers, and decide which one you want to purchase the goods from. Do a background check to make sure the supplier can deliver on time and in full.
  • Finish contract negotiations: Nail down the details of your procurement contract with your suppliers. Then, issue and sign a contract so the supplier can get to work.
  • Take delivery of the goods: When the goods arrive, perform your inventory management and storage plan. Also, check the goods to make sure you got what you paid for, and that there are not defective items. Then, pay your supplier.
  • Evaluate your vendor relationship: Occasionally, you need to review supplier relationships to make sure that the arrangement is working well for all parties. If needed, make adjustments or change vendors to get the right deal.
  • Manage your supplier relationships: Stay in communication with each vendor to maximize mutual cooperation. You can also communicate as problems or developments arise so both parties can adjust as necessary.
  • Employ asset management: This final step of the procurement life cycle makes sure that your procurement still meets current business needs. Then, you’ll make any adjustments as necessary to ensure optimal performance.

There’s little question that this is a lot of steps. However, the complete procurement life cycle ensures that your business has everything it needs, without wasteful spending and while minimizing the hiccups that disrupt operations.

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Procure to Pay Automation: The Ultimate Guide

As the procure to pay process gets more complicated, there’s a greater need to streamline the process. However, making our lives easier is no excuse for ignoring the best practices that help keep our business compliant with regulations and running smoothly. That’s why procure to pay automation is so important.

What’s procure to pay automation? In short, it’s the process of automating each step of the P2P process as much as possible. While manual review will remain necessary, automation provides a significant reduction in the overall amount of paperwork and, in addition, frees your employees up to do more important tasks.

We’ve already talked in depth about the different steps within the overall procure to pay process, even with everything being done manually. With procure to pay automation, however, the steps remain the same while the process changes significantly. Not only does it involve less paperwork, but the overall process moves faster.

Here’s how the process plays out with automation.

  • Purchase requisitions and approvals become much more efficient: For instance, if you need a shipment of aluminum parts every month, your software will alert the manager and ask for approval. In addition, this will be done at the right time so that your parts arrive when they’re needed.
  • Vendors are selected based on the best information: With procure to pay transformation, the software will automatically upload new vendor information. If these changes warrant your attention, you’ll get an alert. Similarly, if there’s a problem with a vendor you’ll have the information you need at your fingertips.
  • Purchase order automation and systems integration: When a purchase is approved, the software automatically issues a purchase order. Then, it creates a record for shipping and receiving, accounts payable, and other functions.
  • Faster invoice processing: When each supplier sends an invoice, the procure to pay automation software will streamline tracking and payment approvals. 
  • Suppliers get paid within the software: Finally, your accounts payable department can issue checks or other payments to each supplier without leaving the software suite. This streamlines the payment process and helps improve vendor relations.

Simply put, procure to pay automation makes the jobs of purchasing and accounts payable much easier. Rather than tracking everything down and emailing invoices right and left, the two departments can collaborate almost seamlessly.

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Top 4 Procure to Pay Software Solutions Your Business Needs

If you’re like most business leaders, you want the best procurement solutions for your business. After all, businesses run more smoothly when supply chains are carefully managed and there’s an established procedure for everything. In most cases, your business needs procure to pay solutions that include a high level of automation. Here are the must-have items for your business.

Purchase requisition handling solution

The first of our procure to pay solutions is a way to handle purchase requisitions. Because the P2P process starts with a requisition, nothing else can go forward without one. Therefore, any solution that you choose is incomplete unless your managers can request that procurement obtain things from suppliers. And remember, the simpler the better with this step because the most people must deal with it.

Purchase order issuance

All procure to pay solutions need a way to issue purchase orders. That’s because in most cases you’ll use a PO to order items from a supplier. You also need to ensure that each purchase order matches to an invoice at the end of the P2P process. Ideally, during the process you should be able to tell what orders have been made, what’s pending payment, and how each PO impacts a department budget.

Vendor management functions

It’s easy to ignore vendor management as part of procure to pay solutions. While everyone understands that vendors are critical to the procurement process generally, it’s easy for a manager to forget that vendors need management as surely as their employees. That’s because poor vendor management can lead to severe troubles, like supply chain shortages and prices going out of control, that severely threaten profitability. For that reason, make sure to choose a P2P solution that aids vendor management.

Invoicing support

Finally, adequate procure to pay solutions should always include invoicing support. That’s because companies need to have a link between purchase orders, invoices, and vendor payments. If your P2P automation doesn’t help with incoming invoices, it doesn’t live up to its potential. Ideally, your solution should encompass all of the critical P2P functions throughout the lifecycle.

In short, the best procure to pay solutions thoroughly cover the entire process to the maximum extent possible. This saves you and your team time, money, and aggravation. And as a bonus, the bean counters and accountants will be happy to see everything is easier to manage.

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The Ultimate Guide to a Truly Effective Procure-to-Pay Process

It’s one thing to talk about a procure to pay system, and another to ensure that your process is effective. After all, any process with a lot of steps can quickly get cumbersome and slow down your business operations. However, you don’t want to sacrifice procurement best practices for a faster procure to pay system. Rather, you need to choose an automation solution that lets you perform all the steps efficiently.

An overview of the procure to pay process

We’ve talked about this process more in-depth earlier, but in a nutshell a proper P2P process should include an orderly sequence of steps, each of which requires approval. First, a manager will fill out a requisition form that asks permission to buy something. Then, the procurement department sources the product if necessary, negotiates the purchase price, and issues a purchase order. When the goods arrive, personnel ensure that your company got what it paid for, and that they are of the specified quality. Finally, purchasing approves the release of payment through accounts payable.

Ideally, all of this work will be done in the same automated procure to pay system. The fewer times you must move data from one place to another, the less chance there is of human error. However, at the same time you need to get approval for each step so that there’s accountability and a paper trail.

Automation provides the best procure to pay system

Luckily, automation makes the entire procure to pay system easier to execute. P2P software suites track each step of the procurement process, from requisition to supplier monitoring. Along the way, humans will approve advancement to the next step, while tracking department budgets and making sure that your company only buys what it needs.

Perhaps the best perk of a procure to pay system is that it makes sure that nothing falls through the cracks. However, the automated forms also keep your employees from going crazy while performing the most menial of tasks. Instead, the computer helps create and track paperwork, so your team can go and do other things. Best of all, this kind of software is typically easy to learn, so you can save time on training and hire fewer employees to manage purchasing.

There’s really no reason to use a manual procurement system any more: In fact, not doing so saves a lot of time, energy, and ultimately money.

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Key takeaways

At the end of the day, most businesses need a comprehensive procure to pay process. After all, this disciplined approach to purchasing ensures that everyone stays within their budget, that supply chains are carefully managed, and that everything is ready for tax season each year. 

However, hardware-heavy startups need this new technology even more. That’s because the vastly increased inventory and supply chain requirements can easily clog an old-fashioned Excel or email-based procurement system. Even worse, the amount of work required to use a legacy system can quickly distract from other aspects of running the business, such as fueling innovation and business development.

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