Five Crucial Factors for Implementing P2P System

Written by Chin Ting Boon, DPSM

by Chin Ting Boon, DPSM

Five Crucial Factors for Implementing P2P System

Written by Chin Ting Boon, DPSM

by Chin Ting Boon, DPSM

by Chin Ting Boon, DPSM

Organizations across all industries, from retail to construction to education, rely on Procure-to-Pay (P2P) solutions to convert negotiated contracts to realized savings. Implementing a new P2P solution is a big undertaking that requires collaboration with many stakeholders from suppliers to business and technical leads.

Every detail matters when tracking and managing the deployment of a P2P solution, gathering content from suppliers to fulfilling the needs of every internal team. And the most successful P2P implementations require teamwork from both internal and external stakeholders.

purchase pay retail report

Picture above shows the key elements in P2P, and taken from https://www.paystreamadvisors.com/resource/2015-purchase-pay-retail-report/

Why is Purchase-to-Pay Important?

The deep embedding of technology in business in the late 20th century facilitated a rapid evolution in business practices of all kinds and supply chain was no exception. Historically, procurement and purchasing were distinct from finance and accounting. Although the two functions may have shared a set of suppliers in common, the absence of joined-up processes and detailed business intelligence and reporting meant that there was little opportunity to generate synergy.

In the 21st century, however, the synergy is compelling and significant process efficiencies can be gained through the implementation of Purchase to Pay.

Purchase to Pay Important

Chart above shows the timeline of e-procurement, taken from https://www.ungm.org/Areas/Public/pph/ch04s02.html

Enhance Supplier Relationship

If you were to talk to all of your suppliers and find out the biggest problem, they will likely say that they wait too long in order to receive payment. you can overcome this problem by implementing a new architecture that communicates with your P2P system,

As you give suppliers what they want (faster payment) they will also start to give you what you required. They will have the ability to submit your next order faster because they would have to wait so long for payment. You may also find that many suppliers are willing to discount your invoice if you can meet a Net 5 or Net 10 as opposed to the standard Net 30 payment terms. The added benefit of improving supplier relationships is that you can pass some of these benefits on to your customers, too.

Automated Processes

P2P automation uses software and other technologies to help businesses more easily request, purchase, receive, pay and account for their goods and services. Often referred to as P2P, this system seamlessly connects the entire process from identifying a need, to planning, budgeting and procurement to payment, with the touch of a button. P2P systems enable organizations to monitor and control a transaction’s entire lifecycle and provide insight into a company’s cash flow and financial commitments without the need for manual intervention.

Organisations using P2P automation systems enjoy a wide range of valuable benefits. They include having a clear understanding of financial commitments at the beginning of the purchasing process instead of when the invoice arrives. P2P automation results in improved efficiency, increased visibility of finances and procurement, reduced processing times, enhanced control and the growth in cost savings while using less manpower. Automated P2P systems can capture and control capital, credit card, purchase order and non-purchase order and reimbursable spending and enhance process efficiency and financial rigor and cut costs substantially.

Increase Spend Management Visibility

Better Spend Management allows visibility of spend across whole organization with the ability to police compliance to contract process and policy. In an age of ongoing digital transformation, leading supply chains no longer look to the past to manage their organizational spending.

As technology advances, spend management software is advancing right along with it, with newer systems offering a host of benefits that have never been available before. Instead of sticking to the antiquated legacy systems that many are familiar with, industry-leading professionals are investing in cloud-based P2P software solutions to help increase spend management visibility at their organizations.

