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Procure to Pay: A Comprehensive Guide

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What is Procure-to-Pay?

Procure-to-Pay (purchase to pay or P2P) is the process of obtaining and managing the raw materials needed for manufacturing a product or providing a service. It encompasses the data surrounding the actual order fulfillment and payment for the good or service, as well as the transactional flow of data that is sent to a supplier. This comprehensive approach to the P2P cycle ensures a streamlined operation from start to finish, enhancing efficiency and productivity in the procurement process.

P2P Process

P2P Process

Read more: Procure-to-Pay Process Workflow

1. Requisitioning: Operation staff members that want to make purchases of goods or services create requisitions. The automation of the activity enables the operations staff to electronically complete the requisitions, frequently choosing things from a constrained procurement catalog management or pre-approved list of items.

2. Requisition Approval: A requisition must be approved before it may be distributed to vendors. Given the time needed to secure permissions, manual approval systems have a long history of being inefficient because approvals are sometimes delayed or obtained after the fact. Automation enables the electronic routing of these requisitions, speeding up the approval process.

3. Issuance of Purchase Orders: A purchase order is given to the vendor once a request is authorized. Without automation, purchase orders are faxed, emailed, or called in to vendors. Automation allows for the electronic transmission of purchase orders and the electronic return of acknowledgements.

4. Receiving invoices: Invoices are mostly submitted by suppliers via mail, which upon receipt, are manually entered into the ERP/AP system. In automated AP departments, invoices can be received electronically; & in case of invoices received manually, they can be scanned into the system.

5. Matching Invoices: Once received, invoices should be matched to purchase orders and receipts so that the payment can be released to the vendor according to negotiated payment terms.

Read more: How to Automate the 3-Way Invoice Matching Process

6. Issuing Payments: A combination of ACH (Automated Clearing House) & Procurement Cards (P-Cards) are increasing the volume of payments processed electronically.

The P2P Cycle

P2P Cycle

1. Requirement planning: The cycle starts when someone in the organization discovers they require a certain item to finish a job. Raw materials, tools, or even services, like hiring a contractor to assist with a task, could all be examples.

2. Request for quotation: Once the need is identified, the person responsible creates a request, sort of like a shopping list, specifying what they need and how much of it they need.

3. Getting approval: The request must go through an approval process where a higher-up employee determines whether it is required and within the company’s budget. If everything appears to be in order, the request is granted.

4. Finding a supplier: Following approval, the business looks for a supplier who can deliver the goods or services they require. They can examine various suppliers, evaluate costs, and assess each one’s dependability.

5. Making the purchase: After choosing the supplier, the business issues a formal buy order.

6. Goods Receipt: After receiving the purchase order, the supplier delivers the goods or renders the services in accordance with the contract.

7. Creation of payment invoice: Once everything looks good, the supplier gives the business an invoice, which functions as a bill for the goods they delivered.

Payment and Approval: To make sure everything was done properly; the invoice must go through an internal approval process before being paid. Following approval, the business pays the provider for the goods or services they provided.

Building Supplier Relationships: After the sale, businesses frequently continue to have positive interactions with their suppliers. Future projects benefit from this since they can rely on reliable suppliers and perhaps even negotiate more effectively.

Read more: Procure-to-Pay Cycle: 6 Actionable Tips to Improve & Optimize

Why is Procure-to-Pay Important?

Procure-to-pay (P2P) is an integral component of an organization’s financial and operational framework, crucial for managing expenditures and optimizing the procurement cycle. Here’s why P2P is so important:

  • Financial Control: P2P processes ensure that all expenditures are pre-approved and within budgetary constraints. This level of control is essential for maintaining financial health and preventing overspending. By managing the end-to-end procurement process, from the initial requisition to the final payment, companies can keep a tight rein on their finances.
  • Operational Efficiency: Streamlining the P2P process can significantly enhance operational efficiency. Automation of routine tasks such as order placement, invoice processing, and payment can reduce the cycle time and free up employee resources for more strategic activities. This increases productivity and reduces costs associated with manual processes.
  • Compliance and Transparency: Effective P2P processes help ensure compliance with both internal policies and external regulatory requirements. This is achieved through standardized procedures and centralized documentation, which also enhance transparency across all transactions.
  • Supplier Relationship Management: A well-managed P2P process improves relationships with suppliers by ensuring timely payments and accurate order fulfillment. This can lead to better terms and reliability, which are crucial for maintaining a stable supply chain.

Overall, the P2P process is vital for any organization looking to optimize spending, enhance operational capabilities, and maintain robust supplier relationships, thereby contributing directly to the bottom line.

Important terms in procure to pay software

Procurement Catalog Management:

The process of managing the lifecycle of catalogs containing pre-contracted items from one or more suppliers.

The lifecycle can be broken down into the following steps:

  1. Create » Approve » Publish » Expire » Update
  2. Create/Update catalogs on-screen or by uploading files
  3. Item classification through AI-engine allows real-time spend analytics.
  4. Typical categories include office supplies, IT supplies, domain-specific supplies such as MRO, Lab supplies, etc.

