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A successful Procure to Pay (P2P) process accommodates all the steps to supply your organization with the necessary resources to continue running smoothly. It’s aim is to make the entire production resources chain as fast, secure, and cost-effective as possible.
Image provided by EASY
Yet, the cross-departmental collaboration of finding the right supplier, negotiating contracts, minimizing spend, and finding ways to automate the purchasing cycle doesn’t come without its own set of hiccups.
Only by understanding the most significant challenges facing the Procure to Pay process today, can you initiate the necessary steps towards a seamless procurement process.
P2P Obstacles in 2019
Below are a few Procure to Pay challenges which ultimately impair the ability to manage and execute key procurement activities effectively.
Slow Invoice Process Time
Manual routing, processing, and a high turnaround time for approvals slow down the P2P cycle and make it difficult to capture early payment discounts, lead to late payment penalties, and can even damage your supplier relationships.
Risk of error is inherent in any process involving paper and manual data entry. This is critical because of its impact on working capital and the fact that transactions are subject to scrutiny by external audits for regulatory compliance.
High Costs Per Invoice
Processing errors require resolution, which drives up the cost per invoice and impedes employee productivity. The cost of storing physical copies of invoices and purchase orders (POs) in the office or in off-site warehouses can also add up quickly.
Lack of Spend Visibility
Quick access to information on whether an invoice has been received, processed, or paid brings a level of stability, control, and oversight that is absent in a manual system. Visibility also makes it easier for your company to assess P2P operations, develop the necessary strategies for improvement, and provide a single source of truth (SSOT) to support the decision making process.
Difficult Data Retrieval
From audits to vendor inquiries, finding information quickly can be virtually impossible when invoices and POs are stored in multiple locations and often retrieved manually.
Getting Better with Process Mining
Whether it’s your procurement, enterprise resource planning (ERP), or invoicing system, theses systems keep records of all activities from Purchase Requisition creation to Invoice Payment, marking when each event took place. From this data, called event logs, Process Mining software re-creates a visual model of your entire procurement process.
By including additional case attributes such as vendor, purchasing organization, payment terms, cash discount dates, transport conditions to the model, you can see where mistakes occur, time periods when they happen, which employees are involved, or which vendors follow which process variations most frequently.
Once you shed light on your processes, you can pinpoint the challenges identified above, make needed changes, and focus your improvement efforts to bring out the best results.
If you’re looking to expedite approvals in your purchase request process or calculate how much money you save by reducing unnecessary rework in your P2P process, take a look at how Minit can alleviate challenges and drive change at greater speeds and efficiency.
See Minit in action to become a process hero today.
Cover photo by Ryan McGuire at gratisography.com