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P-2-P: Procurement to Pay – A quick glance at the importance and uniqueness of Skysoft’s solution

What is Procurement to Pay?

In any organization, material purchase is one of the vital operations, especially in manufacturing, healthcare & pharmaceutical companies, retail & e-commerce businesses, construction & engineering firms, automotive, food, textile, etc. Effective purchasing has a direct impact on the profitability of the organization.

P2P is a complete process cycle of effective purchasing activity. It is high time for an organization to move away from inefficient P2P software and traditional approaches and embrace digital transformation.

The Different Stages of the P2P Cycle:

1. Necessity:

The business identifies the need for a material or service.

2. Source Identification and Enrolment:

  • Evaluate suppliers based on price, quality, reliability, past performance, and compliance requirements.
  • Supplier on boarding involves documentation, credit evaluation, and compliance verification.
  • Categorize suppliers (strategic, preferred, and approved) for streamlined procurement.
  • Enroll one or more suppliers per product to mitigate dependency risks and handle emergency procurement needs.

3. Requisition (Indent):

  • Material or service request from the end user based on operational needs.
  • If the requirement falls within a predefined budget, auto-approval can be triggered to speed up procurement.
  • Multi-level approval workflows can be configured based on purchase type, amount, and urgency.

4. Rate Contract:

  • For regular purchases, a rate contract with manufacturers or distributors ensures better pricing and avoids repeated negotiations.
  • Contracts may include volume discounts and escalation clauses for periodic price adjustments.
  • In manufacturing, Blanket Purchase Agreements (BPAs) or Vendor Managed Inventory (VMI) can enhance supply chain efficiency.

5. Purchase Request Creation:

  • Consolidate indents from various departments.
  • Compare with safety stock, reorder level, and stock movement to determine the final procurement need.
  • Integrate with Material Requirements Planning (MRP) for demand-driven procurement.

6. Purchase Order (PO):

  • Create a purchase order (PO) based on the approved purchase request to formalize the agreement with the supplier.
  • The contract may be open-ended for a period or a fixed quantity contract.
  • Consider Call-off Orders, which allow phased purchasing under a master agreement.
  • POs should include Incoterms (shipping terms) and penalty clauses for non-compliance.
  • Advance payments (full or partial) should be tracked in accounts receivable.

7. Order Fulfillment and Delivery:

  • The supplier fulfills the order and delivers the goods or services.
  • Delivery tracking is necessary to monitor progress.

8. Delivery Confirmation & Goods Receipt Note (GRN):

  • Confirm that the delivery has been made.
  • Conduct 3-way matching (PO, GRN, Invoice) to verify receipt before payment processing.
  • Implement quality inspection before accepting goods to ensure compliance with purchase terms.

9. Purchase Bill Accounting:

  • The supplier issues an invoice for the goods or services.
  • The purchase bill is verified against the PO and GRN before processing payment.
  • Advance payments, if made, must be apportioned (fully or proportionately) based on PO and delivered quantity.

10. Accounts Payable & Payment Processing:

  • Payments are processed based on the terms defined in the PO.
  • Consider dynamic discounting (early payment discounts) and automated payment scheduling.
  • Ensure compliance with TDS (Tax Deducted at Source), GST/VAT rules, and other regulatory requirements.

11. Vendor Rating:

  • Evaluate suppliers based on delivery timelines, quality consistency, and responsiveness.
  • Use vendor scorecards and KPIs to track performance for future procurement decisions.

By implementing a structured P2P process integrated with MRP, ERP, and automated workflows, organizations can achieve higher efficiency, cost savings, and compliance adherence. Skysoft’s P2P solution ensures end-to-end automation, seamless supplier collaboration, and enhanced visibility into procurement operations.

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