Typical information in catalogs:

  1. Identifiers: Supplier, Supplier Item #, Internal Item #
  2. Item Info: Short & Long descriptions, Category, Attributes
  3. Price: Market price & Negotiated/ Contracted/ Discounted price
  4. Rich Content: Item Image, Product URL, Supplier website

Types of Catalogs

Internal Catalog

  1. Created by admin or shared by suppliers
  2. Configurable fields such as environmental checks, state taxes, etc.
  3. Search across multiple fields, filter by price/category, compare items

Punchouts (External/Supplier-hosted Catalog)

  1. Content maintained & hosted by the supplier, could be negotiated
  2. Data exchange is done using Standard protocols
  3. Users are directed to punch-out sites where they add items to cart
  4. On checkout, the cart information is transferred to eProcurement

Published procurement Catalogs

  1. procurement Catalogs shared by incumbent suppliers over the supplier portal


End-users/Requesters raise a request for the goods they need through a purchase request (PR) or requisition by adding items to the cart & submitting the request on the check-out page – like on e-Commerce websites (Amazon, Snapdeal, Alibaba, etc.)

Procurement Cards/P-cards

Procurement Cards/P-cards are credit cards issued to buyers to allow them to directly buy items without an approval workflow

  1. Allowed Categories & spend limit is pre-approved
  2. Supplier directly charges the P-card account, which is billed periodically
  3. The P-card statement is reconciled with transaction before settlement

Approval Workflows:

  1. Requisitions above the requester’s spend limit require approval
  2. Approval workflows are configured using a drag-n-drop editor
  3. Such workflows usually require the reporting manager’s approval
  4. Complex routing rules based on combination of cart total, item source/categories, business unit & cost center/department can be configured visually by administrators or users
  5. Approvers can accept, reject, delegate approval, or return it back to the requester

Purchase Orders:

  1. A Purchase Order or (PO) is a formal confirmation of the requirement, sent to the supplier. It includes price & quantity of ordered items, additional charges, taxes, along with billing & shipping information
  2. When created against a contract, it carries the contract number.
  3. Orders can be printed on a custom template or emailed to suppliers. Suppliers can also view orders on the portal or receive them electronically
  4. A blanket order can be created for frequently ordered items. There is a cap on the total amount, and it is usually valid for a fiscal year
  5. Rule-based automatic conversion of requisitions to orders is available
  6. Purchase orders are posted to ERP to act as input for inventory & goods receiving modules

Goods Receipt:

  1. A Goods Receipt is a document issued to acknowledge the receipt of the items listed in it. In other words, it is a document used to register the specifics of items physically received in the warehouse.
  2. Allows requesters or warehouse personnel to receive ordered goods
    1. Desktop receiving: requesters receive against requisition
    2. Central receiving: warehouse personnel, buyers receive against the PO
  3. System can record rejected quantity, to allow creating return receipts
  4. Receipts can be mandatory for certain category of goods
  5. Tolerances can be configured to prevent over-receiving


  1. A commercial instrument issued by a seller to a buyer. It identifies both the trading parties and lists, describes, and quantifies the items sold, shows the date of shipment and mode of transport, prices, and discounts (if any), and delivery and payment terms.
  2. In certain cases (especially when it is signed by the seller or seller’s agent), an invoice serves as a demand for payment and becomes a document of title when paid in full. Types of invoices include commercial invoices, consular invoice, customs invoice, and pro forma invoice.
  3. Bills (tradable debt instrument) is issued by the supplier on delivery or on milestone achievement
  4. It is to be paid within the credit period as agreed on the order/contract
  5. Supplier may offer early payment discounts on the invoice or dynamically
  6. Invoices reach the buyer in 2 ways:
    1. As paper invoices via fax/post, which are digitized by buyers/AP
    2. e-Invoices (PO-flip) from the portal or transmitted via EDI
  7. Invoices are automatically matched (after considering tolerances)
    1. 2-way matching: PO + Invoice
    2. 3-way matching: PO + Goods Receipt + Invoices
  8. Exceptions are put on hold, which are resolved via review/approval
  9. Approved invoices are scheduled for payments to avail full credit period

They can be posted to ERP for accounting/ePayment

Challenges of a P2P Process

Organizations will encounter the following major procurement issues if obsolete spreadsheet-based procurement is not replaced with robust P2P automation software:

Challenges of a P2P Process

1. Disintegrated P2P processes and teams

Within an organization, each department operates according to its own procedures and priorities. It is challenging to establish uniformity to the procurement process due to improper departmental collaboration and communication. The lack of a consistent approach ultimately results in glaring inconsistencies and mistakes.

2. Outdated technology

Organizations that don’t adopt new procure to pay software may experience higher costs, more convoluted processes, and a failure to meet efficiency standards. Additionally, they risk falling short of customer, supplier, and vendor expectations and needs, ultimately falling behind their competition in an increasingly competitive business landscape. Embracing modern procurement tools is vital for enhancing operational effectiveness, cost control, and overall competitiveness.

