Procure-to-pay is a part of the larger procurement process that deals with ordering, approval, delivery, invoicing, and payment of goods and services for an organization. While it does not encompass the total function of a procurement team — which includes things like strategic sourcing, supplier evaluation, and other supplier lifecycle functions — procure-to-pay does represent the lion’s share of daily purchasing and payment activity within the organization.

Having a strong procure-to-pay process is essential to the smooth operation of an organization. It can reduce workload across departments, mitigate risk, reduce spending, and increase the efficiency with which employees purchase, approve, and track the materials and services the compnay need for success. 

Learn more about the procure-to-pay process, and how to implement this efficient business process at your organization:

What’s included in the procure-to-pay process

The procure-to-pay (P2P) process is the multistep system of requests and approvals that allows a purchase to go from first identification of needs to final payment. Depending on the organization, the procure-to-pay process may be conducted manually or maybe assisted by procurement software specifically designed to aid the purchasing and payment process flow.

A well-oiled procure-to-pay process allows stakeholders to quickly and easily assess their needs, request goods and services to get them filled, and allows approvers to ensure accuracy and cost savings in the purchasing process. An efficient SaaS buying process is an efficient procure-to-pay process. 

While the procure-to-pay process is often administered by a purchasing or procurement department, it is actually a cross-departmental function that requires input and oversight from a variety of departmental stakeholders. Automating these business processes can reduce the time department heads and finance professionals spend fulfilling the needs of the organization.

The stages of the procure-to-pay process

The P2P process should be the same for every purchase the company completes, though the approval might change depending on the dollar value of the contract involved. Overall the process of purchasing, reconciling, three-way matching, and paying for necessary goods and services should follow the following predictable pattern:

1. Identify the need

In this step, a buyer, typically a departmental stakeholder, will identify the need for a product or service. Along with identifying a need, a stakeholder may have some solutions in mind for fulfilling it. Once the preliminary parameters are known, the process can move on to purchase requisition.

2. Build a purchase requisition 

In a successful procure-to-pay process, buyers will be able to create an intake form or purchase requisition with all necessary information to fulfill that need. These requisitions should outline the need and (as described above) may present potential solutions. For software or service requisitions, buyers may evaluate and present for consideration. This is called the “three bids and a buy” approach. 

3. Approve the requisition 

Once all necessary information about the purchase is compiled, the requisition will go through an approval process. Depending on the dollar value and the nature of the request, purchases may require approval from several departments, including legal, security, information services, and the finance department. Having a codified, standard purchase requisition approval process can significantly reduce risk and improve the timeline for requisition approvals.

4. Create the purchase order (PO)

After the purchase requisition has met all departmental approval parameters, finance can create a purchase order for transmission to the successful supplier. The purchase order outlines specific goods and services requested. It is also used later for reconciling the goods received.

5. Approve the purchase order

Though the purchase requisition goes through a departmental approval workflow, it is good practice to also submit purchase orders for approval. This creates accountability through the finance system and serves as a final check for inaccuracies in the order for the scope of work. Once approval is completed, the purchase order can be transmitted to the supplier for fulfillment.

6. Receive products/services and match invoices

Receipt of goods refers to both the act of accepting delivery of ordered goods, and reconciling those against the purchase order and purchase requisitions created earlier in the process. This manner of three-way invoice matching ensures that the goods received match what was intended, and allows accounting to reconcile invoices that go through the purchasing process.

7. Approve the invoice

Once receipt and reconciliation are complete, the invoice submitted by the supplier can be approved for processing. This invoice approval may be completed by a manual process or, in the case of procurement software, may be conducted electronically through the system.

8. Pay the supplier 

Once invoice processing and coding are complete, the accounts payable department can initiate vendor payment to the supplier for the goods received. This represents the end of the procure-to-pay process, but does not compass the total procurement function. 

Procurement also conducts post-close activities such as supplier performance and contract management. Many procurement management functions also include processes to align with supply chain management after the procurement of raw goods or services is complete.

The difference between procure-to-pay and e-procurement

Though sometimes used interchangeably, procure-to-pay and e-procurement are two different terms and processes. Procure-to-pay is a process, and a portion of the total procurement function focused on the ordering, receipt, and payment of goods and materials.

E-procurement refers to the automation of that process using software-based procurement solutions. While e-procurement may be part of the procure-to-pay process and strategy within the organization, it refers to the automation of these processes through software, AI and automation technology.

Using procurement management software, the finance team and accounts payable departments can minimize much of the manual labor associated with the purchasing and payment processes. AP automation can save thousands in employee wages while reducing errors and increasing processing capacity.

With a procure-to-pay software tool, suppliers are organized within a centralized SaaS management database. AP automation takes care of the invoice processing, coding, and contract management portions of the procurement process in a touchless system. These software tools make it possible to process thousands of invoices across hundreds of suppliers automatically and with minimal human interaction and fewer inefficiencies and errors.

Why a procurement process matters for SaaS buying

While the procure-to-pay process incorporates purchasing goods and raw materials, it is equally effective with managing SaaS buying and maintaining strong supplier relationships. There are many benefits to translating procure-to-pay processes to administering software buying, including:

Faster fulfillment for employee software needs

When a company has a standardized process in place for purchasing SaaS, an automated P2P process will reduce the time from requisition to completion. A streamlined procure-to-pay process allows all stakeholders to understand their responsibilities and the departmental prerequisites for buying new software, which reduces much of the back-and-forth associated with manual approval.

More visibility into the SaaS lifecycle

A strong procurement process also creates visibility at every stage of the purchase. By integrating the procure-to-pay process into the overall vendor management functions, all information is centralized to successfully manage future upgrades and renewals. Finance will also have a real-time source of truth to use in reporting, forecasting, and spend analytics practices. 

Better bottom-line results

When processes are streamlined, the company saves time and money. Employing a centralized procure-to-pay process for SaaS management reduces manual hours of activity spent approving and tracking purchases and renewals. A clean process also improves everyone’s understanding of how the organization uses SaaS software and improves spend efficiency. This can help teams leverage volume and increase strategic sourcing opportunities in order to save money and secure better contract terms.

How Vendr can help level up your business’ procure-to-pay for better SaaS management

Procurement success and vendor management go hand-in-hand. With a strong procurement solution SaaS buying, you can reap the benefits of a strong process, and benefit from the knowledge of a team with over $1B in software purchases under their belt. 

If you’re at the beginning of crafting a strong procurement strategy, Vendr can help. Once the team gets your process up and running, we optimize your SaaS buying experience through dynamic spend management and supplier relationship management that reduces blockers and increases savings.


Learn what happens when you work with Vendr.

Get an inside look into the platform where you can discover and buy new tools, see how much you're saving on software, and stay up to date on all of your deals with our free guide to the Vendr SaaS buying platform.







Next post Back to all posts