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What is a purchase to pay process?

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For some in the business world – particularly in the world of financial process automation specialists who work with business systems like SAP – the term purchase to pay may be nothing new. But for many other people involved in other areas of business, or in only one aspect of the purchase-to-pay (P2P) process, we want to provide an explanation of what a purchase to pay process is in its entirety.

A purchase to pay process or ‘cycle’ – also called ‘procure to pay’ in some organizations – is the process of events which occurs in a business between the purchase of goods and services and the payment of an invoice.

This cycle includes steps like the purchase requisition, purchase order, order confirmation, delivery notification and invoice payment – and includes all checks, verification, approval processes, and documents which arise during the process.

By its nature, the purchase-to-pay process is a system which involves many different people and departments, and the larger the company, the greater the number of people will be involved. This means not only a time-consuming process, but each step is also a potential source of error due to manual editing of documents. Furthermore, for larger organizations a lack of transparency into the flow of process is also an issue, leading to workflow related questions such as: Is the order approved yet? Who has reviewed whether the delivery is complete? Who still needs to approve the invoice before it is paid?

Below: A flow chart infographic of the purchase to pay process. (Click to see the illustration in full size)

Purchase to pay and order to cash cycle process steps – flow chart

These problems have led many companies to automate single steps (commonly invoice processing – accounts payable automation) or even the entire purchase-to-pay process in order to increase transparency, accelerate the process and save a considerable amount of time and money.

Automation solutions often integrate with the business systems (e.g., ReadSoft has a certified SAP integration) and allow users to experience the same environment as their business system, while enjoying the benefits of the process automation.

To learn more about the purchase-to-pay process and making the steps within it more efficient, we recommend:

  • Our overview of different steps of the P2P process than can be automated. Discover all of the steps that can be automated within SAP and how it works in each process step. Visit our SAP microsite here to learn more.
  • PayStream Advisors’ 2014 Purchase to Pay for SAP report. This report includes a survey with financial professionals and best practices for companies wanting to utilize third-party solutions with their SAP ERP system. Get the report here.

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