P2P systems help centralize all of the information about an organization’s contracted suppliers, including everything from item-level pricing to supplier payment terms. This software helps users spot inefficiencies within the supply chain, reduce the number of manual errors, and ultimately stay within a budget by providing detailed spend data. Leveraging this type of cloud solution to analyse your organization’s spend can help you identify new opportunities for saving money, automate tedious and outdated processes, manage risk and legal compliance, and take complete control of all categories of your organization’s spend.

spend management

Chart above shows the spend management, taken from https://www.youtube.com/watch?v=Lrg4HeS5-Gw

Better Planning and Forecasting

Planning and forecasting involve buyer companies establishing sales goals for particular periods of time and determining the amount of product needed to meet those goals. When suppliers do not receive any forecast or insight into what orders are coming, they are forced into a last-minute scramble to determine if they can accept the order. On the basis of planning and forecasting, purchasing staff will often book capacity with preferred suppliers to ensure their production needs can be met.

Customer orders can trigger a need for material requirements, particularly when changes to existing products require new components. Customer orders can also signal the need to obtain existing materials. As companies increasingly customize products to meet the needs of individual customers, purchasing must be ready to support new material requirements.

Market forecasts can also signal the need for material. An increasing product forecast, for example, may signal the need for additional or new material. If a supplier is already selected to provide that material, then an automated ordering system such as a material requirement planning (MRP) in P2P system may forward the material request to suppliers automatically.

Dynamic Discounting The New Way to Manage Cash

Today’s most efficient P2P operations are actively driving Dynamic Discounting programs to increasingly broader segments of their Supplier base. The secret is gaining control of the P2P process, which gives you the choice of how and when to pay in line with your working capital strategies.

Having an automated invoice processing solution is a key first step – to ensure that invoices are received electronically or scanned to enable electronic processing. But it’s vital to look beyond simply scanning and capturing of invoice data and uploading it onto the accounting system. The most vital stage is what happens after the invoice is digitised – matching the invoice to its corresponding PO or other documents, so that all evidence for prompt approval and payment is available to AP staff.

The keys to success with AP automation or P2P are control and choice. With control over your processes, you have the choice of how and when to pay your supplier. This in turn allows you to maximise the return on your capital. For those companies that have that integration and control over their cycle, purchase-to-pay automation offers a real payback for paying forward.

traditional discounts

Chart above shows the Dynamic Discounts vs Traditional Discounts, taken from http://www.adpcomplianceinsights.com/dynamic-payables-discounting-how-is-it-different-from-traditional-discounts/

Conclusion

eProcurement has the ability to manage purchase orders, invoices, expense reports, and payments from a centralized. With P2P process companies have improved flexibility and visibility in procurement. Purchase-to-Pay systems are not intended to speed up the payment process. Rather, the goal of a Purchase-to-Pay system is to improve efficiency and financial controls, since finance departments have timely purchasing data at their fingertips.


References

Ben Ng Boon Hee, DPSM. (2018). “Key Strategies to Enhance Supplier Relationship”. Retrieved from SIPMM: https://sipmm.edu.sg/key-strategies-enhance-supplier-relationship, accessed 16/12/2018.

ISS Group, (2018). “Improving Supplier Relationships with Efficient P2P Processes”. Retrieved from https://issgroup.com/2018/05/18/improving-supplier-relationships-with-efficient-p2p-processes, accessed 16/12/2018.

Kenneth Tan, (2018). “What Is Purchase-to-Pay (P2P) Automation?”. Retrieved from http://nufindata.com/purchase-pay-p2p-automation, accessed 16/12/2018.

NurazyyatiJaffar, ADPSM. (2017). “Key Strategies to Build an Effective Supplier Relationship Management”. Retrieved from SIPMM: https://sipmm.edu.sg/key-strategies-build-effective-supplier-relationship-management, accessed 16/12/2018.

Wikipedia (2018). “Purchase-to-Pay”. Retrieved from https://en.wikipedia.org/wiki/Procure-to-pay, accessed 16/12/2018.

About the Author: Chin Ting Boon has several years of experience in the field of procurement, specifically in design engineering and architecture. He is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Ting Boon completed Diploma in Procurement and Supply Management (DPSM) course on December 2018 at SIPMM.

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