The procure-to-pay (P2P) process in any organization begins with the identification of needs and ends with the payment of suppliers and maintenance of proper records. A lot of work happens in between, and proper controls must be in place to prevent errors, fraud, and to build strong relationships with suppliers. A lot of innovation has gone into trying to speed up and smooth out the P2P process. 3-way invoice matching and reliance on P2P software are just two examples. Here are 6 six best practices in the procure-to-pay process today.
Improved Supplier Relationships
When a company realizes that a supplier is a critical part of their value chain, they ought to build a positive working relationship with them. The company should seek to generate win-win situations with essential suppliers. One way to do this would be to give the longer contracts. This makes them happy, but it also reduces the frequency of sourcing for a supplier which can be expensive. Specialty suppliers should also be treated as strategic partners. The company can share with them their projections on demand, which then enables the supplier to plan to meet those needs. This might involve expanding their production capacity.
As time goes by, the company should work to develop Key Performance Indicators for suppliers. It should not shy away from sharing the reviews with suppliers to help them improve internally.
Total Ownership Cost vs Price
When evaluating different suppliers to work with for a particular good or service, the best procurement teams do not just compare prices. They compare the total value propositions. Some suppliers charge a slightly higher price but offer free maintenance for the first few months of using their machine. Others offer technical advice or support to your internal staff. In other cases, there is a big community of users of a particular service, which makes it easier to find solutions to problems in use. In other situations, you might consider the flexibility of the supplier. Some suppliers insist on a certain minimum order quantity with every purchase requisition. Others might be willing to supply smaller quantities. Evaluating suppliers, therefore, is simply not about price.
Getting the Staff to Buy into New Processes
When introducing a new method of managing the procure to pay process, it’s important that staff members buy into it. The company should take time to explain the benefits of a new e-procurement system. Proper training resources should be availed. Senior staff at the company should be ambassadors of the new system. If opinion leaders within a company support a new system, the rest of the staff will get on board. The executives should be careful not to flip-flop after announcing the change. Challenges that arise during the implementation should not lead to going back to the old way of managing the procure-to-pay process.
Transparency in P2P
An important best practice in P2P management is transparency. P2P software should allow vendors to track the approval process of their invoices through a portal. They should also be allowed to access supply requisitions for which they are eligible to apply. This adds confidence that tender awards in the company are done in a manner that is beyond reproach.
Putting in measures that improve transparency leads to better records management. Transparency also opens the door for more advanced strategic planning because the concerned people can access the information they need for decision-making.
The procure to pay best practices must add value to the organization through insights into important matters. This is achieved through analytics. Analytics should point out ways in which the company can save costs by changing suppliers, altering MOQs, or ordering at certain times of the year. Analytics can also help achieve better compliance by sending notifications when licenses are set to expire. Other goals include achieving better cash flow. The e-procurement solution chosen for a particular organization should allow for customized querying to find specific information to answer questions the management might have.
The Importance of Standardization
In any organization with a procurement department, standardization of P2P processes is crucial. The company must develop rules, assign responsibilities, and train its staff in a standardized manner. It ensures that people understand the internal procurement laws. Training is also crucial for quality control. There must be clear checks and balances integrated into the P2P software. This includes e-signatures for the different approvals that need to be done in the P2P process.
The company can also develop templates of the most used documents in the P2P process. This saves time usually spent drafting documents, but it also ensures that the same type of documents is standardized.
Implementing Best Practices with ProcurePort P2P Software
Procure-to-pay best practices today are heavily reliant on good P2P software. Such software makes it possible to keep better records, collect data for better decision-making, and create greater transparency through supplier portals.
If you need an e-procurement solution, check out ProcurePort’s procure-to-pay software. We are the world’s leading provider of e-procurement tools.