What is the P2P payment process?

The P2P payment process is the process of paying a supplier for goods or services that have been received. It typically involves the following steps: The buyer creates a purchase order and sends it to the supplier. The supplier delivers the goods or services and sends an invoice to the buyer. The buyer receives and inspects the goods or services and approves the invoice. The buyer makes a payment to the supplier.

What is the difference between P2P and O2C?

P2P stands for procure-to-pay, while O2C stands for order-to-cash. P2P is the process of acquiring goods and services from suppliers, while O2C is the process of fulfilling customer orders and receiving payment. The main difference between P2P and O2C is that P2P is focused on the buyer side of the transaction, while O2C is focused on the seller side of the transaction.

P2P is used by businesses of all sizes to acquire goods and services from suppliers. It is a critical business process that can help businesses to save money, reduce risk, and improve efficiency.

What is P2P software?

P2P software is a software solution that helps businesses to automate and streamline their P2P process. It can help companies to create and manage purchase orders, process invoices, make payments to suppliers and track and manage spending.

What is P2P (Procure to Pay)?

P2P, or Procure-to-Pay, is the entire process a business goes through to acquire goods and services. It starts with identifying a need, like office supplies, and ends with the final payment to the supplier. An efficient P2P system saves money, avoids maverick spending, and keeps everything organized from purchase order to receipt.

What is the difference between P2P and procurement?

P2P (Procure-to-Pay) and procurement are related but not identical concepts. Here's the key difference: Procurement: Procurement refers to the broader function of acquiring goods and services for a company. It encompasses activities like identifying needs, sourcing suppliers, negotiating contracts, and managing supplier relationships. P2P (Procure-to-Pay): P2P focuses on the specific operational processes involved in fulfilling a purchase request. It's a streamlined flow within the larger procurement function, managing tasks like generating purchase orders, receiving goods, processing invoices, and making payments. Think of procurement as the big picture of acquiring what your business needs, while P2P is the step-by-step execution of that process.

What is 2-way matching in P2P?

In P2P, 2-way matching is double-checking your spending. It compares the purchase order (what you agreed to buy) with the invoice (what the supplier is charging). Matching quantities and prices helps avoid paying for extras or inflated costs. This keeps your P2P process accurate and saves money.

How can automation optimize the P2P process?

P2P automation streamlines the process by automating repetitive tasks. Manual data entry, purchase order generation, and invoice approvals can be automated, saving time and reducing errors. Automation also allows for real-time tracking of purchases and spending, giving you better control over your budget. Overall, a smoother P2P process with automation frees up your team to focus on more strategic work.

Procure to Pay (P2P) - Procure to Pay Process & Software

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What is Procure to Pay Process (P2P)?

Procure to pay is the process of acquiring required goods and services from external suppliers. A well-managed, streamlined procure to pay process brings significant cost and time savings for the business.

The process of procure to pay includes the following steps:

Measuring requirements for goods and services
Creating POs, compliance and approvals
Receipt of goods/services, reconciliation
Invoicing and payment

The most efficient way to manage procurement involves software and automation. With the innovation available today, businesses can manage the entire procurement supply chain in one place instead of the disconnected approach of manual or semi-digital tools.

Tools like RazorpayX Source to Pay can optimize your entire procurement process – every single step. Find out how.

Procure to Pay Process Steps

The procure to pay process has multiple steps. All these steps should be managed from one single dashboard.

Identifying needs and creating requisitions

The process begins with identifying business requirements. Employees with a need for goods or services fill out a purchase request form with specifications of the required items or services.

At this step, it is also important to match requirements to the department’s budget and alter specifications appropriately. This improves the chances of getting the purchase request form accepted by the department head or manager.

Some businesses carry out this process manually, while others have software and automation to make the process easier and error-free. RazorpayX Source to Pay is an industry-first central tool to manage the entire procurement process, including budgeting and department-level management.

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Purchase request creation

After deciding the requirements, the second step is to create a formal purchase request. The requesting department raises a PR with the procurement team, after ensuring it matches the budget and administrative requirements.

Purchase request approvals

Once the purchase request is created and budgeted, the next step is to get the necessary approvals. Managers or department heads evaluate the need, verify the budget and either approve or reject the purchase request form.

Purchase Order creation

After approval of the purchase request, it is sent to the procurement department. The procurement or accounts payable (AP) team then reviews the purchase request and creates a Purchase Order (PO) to send to the vendor.

The PO should contain specifications, prices, expected delivery date, and business details like the delivery address and a POC contact number.

RazorpayX Source to Pay comes with a vendor portal allowing vendors to view Purchase Orders and other documents anytime.

If the item requested is low-value or a one-time unique purchase, the AP team might choose to bypass creating a Purchase Order, and spot buy the item required.

PO Approval

The purchase order is now to be sent through an approval loop to all relevant department heads and stakeholders. The PO is approved first by the head of the requesting department, then by the procurement team, and sometimes by the finance and legal teams as well.

Getting these approvals manually is a tedious, time-consuming process. With automated software, each stakeholder can independently view and approve the PO on their dashboards, significantly cutting down on the time taken for the entire approval process.

