The procure-to-pay (P2P) process begins when a company needs a particular item or service and ends when payment is made. While this may sound simple, a lot of work happens in between when challenges in procure to pay process to arise including finding the right supplier, negotiating contracts, tracking supplier performance, following up on discounts, and more. Smoothing out the process is important because it can cause massive savings for a company.
P2P software helps businesses not only automate the procure-to-pay process but also collect data for process mining. Process mining involves analyzing data from a process with an aim to get a holistic view of the process and solve inefficiencies along the way. Doing so for your P2P process can highlight common bottlenecks and provide the chance to resolve them. Here are a few procure-to-pay challenges you can resolve with process mining.
Slow Invoice Processing
A major challenge facing many companies with complex supply chains is slow invoice processing. There might be a host of departments supposed to sign off on an invoice before it gets approved for payment. The implications include missing out on discounts for prompt payments, penalties for late payments, and complicated supplier relationships. By examining the process, an organization can find ways of reducing processing time. Perhaps forming a committee with members from various departments to approve invoices instead of passing the invoice from one department to the next would help.
Inaccuracies in Invoices
Failing to capture the right amounts in invoices can be the downfall of a company. Discrepancies between contract amounts, invoice figures, and receipts are a major problem in many organizations. Procurement-to-pay software should help solve this problem by eliminating manual data entry. Before payments are made, invoices must be matched with the contracts where the amounts were agreed upon, as well as evidence that goods and services were delivered. This eliminates opportunities for fraud, where internal parties might collude with suppliers to make fraudulent payments.
Poor Spending Visibility
Without a proper P2P system, there may be no insight into where a company is spending its money. Within a manual system, it may not be clear who is approving payments, how long it is taking, who the biggest suppliers are, and so forth. Having a single source of truth on an organization’s procurement systems is a big incentive for having a P2P system. It becomes possible to flag such things as unusual spikes in invoices, irregular payments, and so forth.
A lack of Flexibility
Supply chains today are quite complex from what they were a few decades back. Globalization has seen companies source products from several continents because of superior prices, speed, and quality. This has, however, meant more supply chain exposure to geo-politics, exchange rate risk, and unforeseen events such as pandemics. Visualizing the procurement process using process mining software can help identify areas of vulnerability and craft contingent responses.
Collaboration between Teams
The procurement process in any organization touches at least 3 departments. There is the department that needs the item, the procurement department that sources from suppliers, and the department that approves and pays for the item. If a proper system for communication is not in place, requests for procuring important products may take too long or fail completely. This might hinder the organization from attaining strategic goals because of a lack of congruence between departments.
Take, for instance, a school where the gym teacher needs certain equipment for training the basketball team. They need to write formally to the procurement department, then wait until they make a budget approval. Unless there is goodwill from top leadership, the process might take long or stall altogether. This is an example of why procurement is very valuable to C-suite-level leadership. It should complement strategic level goals.
How Process Mining Software works
When you deploy procurement software to manage your P2P process, it will create a record of important activities. These are event logs. Process mining software extracts events logs from your procurement management system to help you recreate and visualize the process. This way, you can draw insights into your procurement process based on factual data. If approvals are taking too long, you can see where the problem lies. If fraudulent payments were made, you can identify loopholes in your system. The chief advantage is that process mining software does not require taking apart your existing P2P software. Instead, it complements it.
If your organization is looking to automate your P2P process, check out ProcurePort’s Procure-to-Pay software. It will simplify your organization’s contract management, supplier catalog, award management and so much more.