How to Conduct a Procure to Pay Audit for Better Efficiency

For many businesses looking to secure raw materials and optimize their supply chain, the procurement process is complex (even without procure to pay audits). It involves many steps, interactions with suppliers at various stages, and multiple team members moving individual purchases and transactions along to the payment stage.

For greater business efficiency, optimizing your procure to pay process is crucial. By embracing best practices like strategic goal setting, standardization, and automation, your business can save money while reducing the time and resources needed to get materials in the door.

Of course, setting these practices is only the first step. Effective procurement departments also need to conduct regular, internal audits to measure progress toward goals, uncover inefficiencies, and recommend improvements where needed. The benefits of these audits justify the time and effort required to audit your procure to pay process.

The Benefits of Auditing Your Procure to Pay Cycle

Before jumping into your first audit, it makes sense to build a better understanding of why the process is necessary and valuable. For most companies, and across industries, auditing your procure to pay cycle comes with very tangible benefits:

  1. Increase spend visibility and transparency, especially for complex purchases.
  2. Identify inefficiencies and bottlenecks that can be solved with a better process.
  3. Uncover hidden procurement cost savings through improved worker productivity and reduced cycle time.
  4. Understand the potential for integration between procurement and accounts payable.
  5. Identify potential lost profits due to over-payments or missed opportunities.

The premise is simple: the more you know about how your procure to pay process actually works, the better you will be able to optimize it. Regular audits offer the visibility and transparency you need to increase efficiency and integration of these processes, maximizing productivity while minimizing costs and bottlenecks.

5 Steps to Audit Your Procure to Pay Process for Better Efficiency

Understanding the necessity of a regular audit is an important first step. Now, it’s time to examine what you can do to ensure an audit results in tangible takeaways and improvements.

1. Establish Audit Goals

As is the case with any business process, no audit can be successful without knowing the desired outcome. Ideally, anyone involved in the process should be able to answer this question: what information do we need to uncover with the audit?

The answer to that question likely includes some of the benefits outlined above. The more specific and measurable the goals are, the better. Whether you’re looking to increase integration or find hidden costs, specify your goals first before the following steps.

2. Compare Purchase Orders to Final Transactions

This step allows you to evaluate exactly how accurate your initial estimates are. It also helps you understand whether any aspect of the intake process needs to be improved.

No organization is fully optimized, so some discrepancies between purchase orders and final transactions will likely exist. Finding these discrepancies, and discovering trends that can be corrected with a better ordering process, can help improve your procure to pay cycle.

3. Evaluate Supplier Selection and Collaboration

Naturally, the procurement process requires close collaboration with various vendors and suppliers. How are you making sure that you are working with the best possible options, while also maximizing your collaboration capabilities to establish mutually beneficial supply chain relationships?

This evaluation can take various forms, from rating supplier effectiveness and quality after each transaction to reconciling communication through the cycle with these rankings. Either way, making your supplier relationships a component of your audit can be immensely beneficial.

4. Assess Procurement-Accounts Payable Integration

In most organizations, the lines of demarcation are clear: procurement secures the contract, while accounts payable is responsible for actual payment. But increasingly, a successful spend management approach ensures integration between both departments to avoid inefficiencies and bottlenecks.

Assessing this integration can be difficult, but is possible. Accuracy and timeliness of communications are key, as is the time to pay in a typical transaction. A qualitative component, achieved by simply asking members of each team about current processes and potential for improvement, can also be beneficial.

5. Compare Goal and Actual Spend

The final step in a procure to pay audit should be a look at the bigger picture. Did your organization meet its goals in not only procuring the right materials but also staying within budget and spending goals? The answers to these seemingly simple questions can be complex but are vital to a larger assessment of the procurement cycle.

Context is key in this step. Purchases that are larger than anticipated, in isolation, are an unfavorable outcome. But if these purchases are larger because of increased demand and production, they were necessary. Comparing actual spend with your initial goal, while keeping demand in mind, can give helpful direction on improving effectiveness while reducing costs.

Building the Framework For a Better Procure to Pay Audit

Through these steps, you can increase the accountability, transparency, integration, and efficiency of your procure to pay cycle. Of course, audits can also be more complex, going beyond the relatively basic tips outlined above. To get to that point, of course, you also have to make sure that you have the framework in place that allows you to audit your process in a standardized fashion.

Finding the right software is an important first step in that effort. ProcurePort’s Spend Management System does more than just automate your procure to pay process. It offers enhanced transparency, allowing for collaboration with suppliers, invoice generation and evaluation, and monitoring of spend in a single web interface. It’s the perfect tool to help you embrace regular audits, and improve your procurement processes over time.

Request a demo to see how ProcurePort’s e-Sourcing Software can help your organization achieve its procurement goals. Each 30-minute demo is conducted by an expert Solutions Consultant who will demonstrate ProcurePort, answer your questions and show you how ProcurePort’s platform can be customized to your needs and processes.

You may also be interested in: Strategies for Easier Implementation of Automated P2P Solutions