How to Map Your Procure to Pay Process

8th October 2024

by Anna Roebuck

Understanding how to map your Procure to Pay (P2P) process can seem somewhat daunting at first. The steps may already exist in your organisation, but being able to get it all down in one place can seem a difficult task.

In this blog, we’ll share with you some of the basic stages you should consider and the reasons why it is so important to have a clear understanding of your process. Our guide, “How to Map the Procure to Pay Process” will outline the steps, and we’ve even thrown in a free Procure to Pay template to help you get started.

What is the Procure to Pay process?

Procure to Pay is the end to end process from selecting and ordering from a supplier to receiving goods/services and making payments. Historically known as Purchase to Pay, or P2P, it was a manual process involving numerous parties, different requirements and countless pieces of paper. Whilst the numerous stages remain, many organisations are taking great steps to automate the Procure to Pay process. As a vital component of any business, an efficient Procure to Pay process results in a healthy financial outlook, competitive strength and not to mention a honourable reputation.

You can break the Procure to Pay process down into different sections and there are different interpretations of this. At the end of the day it doesn’t really matter how many stages you have as long as you’ve included the fundamentals. In this blog we group them into four main categories – to keep it simple.

When you start to examine how your business runs its purchasing process, you really need to consider the following aspects:

Selection and sourcing

Before you even start raising purchase orders, you need to detail the system in place to identify company needs. Plus how you find and select suppliers. Ask yourself:

• Who do you need to speak to in the company?
• What are your criteria for selection?
• Do you have existing relationships with suppliers and who manages them?

Once suppliers are selected:

• What contractual agreements are in place?
• Who manages these relationships?

In addition, this also our first glimpse into compliance requirements in the Procure to Pay process. It’s vital to get this right from the start at the Selection and Sourcing stages.

Selection and sourcing

Once you have selected a supplier and signed the relevant agreements, consider how you raise your purchase orders. It can be a very simple process, but historical and manual involvement means that it is often convoluted, confusing and wastes time. This is often due to a delay in getting sign off or a lack of clarity around your company rules and policy.  Mapping out your Procure to Pay processes is a great opportunity to see the steps involved here and whether there is room for improvement.

You should consider the following:

• Think about how you create a requisition?
• Who decides how much money you will spend?
• How do you get approval from the budget owner and who enters the details into your computer system so a purchase order can be raised?
• Once a PO has been generated how do you send it off to the supplier ready to order your goods or services?

Receiving goods and services

Next, your services or goods should arrive. This is the time to add in further information around the following:

• Whose responsibility is it to check on the quality of the goods/services?
• How do you define if they are up to the standard you were expecting?
• Have they arrived in a timely fashion?
• Are there any credit notes or faulty items to return?
• How has your purchasing experience measured up so far? 
• Most importantly who is responsible in your organisation for each part of this stage?

Remember these are the types of questions you should be asking your organisation as you work through the process. Consider what tools you use in your organisation to measure these questions. Make sure you document them as you capture the Procure to Pay process.

Invoices and expenses

Finally, as soon as the goods/services are delivered the payment part of the process is in motion. Invoices will be raised and entered into your accounts system. Goods or services delivered are crossed off and compared to what was ordered. Payments are made and accounts settled. You want this to run smoothly, paying suppliers promptly and without mistakes of course makes for a smooth supply chain. Once again, consider who does what at these different stages:

• What different departments are involved in releasing payments?
• The different methods of payment your business uses to pay back suppliers?

You also need to compare how much you forecast to spend at the requisition stage and check how much the actual amount is in the invoice. This is key to managing the company’s cash flow. This is another clear example of how learning how to map your P2P process will help with the financial management of your business and keep it healthy too.

At this stage you can also include details of how you deal with internal expenses, such as:

• How do you pay back your employees?
• How do you keep copies of receipts and proof of payment?
• What do you ask to see and who needs to sign these off before payment can be made?
• Expenses payments are a vital part of the P2P payment process.

The risk in not having a well thought out Procure to Pay process

As highlighted in this article, the Procure to Pay process is fundamental to an effective business. Making sure you know how to map out the Procure to Pay process is key.  Not taking the time to clearly outline the process can result in many issues for any organisation including:

Slowing productivity

Customer satisfaction decreased because you couldn’t hire the temporary staff quick enough to satisfy demand? Products removed from your stock because you couldn’t get hold of the goods you needed to make them? All this relates back to your Purchase to Pay process. If you can’t get that right, your business can’t work quick enough.

Hidden costs

Do you really know how much you are spending on your suppliers vs the value it brings the organisation? Are you able to access this information at a touch of a button? A lack of clarity from your business means that you may not be able to track the flow of money around your organisation easily.

Compliance

A purchase to pay process that has not been clearly mapped means it’s easy to fall into the trap of making mistakes or not adhering to regulations. If your organisation was audited tomorrow – could you relax knowing that everyone in your business understands the rules and regulations and has been following them?

Communications

Traditional approaches meant that Procure to Pay had a paper trail. How many lost purchase orders or requisitions entered incorrectly have you experienced? Do you truly know how many people are involved in the P2P process? Do they all understand the steps and requirements? If there was an issue with payment tomorrow – do you know who to speak to about it?

Reputation

Supplier disputes, late payments? All headaches you clearly don’t need. They aren’t great for your reputation, suppliers need paying and all of this can be avoided if you have a system in place that works well. You may not even be aware of the issues your suppliers and staff are experiencing until you take the time to map out the Procure to Pay process.  Successful P2P leads to successful organisations

Successful Procure to Pay leads to successful organisations

When you look at the breakdown of the Procure to Pay Process, you begin to understand why it is such an integral part of any organisation. The delivery of goods and services are a component of every department. The success and smooth running of any Procure to Pay process is key to an efficient and profitable business.

Yet we still see hesitation. For many the task itself seems overwhelming. Procure to Pay affects every part of your business and at Spark we see that some people just don’t know where to start. By mapping out your process you are opening up that discussion. You are discovering your key people in this process, learning about the limitations and uncovering where your bottlenecks are.

A clearly defined Procure to Pay process means that:

• You have better control of your business.
• The lines of communication are open within departments and everyone understands their roles.
• Efficient sourcing and payments will make your company more competitive in the marketplace and of course improves reputation.
• More opportunities to uncover hidden costs and potentially save money
• Saves time approving suppliers and creating orders
• Safeguards your company from compliance and risk issues.

And these are just some of the initial benefits.  As more companies move towards automation in the Procure to Pay process, the opportunities to reduce errors and streamline the process become even greater.

How to map your Procure to Pay process – free template

We understand that for some it means just taking the first steps towards a healthy Procure to Pay process. That’s why we have made our Procure to Pay Process template available and free to use.

Spark’s Process Improvement Software solution was designed to be used by everyone in the organisation. That means there are no complicated shapes or terminology to learn and from the moment you start mapping the software will begin to build your analytics dashboard to help you understand where the costs, risks and opportunities are in your business. Discover the Spark way of mapping and take a look below at our procure to pay process which covers all the areas we have talked about above.

The Procure to Pay process template will help you look at a standardised way of managing the process. It’s up to you to customise or change it to your own business requirements. We recommend using a solution like Spark to include all your customisations and ensure that your process stay up to date and used by everyone in the organisation.