What is Procure-to-Pay?

Procure-to-pay is the process by which organizations obtain the goods and services they need to carry out business operations. The assets acquired via procure-to-pay can range from office stationery to the raw materials the business uses to manufacture its products.

The term “procure-to-pay” is used in a couple of contexts. First, it refers to the procurement process itself and everything involved in sourcing, ordering, and paying. Second, it refers to software that facilitates procurement and especially software that helps businesses to streamline and consolidate the individual components of their procurement processes.

There are hundreds of Procure to Pay platforms connected to TradeCentric. Some notable providers include Coupa, SAP Ariba, Jaggaer, Birchstreet, Yardi, Oracle, Tradeshift, Basware and Vroozi.

In this blog post, we look at what procure-to-pay involves and how iPaaS solutions can help businesses to reduce costs and increase procurement efficiency.

The Components of the Procure-to-Pay Process

Procure-to-pay is sometimes called end-to-end procurement because it encompasses everything involved in obtaining goods and services from B2B sellers. It starts with a procurement professional or other employee recognizing the need to purchase goods or services from another business and ends with delivery and payment.

Procure-to-pay is an umbrella term that encompasses many individual processes, often across several different business departments, including the department that initiates a procurement request, the business’s procurement department, and the accounts payable department.

The individual processes involved in procure-to-pay include:

  • Vendor selection and supplier management. The procurement department is typically responsible for vetting, selecting, and negotiating with B2B suppliers.
  • The creation and approval of requisition orders. A requisition order is a document that initiates a procurement request. It includes details about the products and services to be procured, their cost, and the supplier. Requisition orders must be approved before an order is sent to a supplier, usually by a procurement manager or the accounts department.
  • The creation and sending of a purchase order. Once a requisition order is approved, a purchase order is created and delivered to the chosen supplier. Purchase orders include details such as product descriptions, shipping addresses, and invoicing information. The purchase order, once accepted, forms the basis of the agreement between the buyer and the seller.
  • Delivery of goods and services, which might also involve shipping and delivery notifications (ASNs).
  • The creation and delivery of an invoice. Invoices must be verified against the purchase order and the goods that were delivered. The final process is paying the invoice and entering the payment in the business’s accounting software.

As you can see, the procure-to-pay is a cross-disciplinary business operation that involves many people across different organizations. Processes have to be followed correctly and documents exchanged without error. Multiple software systems are required. For large organizations, all of this may happen dozens or hundreds of times a day.

Towards Procure-to-Pay With Integration and Automation

The costs associated with procure-to-pay errors and inefficiencies are substantial, which is why many purchasing organizations adopt software platforms to streamline and automate some or all of these processes.

The adoption of B2B eCommerce by sellers and eProcurement and spend management systems by buyers are steps towards automation and integration. eCommerce allows buyers to select goods and services in an intuitive interface while streamlining order management for sellers.

eProcurement helps buyers automate requisition, approval, and invoicing. With an eProcurement platform, procurement processes can be standardized, data centralized, and documents communicated in digital formats between stakeholders within the organization.

But neither eCommerce nor eProcurement provides a true procure-to-pay system. As you may have noted in the previous section, the full procure-to-pay process involves the communication of data both within organizations and between organizations. eCommerce and eProcurement can’t automate or centralize key procurement processes without the technology that facilitates the transfer of information between buyer and seller.

This multi-organizational data transfer is the central benefit of a true procure-to-pay integration platform as a service (iPaaS). Just like the procure-to-pay process, iPaaS companies provide technology and services that automate the flow of data between B2B buyers and sellers.

  • eQuotes. Electronic quote integration allows B2B sellers to generate quotes for eCommerce orders and automatically transfer them to the buyer’s eProcurement platform.
  • PunchOut catalogs. PunchOut catalogs integrate B2B eCommerce stores with eProcurement platforms. They allow a buyer to select an approved seller’s catalog from within their eProcurement platform and shop as normal. Instead of checking out, they transfer the shopping cart data back to the eProcurement system, and a requisition order is automatically created.
  • Purchase order automation. Once a requisition order is approved by the buyer’s procurement department, purchase order automation creates a purchase order and routes to the seller’s eCommerce and/or backend order management system to fulfill.
  • eInvoicing. As you might expect, eInvoicing automates the exchange of invoice documents between seller and buyer.

Procure-to-pay software may also automate the exchange of other procurement documents, such as advanced shipping notifications (ASNs).

What Are the Benefits of an iPaaS Solution?

The main benefit of iPaaS solutions for B2B buyers is that reliable data is always available in their eProcurement platform without manual data entry. A lack of integration often causes poor compliance with procurement processes, leading to rogue spending and inadequate oversight. But with a third-party iPaaS that can quickly and accurately transfer data between platforms, buyers can bring more sellers under the control of spend management processes.

IPaaS solutions that provide B2B integration and automation also accelerate the entire procure-to-pay process by ensuring that procurement documents are immediately available to both buyer and seller. Rather than sitting in an email inbox, requisition orders and invoices are always available to the relevant employees. End-to-end procurement reduces supplier lead time and enhances the agility of B2B procurement.

Reduce Manual Labor and Errors in the Procurement Process

Furthermore, these solutions reduce manual labor and the errors it introduces into the procurement process. Before eCommerce and eProcurement, the time of procurement and B2B sales professionals was consumed with massive amounts of paperwork. Digitization on the buy-side and the sell-side reduced manual document creation and data entry, but it didn’t eliminate it.

If buy-side and sell-side platforms aren’t integrated, data still has to be entered by hand. Requisition orders, purchase orders, and invoices are communicated via email and the data is manually added to the relevant platform. With an iPaaS solution, there is no longer any need for error-prone manual data entry.

In short, iPaaS providers streamline the procurement process, integrate buyers and sellers, reduce procurement costs, and improve the quality of data available on both sides of a transaction.

To learn more about how TradeCentric can help your business benefit from procure-to-pay integration and automation, contact us below.