The procure to pay process is a necessary but time consuming and manual process particularly in small to mid-size organizations that are focused more on scaling the business and less on back-office process efficiency. With the most modern ERP or financial systems, this process can become very efficient through technology.
Five tips for leveraging technology to streamline the procure-to-pay process include:
- Keeping the approval workflow simple. Building an automated approval workflow into the system is critical to put in the appropriate controls. Overcomplicating the workflow can slow down the process and be difficult to maintain with employee turnover. Keeping the workflow to a 1-3 thresholds and a finance review is adequate to ensure that spending is aligned with budget and plans.
- Two-way match for services, three-way match for goods. It is an important spend control to utilize POs for services as well as goods. Services are received in multiple invoices and only the owner of the service contract knows whether the services have actually been rendered by the provider. It is easier to identify receipt for goods because exact quantities can be recognized. It is more efficient to match the invoice to PO for services and invoice to receipt to PO for goods. The approval is captured up front on the PO and then upon receiving the invoice. This ensures adequate controls are in place to confirm that the services or goods that you receive were delivered.
- Integration with key suppliers. For high-volume suppliers, systems have functionality to integrate with suppliers. Two of the most common options are vendor punch out and Electronic Data Interchange (EDI). With vendor punch out, a key supplier’s online catalog is viewed within your ERP system and selections are then converted into a PO. This pushes the responsibility for pricelist and item maintenance onto the vendor and provides visibility into real-time pricing. EDI is another method for integrating with supplier ERP systems. A standard protocol is used to transmit purchase order request information to a vendor and confirmation of shipping and fulfillment is sent back to the ERP system. This method takes away the need to manually place orders. Companies with minimal frequency or volume of purchasing, the cost will likely outweigh the benefit however automated email generation of purchase orders to vendors can improve the efficiency of the ordering process.
- Automated invoice approval routing. By having invoices sent directly to accounts payable these invoices can be coded and sent through an approval workflow within the system which will save time gathering, documenting, and tracking approvals through paper and email. The approval workflow typically has an audit trail history eliminating the risk of losing key approval information that may only live in an email inbox.
- Electronic payment methods. Taking advantage of electronic payment methods such as Automated Clearing House (ACH) to pay vendors will greatly improve overall processing time. While some vendors still may require checks, transitioning to EFT (Electronic Funds Transfer) for as many vendors as possible will significantly reduce the duration of the payment runs.