Dynamic technological development affects the functioning of companies. Modern business solutions which are available on the market as well as tools that automate the work are changing the approach to the financial and accounting management.
And of course, there are still organizations with a traditional character of management and their main data carriers are paper documents.
Let’s face the truth – modern technologies were not only created to save paper, but above all to simplify work, streamline processes and reduce company costs.
One of the areas where the use of technology brings tangible benefits is the Purchase to Pay process, known as P2P.
The article will tell you who can use it and how it should be done to effectively improve the purchasing, delivery, invoicing and payment processes in the company.
Effective cooperation is the key to success
It seems to be a real challenge to manage the entire financial and accounting area in larger organizations. To make the whole process run smoothly you need the right tools and transparent cooperation between departments. With the latter it is not always as it should be.
Frequently observed phenomenon is the lack of a common purpose, interests and vision while trying to implement systems supporting the work of accounting and purchasing departments. Relatively often, there is a conflict of interest or mutual misunderstanding between these entities.
From the entire organization’s perspective, such a situation should not happen. Otherwise, internal processes become very difficult, yet all departments want to manage their processes wisely and efficiently.
The recipe for improvement – Purchase to Pay process
To achieve truly measurable benefits for the company, the entire transaction process needs to be improved. This requires a software solution that covers and automates the P2P process.
Such solution gives us opportunity to efficiently go through all stages from the purchase need appearance. Software is not only the case. This cannot happen without the involvement and cooperation of the accounting department with the other departments that participate in the process is essential.
Worth remembering is that in the Purchase to Pay process we are not dealing with separate processes, but with one, multi-stage and integrated operations. And even though the whole process has one goal, each stage has its own specificity, which is worth looking at in order to make good use of the potential of the whole.
Different stages, one goal
No process is a lonely island. The processes of different departments are constantly intertwined and change in one area affects another. That is why, it is worth spending time on education and efficient internal communication discussing internal activities and objectives of all stakeholders related to the P2P process.
Which departments are involved in the Purchase to Pay?
The largest beneficiary of the P2P process is, of course, the accounting department. This is where the most of automation takes place and here operational savings are generated. However, in order to efficiently carry out the entire process, the accounting department cooperates with other organizational units that are responsible for the various stages of the process. These are often internal customers, controlling, finance and purchasing departments.
Thanks to the effective cooperation between individual entities, purchasing procedures are implemented quicker. This increases the effectiveness of planned spend control and considerably simplifies the acceptance processes. Additionally, the accuracy of financial reserves forecasting is significantly improved.
And what exactly can be achieved through the effective use of the potential of P2P process in particular departments?
Working out a standard can do wonders.
It seems to be a fairly trivial statement, but in the P2P process it is crucial. All activities run smoothly when we have a working standard for the organization at every stage of the procurement process. This is worth remembering when we want to improve it in the P2P organization. Developing such a standard is also a task which requires tight cooperation between all departments involved in the process.
After working out the standard, you can implement an effective automation strategy in terms of matching invoices with orders and goods receipts. This is how we effectively automate the process of invoice coding and invoice approval.
The most attention is paid to accounting.
Accountants receive related invoices from various departments, where the scale of the whole company cannot be seen. Therefore, it often turns out that there are so many invoices, that settling all of them is problematic.
Thanks to the automated P2P process, we primarily improve the functioning of the accounting department.
Process automation, development of standards for individual tasks, acceleration of documents acceptance- these elements allow to achieve the greatest benefits for the organization.
In addition, thanks to an efficiently operating P2P, the accounting department quickly closes the accounting periods and avoids delays in payments, which significantly improves the negotiating position of the purchasing department.
We eliminate the phenomenon of doubling the work.
In an efficient P2P process, the purchase should be coded as early as possible and approved once, taking into consideration of course, multi-stage approval. Thanks to this, after receiving the invoice, its automatic coding and approval is possible, avoiding manual work. That is how we manage to gain the time significantly. The whole of this element of the process is automated, so consequently it runs very smoothly, without causing unnecessary duplication of the same activities.
We use the potential of the purchasing department to the limit.
In the Purchase to Pay process, the role of the purchasing department is strictly defined. Specialists focus on sourcing, agreements negotiation, managing product catalogues and developing strategic activities. Additionally, if necessary, they substantively assess the order. Giving their best to make supply process effective and uninterrupted.
Accounting department is involved in gathering information.
We also get the accounting department strongly involved in the process of collecting information when making orders. Please note, that ultimately the invoice is the legal thing that is posted. The better the accounting department is informed, the more efficiently all processes run, and the implemented automation is starting to bring tangible benefits.
To make the purchase authorization path work well, make sure it is the same as the invoice authorization path. The difference is that in the process of purchasing authorization, we also need a person who verifies substantively the submitted need. Thanks to standards and greater automation, we save time and we speed up the following processes after purchase: delivery, invoicing and payment.
To achieve the ideal state, close cooperation of accounting, purchasing and controlling departments is needed. Worth remembering is the fact that the recipe for a well-functioning Purchase to Pay process lies in a well-developed standard and excellent internal cooperation. Particular benefits are visible in the accounting department, where time is saved, it allows to reduce the costs of handling settlements and avoid delays in payments. Improvements in this area can also provide clear and measurable benefits to other participants in the process.
The purchasing department receives better control over the process of incurring liabilities, it can also focus on strategic goals for the organization and improve the relationship with suppliers. The controlling department receives a complete audit trail.