Cash & Liquidity ManagementCash ManagementPracticeAutomating the Procure-to-pay Process

Automating the Procure-to-pay Process

The procure-to-pay (P2P) cycle can vary considerably from organisation to organisation, depending upon the nature and size of company, the organisational structure and also its culture. Some organisations have a fully-automated P2P process while many organisations still rely upon a largely manual process involving the circulation and signing of paper documents. So should the procurement process chosen by a company actually matter as long as it works for them and should all organisations strive for automated P2P?

Organisations should always be considering how to alter their P2P processes to improve efficiencies and enable smarter and more cost-effective procurement. P2P is not an area in which to stagnate, particularly during a time of economic austerity.

The automation of the procurement cycle and the benefits of doing so should therefore be considered by every organisation. A fully-automated P2P process may not suit every company; however if going down this route is not investigated, how will the company ever know?

A Typical P2P Process

There are probably as many P2P processes as there are organisations, however a typical P2P process involves the following key stages:

  • The purchase requirement is identified and the purchase order (PO) is raised.
  • PO authorisation is obtained via a pre-defined authorisation route (including budget checking).
  • The approved PO is made available to the procurement department.
  • Buyer sourcing takes place (incorporating contract-bid management).
  • The preferred vendor is selected.
  • The PO is despatched to the vendor.
  • Goods/services are received.
  • Supplier invoice is received and authorised.
  • Payment is made to the supplier.

Organisations that perform P2P manually will typically print out a PO, which is circulated to the relevant managers for approval. It is then physically signed and returned to the requisitioner or sent directly to the procurement department for actioning. Buyer sourcing can take many forms according to the procurement rules and regulations of the particular company with the resulting purchase order despatch, supplier invoice authorisation and payment typically involving the printing, photocopying and posting of a number of paper documents.

Automating P2P

Organisations that automate the P2P process replace the manual intensive (and paper heavy) nature of procurement with electronic processes. A number of technologies can be used to automate the different stages of the P2P process, such as:

Electronic PO requisitioning and authorisation

Organisations have the ability to fully streamline and automate the requisition process. Using authorisation/workflow technologies, POs can be raised by the requisitioner electronically. Once raised, they will be automatically forwarded to the relevant individuals for coding and then routed for authorisation.

Extensive authorisation and routing capabilities ensure that every purchase order is sent to the correct individuals for approval. For instance, rules can be set to ensure that purchase orders under £1000 are sent to the line manager for approval. For orders over £1000 they may be routed to the line manager and then the head of department; and for higher value orders, such as those over £5000, orders may be routed to the line manager, head of department and then the financial director or managing director (MD).

Full workflow and alerts functionality can be provided to notify authorisers of requisitions awaiting approval. Full residual budget checking facilities, comprehensive auditable controls and validation checks can also be incorporated into the purchase authorisation process.


IT systems are available which can streamline the often complex sourcing and tendering process. This is especially important for public sector organisations that have to abide by strict procurement policies.

These IT systems can deliver a suite of collaborative, web-based tools that enable procurement professionals and suppliers to conduct the buying and tendering process over the internet via a fully hosted and secure environment.

Organisations are given the ability to fully facilitate ‘e-sourcing’ including request for quotes (RFQs); e-tendering (as well as the ability to fully facilitate OJEU notice processing); e-auctions; supplier selection; contract award management; and supplier management.

In addition, the most advanced solutions support organisations with the sourcing of goods through online catalogues. These can include organisations’ own internal catalogues as well as ‘punching out’ into third party supplier portals and catalogue marketplaces such as Science Warehouse, @UK, IDeA and Zanzibar.

Despatching PO to the supplier

There are a number of methods by which a PO can be electronically sent to the chosen supplier. Using the authorisation/workflow solution, the approved PO can be emailed to the requisitioner for forwarding onto the supplier. POss can also be sent to the supplier in line with their requirements, such as using the latest online XML technology or via supplier portals. For optimum automation, a PO can be automatically generated and sent to a chosen supplier as soon as a requisition has been raised and approved, eliminating any manual intervention.

Supplier invoice processing

The processing of supplier invoices can also be fully automated using workflow and document management technologies. Paper invoices received into the organisation are scanned and automatically tagged to the appropriate record in the finance system. Optical character recognition (OCR) technology reads and verifies the data on the invoice before being uploaded to the core finance system, reducing manual data entry and the associated errors. At the same time, using workflow software and pre-defined authorisation routes, the imaged invoices are automatically emailed to the relevant approvers for them to approve, reject or query on-screen. The approvers can also view all associated documents on-screen such as POs and proof of deliveries to aid invoice authorisation. Once the invoice has been authorised, the accounts department can be automatically notified so that payment can be made.

