Explainer

Procure to pay (P2P) explained: the process, the systems and how to fix it

Procure to pay covers everything from a request to buy something to paying the supplier. Here are the steps, the controls that matter, how P2P software fits and where most organisations lose money.

By Christopher Fagan, Managing Partner, PEF Consulting Partners

What is procure to pay?

Procure to pay, often shortened to P2P and sometimes called purchase to pay, is the end to end process of buying goods and services: from identifying a need, through requisition, approval, ordering and receipt, to matching the invoice and paying the supplier. It sits between procurement, which decides what to buy and from whom, and accounts payable, which pays for it.

The procure to pay process

  1. A need is identified and a requisition raised
  2. The requisition is approved against budget and delegated authority
  3. A purchase order is issued to an approved supplier
  4. The goods or services are received and receipted
  5. The supplier’s invoice arrives
  6. Three way match: purchase order, receipt and invoice
  7. Payment is made on the agreed terms
  8. Accounting and reporting, including accruals for goods received but not yet invoiced

Source to pay vs procure to pay

Source to pay adds the strategic stages in front: category strategy, supplier selection, tendering and contracting. Procure to pay starts once the supplier and the contract are in place.

Where P2P goes wrong

Measures that matter

Measure Why it matters
Share of spend on a purchase order Visibility and control of commitments
Invoice cycle time Cost and supplier relationships
First time match rate How efficient matching is
Cost per invoice Efficiency of the whole process
On time payment Supplier relationships and the payment practices that large UK companies must report
Ageing of exceptions The hidden backlog

P2P software

Most ERP systems include purchasing and payables. Specialist procure to pay suites add guided buying, catalogues, invoice capture, supplier portals and workflow automation. Choose on your spend profile, how much is catalogue, contract or one off, and how well the tool connects to your ERP, rather than on the length of the feature list.

How to improve P2P

Related reading: finance transformation, order to cash explained, the month end close checklist, software procurement and selection.

Common questions

What is procure to pay?

The end to end process of buying goods and services, from requisition and approval through ordering and receipt to invoice matching and payment.

What is the difference between procure to pay and purchase to pay?

None in practice: they are two names for the same process. Source to pay is the wider term that also covers sourcing and contracting.

What is three way matching?

Checking that the purchase order, the goods receipt and the supplier invoice agree on quantity and price before an invoice is paid.

What is P2P software?

Software that automates the procure to pay process, from guided buying and purchase orders to invoice capture, matching and payment, usually integrated with the ERP.

If payables is drowning in exceptions or spend is escaping purchase orders, the fix is usually process and data before software, and we can help you find the quickest wins.

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