Procure-to-pay

Procure-to-pay is a term used in the software industry to designate a specific subdivision of the procurement process.

Definition

The procure-to-pay systems enable the integration of purchasing department with account payables department. Some of the largest players of the software industry such as Oracle, SAP, ARIBA agree on a common definition of procure-to-pay, linking the procurement process and financial department. These steps are included in this definition:

• Supply management
• Cart or requisition
• Purchase order
• Receiving
• Invoice reconciliation
• Accounts payable

Unlike purchase-to-pay systems, procure-to-pay systems do not include the function of sourcing. Also, notions of production planning and forecasting will be excluded from this definition since it relates to the supply chain management.

According to spend matters. European organizations are centralized with top-down decision processes. This is emphasized in France, where the President and CEO having quite a lot of power within a company. It makes things much easier when someone has to make the decision to implement new software that will change the way all people in a company are working. These executives can decide to fully automate all processes related to 100% of the spending for the entire company, even on a pilot / shotgun rollout strategy. That makes company reorganization and transformation happen much faster, once the decision has been made.

The other difference is about requirements and P2P vendors. For software providers, requirements make their lives quite challenging, because expectations are usually much larger than their product specifications. They are very detailed and include all kinds of ideas coming from many managers who unfortunately expend energy thinking about how to address complex problems before solving the simple ones. The good thing is that it makes products evolve quickly, with a lot of features coming from the field. The US focuses more on the simplicity and the usability of the product. I think that the company that can provide solutions that address both of these points will have a real advantage in the global market.

Benefits

Procure-to-pay systems are designed to provide organizations with control and visibility over the entire life-cycle of a transaction – from the way an item is ordered to the way that the final invoice is processed – providing full insight into cash-flow and financial commitments. Most of the companies using these systems look for a centralization of their procurement department, or to set-up a shared services organization for the same purpose.

According to Aberdeen, despite the availability of technology that can drastically reduce the mountains of paperwork and inefficiencies plaguing accounts payable, few companies have addressed AP transformation like other processes essential to the business.

Risks

As any system that touches a significant amount of users, implementing a procure-to-pay system requires significant knowledge of the as-is business processes as well as the to-be. Change management is a key component in implementing a procure-to-pay solution.

See also

• Supply chain and supply chain management
• E-procurement
• Purchase-to-pay
• Spend management
• Contract management
• Purchasing
• Procurement outsourcing
• Shared services