There are also a number of other automated methods of processing supplier invoices. For instance, Gloucester City Council’s electronic procurement (e-procurement) processes involve authorised council users ‘punching out’ into the @UK eMarketplace where they can automatically select their goods and services from a wide range of suppliers without manually keying-in information. Once a basket of goods has been selected for purchase, the specific contact details of the person who raised the order are added to the system. Instead of having to pay at the supplier’s checkout, the order is brought back into the Advanced Business Solutions (ABS) e-procurement system and the goods are matched with the general ledger codes before being sent to a council officer for approval. Once approved, the order is raised and sent electronically via the @UK eMarketplace to the chosen supplier where it is seamlessly converted into an electronic invoice and instantly committed to the council’s financial management system. This eliminates the need for the supplier to physically raise and send an invoice to the council.

Supplier payment

Once the purchase invoices have been authorised, the finance department can credit the supplier account and payment can be released to the supplier, ideally via an electronic payment (e-payment) method. A remittance advice can also be automatically generated and emailed to the supplier advising of payment.

Complementary P2P Technologies

Once the key stages of the P2P process have been automated, organisations should investigate complementary integrated technologies that can further streamline the procurement process, while ensuring tighter control over spend. Purchase card reconciliation, spend analytics and fraud detection solutions are just some of the technologies organisations should consider implementing.

Purchase card reconciliation

The introduction of purchasing cards into an organisation may well relieve the card holder from a previously arduous process, however the administrative burden is simply passed to the back office causing increased costs to the finance department. There is often a high level of manual input with purchasing cards, for instance card holders having to log spend, reconciliation of paper-based records, manual approval of physical records and the manual generation of general ledger journals. Purchase card reconciliation software automates the processing of purchase card spend whilst ensuring greater control over what is spent and by whom.

Spend analytics

Spend analytics is a business intelligence solution that provides visibility and clarity of an organisation’s procurement performance, facilitating smarter procurement and ultimately, cost savings.

Using spend analytics, procurement professionals can identify direct cost savings through instant access to key procurement data. They can also identify process improvements. Spend analytics provides ‘out of the box’ metrics and measurements for everything from contract versus non-contract spend, category spend analysis and identification of different prices for the same product or service.

Fraudulent spend prevention

Despite the level of financial security within many systems, abuse of loopholes within certain systems is more common than many would think. This is why an additional level of security and protection should be considered in order to identify and prevent fraudulent spending by staff.

A number of fraud prevention and detection systems are on the market with differing levels of functionality. The most advanced systems have the ability to anticipate and detect collaborative fraud, which is often the hardest type of fraud to detect. Typically, collaborative fraud is when an internal employee makes unusual arrangements with an external supplier or customer which may result in suspect credit notes, write-offs, discounts, special order conditions or one-off payments. The right fraud technologies can deliver a mixture of parameters, conditions and alerts to highlight and help to prevent dubious procurement activities.

Benefiting from Automated Procurement

The decision to go down the automated procurement route removes time-consuming administration and paper-intensive P2P processes. However, this is just the tip of the iceberg. Automating the full procurement cycle or just part of it can deliver a multitude of organisational benefits. The key benefits are:

More efficient purchasing

Less administration and manual intervention throughout the procurement process results in more efficient purchasing. Purchases can be procured in less time so that day-to-day business operations are not impacted by the slow procurement of new or replacement goods and services. Newcastle City Council is one organisation that has greatly reduced the time taken to process orders and payments through automating P2P. Gloucester City Council has also cut the time it takes to procure an item by 75%. It previously used to take around 20 minutes to manually order a dozen stationery items, whereas now it takes just five minutes.

Greater control over spend and elimination of maverick spending

Automation means that all spend is documented and there is an audit trail of who has raised which PO, who has approved what, the goods bought and when payment was made. Having total visibility of spend leads to much greater control over procurement, helping to reduce unnecessary and maverick spend.

Reduced costs and smarter procurement

Savings can be realised by automating procurement and ensuring greater control over purchases. ABS’s’ customers report significant transaction savings as a result of the electronic capture of orders, electronic communication between customers and suppliers, and the electronic receipt and processing of supplier invoices. Seventy-five percent reduction in requisition process costs, 80% reduction in central procurement processing costs and 40% savings in invoice processing costs are typically achieved through the implementation of best practice procurement processes.

Having greater visibility over spend also leads to smarter procurement decisions. Consolidating suppliers and then improving negotiation with a few chosen suppliers can lead to significant cost gains, for example.

Corporate governance

Stringent procurement processes ensure that an organisation’s procurement framework and polices are adhered to. Manual procurement processes are extremely difficult to control and manage, leading to loopholes for errors and fraudsters.

The addition of an extra layer of security on an organisation’s finance system, such as an integrated fraud detection and prevention solution, provides even greater control over the whole payment process.


Not every organisation may feel the need (and have the budget) to move across to a fully-automated procurement process, however it is vital for organisations to recognise which procurement technologies are on the market and how these can improve the P2P process. These technologies deliver a range of benefits, from streamlined procurement and the elimination of maverick spending through to the early identification of suspicious procurement activity.

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