Procure to pay (p2p) is the name for software that handles procurement via electronic format. That includes all steps of the p2p cycle from requesting and sourcing to purchasing and paying suppliers for goods and services. A good procure to pay strategy pays attention to all of these steps. The more seamless the process, the more efficient a buyer can be with resources.
Avoiding Procurement Mistakes With a Procure to Pay Strategy
Whether you are in the procurement industry on behalf of a business or a government entity, the software available to you is more or less the same. e-Procurement platforms are all software packages that combine electronic solutions to make the work easier. At the end of the day, the quality of the software depends on how much it prevents common mistakes. Why? Procurement mistakes are costly. From large-scale budgets to strict regulation compliance, a procurement mistake tends to mean facing a huge monetary penalty. Let’s take a look at five costly mistakes that a good procure to pay strategy and software can prevent.
Mistake #1: Omitting Enterprise Resource Planning
Some organizations work with a variety of disparate systems. From analog and paper shuffling to fully electronic systems, it’s still typical to see enterprise resource planning (ERP) platforms in a silo apart from the p2p network. As long as your electronic procure to pay solution is cloud-hosted and has the right APIs, an organization that is serious about tracking and managing their savings pipeline can link the two solutions together. With cross-platform transparency in a single e-Procurement platform, your money management extends beyond simple p2p to encompass the entire organization.
Mistake #2: Maverick Spending
In the process of purchase order (PO) management, your procure to pay strategy and software can solve cases of maverick spending. Not only will p2p software allow you to enforce your “No PO, no pay” policy by centralizing procurement department functions, but detailed spend analysis means you get names. Read more about how this technology pinpoints repeat offenders here.
Mistake #3: Contract Lapses
When a contract reaches its end date without renewal or a formal ending, business often continues without a safety net. This can lead to overspending, accepting responsibility for delivery errors, or total contract failure. Recently we discussed the 3 main reasons that vendor contracts fail:
- Poor foundation
- Poor visibility
- Poor definition of the endpoint
All contracts end. With the wrong foundation and a laissez-faire attitude towards management, lapses are inevitable. Procure to pay systems provide a way for suppliers and buyers to have constant communication regarding contract details. With electronic supplier on-boarding, contract management as part of your e-Procurement platform is a solution to avoiding unplanned lapses and mismanagement.
Mistake #4: Increases in the Cost of Doing Business
The goal of business is to consistently find better pricing, better suppliers, and better deals on the market. With a robust procure to pay strategy that includes p2p software, you can rely on the system to evaluate hidden cost savings in your procure to pay cycle. Vendor consolidation, for example, is an automated step when onboarding suppliers. It can reveal opportunities for larger volume purchases from an existing contract that is already on the books. With a quick notification, you avoid wasted time searching for new suppliers.
Mistake #5: Lagging Efficiency
When efficiency in procurement is low, it makes logical sense that there is wasted money and resources leaking from the process. The more man-hours spent on acquiring materials, the higher the cost per unit of that item will be. Research from the American Productivity & Quality Center (APQC) confirms that all top performers in procurement have one thing in common: cycle time efficiency. A fundamental way to cut costs is to decrease the cycle times associated with procuring goods and services. With p2p software implemented, APQC reports that organizations can expect the following efficiency results in the supply chain:
- faster PO creation
- shorter wait times from accounts payable (AP)
- improved internal processes
- expanded supplier management efforts
- regular contract performance evaluations
- increased shared goals between suppliers and buyers
From these efficiencies in business process management across the procurement process, it’s clear that procure to pay solutions prevent all of the most common p2p mistakes. By avoiding these 5 mistakes mentioned above, organizations cut down on wasted money via payments as well as company resources in general.
Developing a Procure to Pay Strategy
With time and money savings being such a commodity, it’s not surprising why many organizations have been onboard with the digital migration. Taking the procure to pay process from manual to digital may not be an easy adjustment, but it’s digitization that solves immediate and future issues. The benefits are hard to ignore. When an organization keeps messing up, the obvious need for a modern p2p solution is glaring.
To understand how to leverage ProcurePort’s p2p and other procurement software into real business benefits, download our FREE whitepaper on sourcing intelligence today.