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Receipt of goods

The vendor then delivers the goods or services with a Goods Receipt Note (GRN). The goods received should be checked against the GRN and the PO to ensure compliance with contract terms.

If any items received are damaged, faulty, or missing, the business can request a replacement or a refund. Once all the goods have been checked to the business’s satisfaction, the GRN is accepted.

Matching and checks

Once the goods have been accepted by the business, the vendor raises an invoice or a bill specifying the amount due and a due date.

Upon receipt of the vendor’s invoice, a three-way match between the Goods Receipt Note (GRN), the Purchase Order (PO) and the Invoice raised by the vendor is mandatory for accurate payment and internal control purposes.

The following details must be matched:

Items ordered and received: Quantity, description, and any identifying codes.
Prices and totals: Unit price, total amount, and agreed-upon discounts.
Delivery details: Dates, locations, and carrier information.

RazorpayX Source to Pay is the ONLY solution on the market that offers free 3-way matching with OCR technology.

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Vendor payment

Finally, the invoice is sent to the finance team for payment disbursal. The finance team will process and make the payment to the vendor.

This payment must be made on time and accurately to maintain a good relationship with the vendor. Happy vendors will deliver good quality supplies on time and be more open to negotiation and collaboration.

Automated and scheduled vendor payments ensure that no payment is missed. With good procurement software, you can schedule vendor payments of different types: partial payments, advance payments, instalment payments or holdback payments.

Recording and reconciliation

Once the vendor receives the payment, the payment is then recorded and reconciled in the books of accounts. The finance team does this step if your procurement process is not automated.

Find out how to automate your procurement process

How Can Procure to Pay Automation Help the Procurement Process?

The procurement process involves:

A lot of paperwork – purchase request forms, POs, GRNs, invoices

Multiple stakeholders – finance teams, procurement teams, individual buying departments

Tedious manual tasks – getting approvals, disbursing payments, recording and reconciling transactions in books of accounts

These factors make manual procurement processes highly inefficient and costly. With automated solutions like RazorpayX Source to Pay, businesses can streamline the whole process – bringing huge time and cost savings.

How can software and automation improve every step in the procurement process?

Why is Procure to Pay Important?

The procure-to-pay (P2P) process might sound complex, but it’s actually the backbone of any well-run business. Imagine trying to manage all your purchases – from office supplies to raw materials – without a clear system! An effective P2P system keeps everything organized and efficient, saving you time, money, and frustration.

Here’s why a good P2P process is so important: First, it helps you control your spending. By having a clear overview of what’s being ordered and how much it costs, you can identify areas to cut back or negotiate better deals with suppliers. P2P also prevents maverick spending – unauthorized purchases that can throw your budget off track.

Second, P2P streamlines the entire process, from identifying a need to making the final payment. This means less time wasted on paperwork and chasing down approvals. Automated systems can handle routine tasks, freeing up your team to focus on more strategic initiatives. Finally, a smooth P2P process keeps your suppliers happy. Clear communication, timely payments, and accurate records build strong relationships that benefit your business in the long run.

Best Practices in Procure to Pay Process

Businesses with good procure to pay processes follow certain best practices that other businesses would also benefit from:

Automated procurement processes for error-free, non-labour intensive procurement
Ensure proper policies are put in place to support transparency for all stakeholders
Support seamless collaboration between different departments: requesting department, procurement department, finance department
Create quantifiable OKRs with concrete success metrics to track progress. These OKRs can be: number of delayed payments in a month, amount paid as late fees to vendors, etc.

How Procure to Pay Software Brings Efficiency to Purchasing

Budgeting	Start by assigning budgets to different cost centres. Procurement software allows businesses to measure budgets and spending simultaneously, enabling department-wise spending analysis and accurate forecasting.
Purchase request approval	With automated procurement software, multiple stakeholders can view and approve purchase requests from one single dashboard as soon as they are raised.
Purchase request approval	Purchase requests that exceed the budget can be auto-declined to avoid overspending.
Purchase order creation	As soon as the manager approves a purchase request, procure to pay software can auto-create a Purchase Order (PO) to be sent to the vendor.
Vendor management	Here are all the touchpoints the business has with the vendor: Sending the PO to the vendor Receiving the GRN from the vendor Sending back the approved GRN to the vendor Receiving the invoice from the vendor Vendor-business touchpoints can be handled entirely digitally with a vendor portal. Vendors can access these documents as soon as they are created by the business. Vendor portals also make the vendor onboarding process so much easier – the RazorpayX Source to Pay vendor portal allows for self-onboarding and KYC.
3 way matching of GRN, PO and Invoice	3 way matching can be entirely automated – Source to Pay is the only solution on the market that allows for automated 3-way matching with OCR reading. The software automatically reads, matches and verifies your GRN-PO-Invoice, resulting in error-free invoice processing.
Vendor payments	The best way to maintain a good relationship with your vendors is to pay them on time. Procure to pay software helps businesses do this with scheduled payments, automatic GST ITC credit checks and instant bulk payouts.
Accounting	With procurement software, vendor payments are automatically entered into the business’ accounting tool, removing the need for manual entry and reconciliation. RazorpayX Source to Pay also allows businesses to create smart rules, automating bookkeeping by categorizing transactions.