Purchase-to-Pay Excellence Optimizes Financial Operations

While effective spend and cash flow management are of utmost importance to most companies today, they are often very challenging to implement. Companies have to manage complex, global supply chains, on and off contract spend, maverick buying and large...


While effective spend and cash flow management are of utmost importance to most companies today, they are often very challenging to implement. Companies have to manage complex, global supply chains, on and off contract spend, maverick buying and large volumes of invoices. To gain insight across their financial value chain, it’s critical that they have visibility throughout the purchase-to-pay (P2P) process.

The Purchase-to-pay process requires interactions with multiple departments – Finance, Procurement, Accounts Payable and the Treasury, and typically encompasses several core steps: spend analysis, sourcing, contracting, procurement, receiving, invoice processing and transfer for payment.  When businesses take a more integrated approach to purchase-to-pay, it can free up working capital, drive more profitable relationships with suppliers and create a more agile finance function.

There are several best practices that can help companies gain greater visibility and control over their purchase-to-pay operations.  Following are some strategies companies can implement to further these goals:

-      Achieve visibility. Companies can’t control what they can’t see, so visibility across purchase-to-pay should be a key area of focus. With real-time visibility, companies will be able to know what their liabilities are, how much they are spending and with whom, and where they stand in their payment commitments to suppliers.  It will also enable them to find opportunities to cut costs, get early payment discounts and make better purchasing and payment decisions.

-      Focus on automation. In addition to providing real-time visibility, purchase-to-pay automation is critical in helping companies gain control over their business processes, and enforce their policies in areas such as purchasing and invoice approvals.  By establishing easy-to-use electronic catalogs, for example, companies can reduce maverick buying, when employees purchase goods off catalog.   Automation also provides significant efficiencies and cost savings.

-      Connect with suppliers.  Open collaboration with suppliers can strengthen relationships and enable companies to find opportunities to cut costs and  better manage spend. An effective way to further buyer-supplier relationships and gain efficiencies is through an automated buyer-supplier network.  These networks offer catalog-based purchasing as well as the ability to issue and receive purchase orders, purchase messages, and invoices electronically. This allows purchasing organizations to promote buying from preferred suppliers at contracted prices and also trade with thousands of suppliers globally. Buyers should implement supplier activation programs to make it easy for suppliers to participate in these trading networks. Suppliers can create customer-specific catalogs and post catalogs to the network, improving the service they can offer to  buyers, along with increasing their own revenue opportunities. 

-      Promote collaboration between Procurement and Finance.  While procurement and invoice processing are part of the same process—from spend planning to actual spend—they are often separate, siloed operations within an organization.  Companies need to have visibility across purchase-to-pay to be able to identify opportunities for supplier consolidation and volume discounts, as well as to effectively manage cash flow and working capital.

-      Get executive buy-in.  Executive sponsorship will create the impetus to promote purchase-to-pay best practices and implement change. At the highest levels of your organization, make the business case for the cost savings, productivity gains and better visibility and control over finance that improved purchase-to-pay practices provide.

The Basware Purchase-to-Pay Model was developed to describe the different stages companies move through as they improve their procurement and finance operations. This  framework identifies many of the best practices companies can implement at each stage to achieve greater P2P excellence:

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