There are many steps involved in an advanced, comprehensive, and sophisticated procurement department. Furthermore, the larger the organization, the more involved and intricate the procurement process or lifecycle is likely going to be. This is partially due to scale, and partially due to the nature of procurement in general. A procure to pay: a business process map is a tool that your organization can implement to better define the entire procurement process as it exists within your organization. Beyond that, though, a procure to pay: business process map can be as detailed as to break down the individual responsibilities of the different procurement roles of your staff.
Firstly, a business process map is a versatile tool that is used by many organizations, in many different contexts. In the field of procurement, however, a procure to pay: business process map is specifically created to outline, define, and organize the procurement lifecycle in your business.
Breaking Down a Procure to Pay: Business Process Map
When creating any business process map, you first need to know the process that you’re trying to define and have an idea of what that process normally entails. The procure-to-pay process often begins with the identification, or selection, of goods and services needed.
The procure to pay: business process map should begin with the selection phase. This is where the procurement professionals, or software, identify the required goods or services of the organization, whether this is a common purchase, a one-time order, or a long-term contract. The selection phase also includes an aspect of vendor communication. After goods and services are identified, the procurement team can submit an RFP. RFP stands for request for proposal and is a document that’s delivered to a preselected list of suppliers and vendors with which your organization already has an existing relationship or new vendors that seem interesting and high-quality.
From there, these various suppliers and vendors submit back an initial bid or proposal on the contract in question. This is where your procurement professionals sift through the submitted bids and invite a group of the vetted bidders into a reverse auction.
The Reverse Auction
The reverse auction is a procurement business process in which vendors and suppliers bid against one another for the right to execute a contract for goods or services. The contracts are normally industry-scale, and the suppliers and vendors are bidding against one another until the lowest price wins. This is why it’s called a reverse auction, rather than the bidders continually upping the price of the coveted auction piece, rather, the buyer awards the contract to the vendor with the lowest price available.
This benefits the organization awarding the contract, as they are able to drive the price of the contract down to essentially the lowest cost that the market will tolerate. This leads to massive long-term savings.
Continuing the Procure to Pay: Business Process Map
After the contract has been awarded through the reverse auction, your organization should be expecting to receive the actual goods or services that have been contracted. This is the next natural step in the procure-to-pay process that you want to include in the business process map. Receiving and accounting for the goods and services that are delivered to your organization is just as much a procurement responsibility as the actual contract negotiation and management stages.
When mapping out the receipt of the goods or services, your map should include answers to the questions such as: who is responsible for quality assurance, and what that duty includes. In other words, what sort of checklist should the quality assurance specialist have on them in order to properly and accurately evaluate the state of the goods or services received, and determine if any of them need to be returned. Breaking it down even further, your organization might even have more than one employee responsible for the tracking and evaluation of goods or services received.
Finally, in the next phase of the procure to pay: business process mapping is the actual invoicing and payment for goods and services received. Invoice processing by itself can cost an arm and a leg without sophisticated procure to pay software to greatly reduce this financial burden. However, the business process mapping is more concerned with the delegation of responsibility when it comes to both invoicing and payment.
These duties, though, are often delegated to the accounting and finance team, as a portion of their procurement responsibilities. Though, it’s worth noting that each organization likely has a slightly different process for invoicing and payment on procurement contracts executed.
Contract Management and Vendor Relationships
Contract management is another crucial aspect of procurement as a whole, but specifically when it comes to business process mapping. The same can be said for vendor relationships as well.
These two components of procurement are incredibly important and intricately interwoven. By having a higher-quality list of vendors with which your organization regularly partners, the contracts in your pipeline will innately see an increase in the average lifetime value. Including these two aspects of procurement in your procure to pay: business process map guarantees that you have employees whose sole duties are regarding the facilitating and maintenance of vendor relationships and existing contracts.
In modern procurement vendor management, best practices are supplemented through powerful contract management software that utilizes AI to assist with data input and analysis.
Having a defined and cemented process for your procurement lifecycle and procurement professionals on staff will help your team be more efficient. There will be less margin for error and a more structured process for when questions arise. Creating a business map for your procure-to-pay strategy also ensures that you have staff assigned to the many varying procurement duties involved in running a full-scale organization.
For more information on procure to pay: business process mapping, or anything else related to the procurement life cycle, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement, from knowledge and information to software and technology, and everything in between.