By a beginner for a beginner: what is purchase-to-pay?

If you’re anything like myself, having a well-rounded understanding of the industry you are working in is imperative to the success of your work and, more importantly, your confidence.

As a novice to the software automation world, I spent a huge part of my time wrapping my head around financial terms and researching technical processes just to keep my head above water.

Even more frustrating was that my team seemed to digest terms like “purchase-to-pay” and “accounts payable automation” as if they were commonly found in everyday conversation, yet I still struggled.

So, if you’re having difficulty understanding the purchase-to-pay process yourself, don’t worry! Let’s try to figure this out together, from one beginner to another!

First and foremost, what is purchase-to-pay?

To start, let’s address two things: what purchase to pay means and why it matters.

Purchase to pay, also known as P2P, is a term used to describe the complete life cycle of a purchase process. Going back to the basics, this means buying what you need online and then paying for it.

Sounds simple enough, right? I wish I could say that’s all there is to it. But let’s delve a little bit deeper as there are still many more steps to uncover.

Typically, the finance department is responsible for overseeing the purchasing processes because they include many steps and activities ranging from employee approval and compliance to payables processing.

Purchase-to-pay automation streamlines all these steps into one neat, tidy process.

Traditionally, purchase-to-pay processes require a higher level of manual labour

For example, imagine you’re an accounts specialist in a company with about 100 employees, 5 departments, with one approval manager. I can only imagine the Accounts Payable (AP) department running a process like this chaotic mess described below:

After receiving an invoice, your AP team must confirm its accuracy (line by line), match it with the PO (line by line), and then track down the budget holder (who seems never to be available) so they can sign off approval for payment, and THEN the vendor gets paid.

This entire process can require a significant amount of data entry, time, and frustration. Pretty much making human error inevitable.

This is where automation comes in to save the finance teams’ sanity, save them time, and start putting smiles on their faces again.

The gift of purchasing automation in the finance industry has been revolutionary.

I’m sure many of your fellow AP operators get nostalgic thinking back to all the vendors they overpaid, the invoices they lost, and the miscalculations they kept under the radar… before this technology existed.

How does automation help streamline the entire business?

I am not going to go through EVERY benefit of purchase to pay automation (we’ve already highlighted a few here). So here are a few highlights…

A P2P system will store all invoices in a central location, allowing purchasing teams to focus on cost-effective procurement.

It allows the people in the business that need to buy things, to do so. In a simple, effective way that is controlled by budget holders and financial management.

Thanks to the automated purchase-to-pay system, finance departments will appreciate reducing administrative time and improving control and insight.

In addition, an automated purchase to pay system significantly reduces the need for any manual approval process.

P2P software seems like an obvious upgrade… why aren’t we using it?

I like the way you’re thinking!

Since you now understand the importance of automation, why wouldn’t you want to start to drive some business transformations with innovative technology?

Because it’s not your call.

The boss has the decision-making power and is the keeper of your paperless freedom.

But, if you can respectfully explain to your boss just how powerful this technology can be, you might just have a shot of convincing them of some of the benefits:

–       Improved cash flow management

–       Reduced invoice processing costs

–       Increased control over spend and vendor performance

Pro tip: delivery is everything. Show respect and remain tactful. Your boss was already running a successful operation before you came along, make sure your message can convey this.

Automation is life

Look, if I was able to explain what purchase to pay is on a more fundamental level, then realise that these financial terms are more intimidating than the actual meaning behind them.

So, if the phrases “purchase requisition,” “purchase order,” and “invoice automation” have you scratching your head and wondering what they mean, think back to the basics and don’t over complicate.

Finance departments across the country have been using these terms for decades, and others, like myself, are just learning about them now.

Don’t forget, finance employees are some of the most obsessively organised people I’ve ever worked with. So next time you hear someone talking about P2P automation software, join the conversation!

I am sure your payables department would love another advocate cheering them on, and better yet, maybe you’ll be able to teach them a thing or two now…