KMWorld 2024 Is Nov. 18-21 in Washington, DC. Register now for $100 off!

Best P2P practices and their benefits

Article Featured Image

At its most basic level, the procure-to-pay process involves everything from the requisition of goods or services to supplier payments. This includes a number of sequential stages such as identifying needs, developing and approving requisitions, placing and approving purchase orders, goods receipt notes, evaluating supplier performance, and invoice approval and payment.

In short, the procure-to-pay solution cycle is a business’s systematic method for procuring and paying for raw materials and services.

The P2P cycle helps in connecting the procurement operations to an organization’s accounts payable department. The major responsibility of the accounts payable department is to keep track of how much money a company owes its suppliers and creditors, as well as to ensure that payments are correctly made to the concerned parties.

Once the two processes, i.e., procurement and accounts payable, are integrated, procurement processes become simplified and more efficient because they need accounts payable teams, procurement departments, and suppliers to interact.

In this article, we will discuss some of the best practices of the P2P cycle that organizations must adopt in order to increase the efficiency and credibility of the entire P2P process.

Best practices of P2P

No two businesses are alike. Best practices benefits are meant to accept variances and allow each firm to identify areas in need of development, then build and formalize workflows, protocols, and procedures that will result in efficiency, cost savings, and other desired benefits.

For the highest return on procurement investment, organizations must consider using the following P2P best practices.

Focus on supplier relationships

If organizational spend data is crunched with spend analytics, it would undoubtedly be found that an organization spends more on suppliers than on other internal expenses. According to Mckinsey, on average 40%–80% of a company’s total cost includes external spend with suppliers.

Having good relationships with suppliers via supplier management solutions can help organizations make their P2P cycle more efficient and cost-effective. An organization that establishes a strong relationship with its suppliers will get put at the top of those suppliers’ priority lists. This means those suppliers will make exceptions and work tirelessly to meet the quotation, deliver items on the schedule, give the highest quality that is demanded, and provide the assistance that an organization requires.

Moreover, long-term relationships with suppliers can also enable organizations to take advantage of enticing deals, incentives, and discounts given by pleased and loyal vendors. Ultimately, competitive pricing and quality might give them a leg up on the competition.

Collaboration and transparency

Lack of visibility into the P2P process can leave suppliers in the dark, creating confusion and the need for excessive buyer/vendor communication. This makes the lives of both procurement teams and suppliers miserable and often leads to confusion. If the suppliers are not happy working with the organization, they might switch to another client.

The P2P cycle improves visibility by allowing purchasing teams and suppliers to see the status of their requests and invoices. A P2P solution can help procurement teams improve collaboration and transparency between suppliers.

To suppliers, the solution provides a self-service portal so that they can track the status of their invoices whenever they want. Whereas to procurement teams, the P2P solution provides visibility on when the requisition has been made and by whom, all the necessary approvals that are required, and the status of their placed order.

KMWorld Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues