Purchase-to-pay
Encyclopedia
Purchase-to-pay, often abbreviated to P2P and also called req to check, refers to the business processes that cover activities of requesting (requisitioning), purchasing, receiving, paying for and accounting for goods and services.
Key benefits are increased financial and procurement visibility, efficiency, cost savings and control. Automation allows for reduced processing times and straight-through processing where the incoming invoices are handled without any manual intervention.
Purchase-to-pay systems are designed to provide organisations with control and visibility over the entire lifecycle of a transaction
– from the way an item is ordered to the way that the final invoice is processed – providing full insight into cashflow and financial commitments.
Organisations automate invoice processing and purchasing policies and procedures to bring financial rigour and process efficiency to the business of buying.
Both purchase order (PO) and non-PO spending, capital, credit card and reimbursable spending can be captured and controlled through automated P2P systems. Finance departments can also enforce internal spending controls and have instant access to data that tells them who is spending, what they are buying and paying for, and with which vendors.
As a result, efficiency and cost saving benefits can be substantial.
(like B2B
, B2C, G2C etc.) that emerged as Internet applications became used more widely in business. Although it does not necessarily refer directly to the application of technology to the purchasing process, it is most often used in relation to applications like e-procurement
and ERP purchasing and payment modules.
value chain. This was driven primarily from by the supply chain software vendors and consultants but also by governments who had recognised and enthusiastically embraced concepts like e-procurement. The publication of the Gershon Review
in the UK in 2004 for example, gave the British public sector the mandate to direct significant resource and effort toward creating efficiency and in particular in all aspects purchasing.
As a consequence, once disparate business functions, such as accounts payable and purchasing, have in some organisations been brought together, and the concept of purchase-to-pay has evolved from a buzz phrase to a recognised discipline. (Some organisations have changed the reporting line of the payables function from finance to purchasing.)
A 2009 Basware
research report ‘The Cost of Control: The Real Price of Cost Cutting’ identified this growing trend of increased levels of finance and procurement collaboration to overcome finance and purchasing challenges – and highlighted that there is a clear emerging trend toward using technology as a way of overcoming operational challenges and harmonising ‘buyers’ and ‘payers’ within the business. Mark Frohlich, associate professor of operations management at the Kelley School of Business
commented at the time on the findings:
"A resounding majority of those interviewed have woken up to the negative realities of supply chain risk and the crucial positive role supply chains will have in transforming their businesses for years to come. Clearly, such changes to the business landscape will require a coordinated and collaborative response between functional departments – in particular finance and procurement, as well as the intelligent implementation of appropriate integrative knowledge sharing tools and systems. This is something we must all prepare for."
Automation
Purchase-to-pay systems automate the full purchase-to-payment process, connecting procurement and invoicing operations through an intertwined business flow that automates the process from identification of a need, planning and budgeting, through to procurement and payment.Key benefits are increased financial and procurement visibility, efficiency, cost savings and control. Automation allows for reduced processing times and straight-through processing where the incoming invoices are handled without any manual intervention.
Purchase-to-pay systems are designed to provide organisations with control and visibility over the entire lifecycle of a transaction
Financial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
– from the way an item is ordered to the way that the final invoice is processed – providing full insight into cashflow and financial commitments.
Organisations automate invoice processing and purchasing policies and procedures to bring financial rigour and process efficiency to the business of buying.
Both purchase order (PO) and non-PO spending, capital, credit card and reimbursable spending can be captured and controlled through automated P2P systems. Finance departments can also enforce internal spending controls and have instant access to data that tells them who is spending, what they are buying and paying for, and with which vendors.
As a result, efficiency and cost saving benefits can be substantial.
History
The term emerged in the 1990s and is one of a number of buzz phrasesBuzzword
A buzzword is a term of art, salesmanship, politics, or technical jargon that is used in the media and wider society outside of its originally narrow technical context....
(like B2B
Business-to-business
Business-to-business describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer...
, B2C, G2C etc.) that emerged as Internet applications became used more widely in business. Although it does not necessarily refer directly to the application of technology to the purchasing process, it is most often used in relation to applications like e-procurement
E-procurement
E-procurement is the business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies, Work and services through the Internet as well as other informations and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning.E-procurement...
and ERP purchasing and payment modules.
A discipline in its own right
Following the maturation of Internet-supported supply chain processes, the case emerged for identifying opportunities to further streamline business processes across the whole of the procure-to-payProcure-to-pay
Procure-to-pay is a term used in the software industry to designate a specific subdivision of the procurement process.-Definition:The procure-to-pay systems enable the integration of purchasing department with account payables department...
value chain. This was driven primarily from by the supply chain software vendors and consultants but also by governments who had recognised and enthusiastically embraced concepts like e-procurement. The publication of the Gershon Review
Gershon Review
The Gershon Efficiency Review was a review of efficiency in the UK public sector conducted in 2004-5 by Sir Peter Gershon.Gordon Brown and Tony Blair, then Chancellor of the Exchequer and Prime Minister respectively, appointed Peter Gershon, at that time the head of the Office of Government...
in the UK in 2004 for example, gave the British public sector the mandate to direct significant resource and effort toward creating efficiency and in particular in all aspects purchasing.
As a consequence, once disparate business functions, such as accounts payable and purchasing, have in some organisations been brought together, and the concept of purchase-to-pay has evolved from a buzz phrase to a recognised discipline. (Some organisations have changed the reporting line of the payables function from finance to purchasing.)
A 2009 Basware
Basware
Basware Corporation is a Finnish software company selling enterprise software for financial processes, purchase to pay and financial management; main competitors in this arena include Ariba and Proactis...
research report ‘The Cost of Control: The Real Price of Cost Cutting’ identified this growing trend of increased levels of finance and procurement collaboration to overcome finance and purchasing challenges – and highlighted that there is a clear emerging trend toward using technology as a way of overcoming operational challenges and harmonising ‘buyers’ and ‘payers’ within the business. Mark Frohlich, associate professor of operations management at the Kelley School of Business
Kelley School of Business
The Kelley School of Business is a top-ranked American business school operated by Indiana University. As of 2009, approximately 5,500 full-time students are enrolled on its Bloomington campus, as well as 1,750 students at the Indianapolis campus...
commented at the time on the findings:
"A resounding majority of those interviewed have woken up to the negative realities of supply chain risk and the crucial positive role supply chains will have in transforming their businesses for years to come. Clearly, such changes to the business landscape will require a coordinated and collaborative response between functional departments – in particular finance and procurement, as well as the intelligent implementation of appropriate integrative knowledge sharing tools and systems. This is something we must all prepare for."