3. Non-adherence to compliance and policies

To avoid having to submit every request to various levels of approval, employees violate procurement policies. Additionally, due to a lack of clear and timely communication, various teams participating in the process, such as accounts payable and procurement, frequently violate the contract’s requirements.

4. Non-PO invoices

Suppliers occasionally send invoices that are unrelated to a purchase order. These invoices can be challenging for accounts payable to process and can delay things because they cannot be matched to a PO.

5. Supplier management

It is challenging to properly manage suppliers and sustain excellent working relationships when procurement involves manual processes. It might be overwhelming to manage contracts and monitor supplier performance. Onboarding new suppliers can also pose challenges and take up a lot of time.

6. Invoice processing

Even if the invoicing procedure takes a long time, the approval turnaround is prolonged by manual verification and processing. This causes payments to be late and damages your relationship with the suppliers.

Advantages of procure to pay softwareAdvantages of P2P Software

1. Enhances P2P process:

Reduce P2P Cycle streamline purchasing workflows, making it faster and more efficient to acquire necessary goods and services.

2. Decreases procure-to-pay processing costs:

By automating tasks and reducing manual interventions, P2P tools help cut down administrative expenses and improve cost-effectiveness.

3. Provides procure to pay process transparency:

P2P tools offer real-time visibility into procurement activities, enabling stakeholders to track purchases and ensure compliance with regulations.

4. Boosts relationship with the suppliers and vendor:

Improved communication and efficient transactions foster stronger and mutually beneficial relationships with suppliers.

5. Gives a chance to negotiate the price:

Access to detailed procurement data empowers organizations to negotiate better prices and terms with vendors.

6. Makes P2P Cycle data reporting easy:

P2P tools generate comprehensive reports, facilitating data-driven decision-making and performance analysis.

7. Improves procure to pay process productivity:

Automated processes and streamlined workflows free up time and resources, leading to increased overall productivity.

8. Helps to do ‘on-time delivery’:

By optimizing procurement and supply chain processes, P2P tools contribute to ensuring timely delivery of goods and services, enhancing customer satisfaction.

Benefits of procure to pay software

Benefits of Procure-to-Pay software

1. Streamline the process

The global platform centralizes, standardizes, and controls the process, while being easy to use online, leading to high adoption. It seamlessly integrates with existing ERP systems and supports P-cards, offering enhanced compatibility and functionality.

2. Ensure compliance

The system enforces procurement policy and budget compliance effectively while providing real-time contract monitoring. Additionally, it enables accurate tracking of spend by category, ensuring better financial control and decision-making. After adopting a procurement to payment solution, best-in-class companies show 85% of orders compliant with contracts and 75% of spending compliant with contracts.

3. Automate and reduce P2P Cycle time

The platform facilitates seamless set-up of procurement catalogs and punch-outs for indirect purchases, while also offering robust approval workflows for streamlined procurement processes. Furthermore, it automates PO generation and invoice matching, and provides a supplier portal for order viewing, easy PO-to-invoice conversion, and payment tracking, enhancing supplier engagement and efficiency.

4. Speed and scale procure to pay process

The least amount of your valuable time and money should be spent on obtaining items and services for your business. Something is amiss if it takes more than a few minutes to create a purchase order. You can gladly bid your week-long P2P Cycle farewell with world-class procure-to-pay procedures.

5. Transparency

You need to have clear visibility into the money leaving your business in order to control your spending. The whole point of the exercise is lost if you and your team now spend a full day or more compiling monthly spending information. You will be delighted to have access to purchase information, reports, etc. throughout your entire organization once your procure to pay software have been upgraded.

Procure-to-Pay Best Practices

  • Standardize the processes and spell out each party’s roles and responsibilities
  • Encourage cross-functional stakeholders to communicate and work together
  • Offer total data transparency to increase visibility into all aspects
  • Adopt scalable P2P software and rely on reliable technology to automate the procedure
  • Improve vendor management and engagement while putting a focus on improving relationships with suppliers
  • Utilize data to establish measurable, data-supported goals
  • Constantly monitor what’s working and what’s not to streamline your workflows further and maximize savings.

Now that you’re fully conversant with procurement to payment and how to elevate it, it’s time to evaluate your digital transformation partner. Head over to our procure to pay software page, and explore Zycus’ AI-led suite of solutions or book a demo with our experts!

Related Read:

  1. Why Organizations Must Integrate Procure-to-Pay Software
  2. Automating the procurement process with procure to pay process
  3. The 4 Less Talked About P2P Challenges in procurement
  4. Procure-to-Pay Automation– Best Practices And Benefits
  5. Source-to-pay vs Procure-to-pay: A Guide
  6. Procure to Pay Process | The Ultimate Transformation Guide
  7. Linking Source-to-Contract & Procure-to-Pay
  8. Research Report – Robotic Process Automation in Procurement What leaders need to know about?
  9. eBook – Re-imagining Procure to Pay Process for 21st Century & Beyond
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