All organisations have requirements for buying goods and services for internal usage.  The process of deciding what to purchase, selecting a suitable supplier, and the final payment method is known as p2p (procure to pay).  Procure to pay as a process commences with a need to buy something and ends once the payment has been made.  For the effectiveness of p2p process, each team involved; Procurement; Sourcing and Purchasing, Receiving, Vendor Master, Accounts Payable and Payment Processing should have an understanding of the entire flow. The p2p process connects the procurement and entire supply chain processes within a company through the goods receipt process, and finally to the payment issued to the vendor. For ease of understanding, the p2p process can be summarised into a ten step process.

Step 1

Procurement section of an organisation receives a request for the purchase of goods or services from an internal stakeholder with details of its description and quantity (goods) or scope of works (services).

Step 2

The procurement team analyses the request and investigates the best possible product or services available in the market which meets the requirements. Tenders may be issued on the open market, or quotations requested from various vendors (suppliers of goods and services).

Step 3

A formal purchase order, also known as PO is issued to the vendor, approval of the PO is obtained from the appropriate level of authority.

Step 4

Step 4 relates to receiving the goods or services from the supplier.

Step 5

Creation of receipt note, following inspection of goods received in accordance with the purchase order issued.  A report on quality is prepared if the goods are accepted, however if the goods are rejected a material receipt note is prepared. 

Step 6

The invoice from the supplier is sent to the Accounts Department to enter the details so that payment can be processed and hence a payment can be made to the vendor.

Step 7

Invoices to the Accounts Department or the Accounts Payable are usually in digital format, which are then entered in the data form in the system of the organization.

Step 8

Step 9 relates to approval of the payment to the vendor by the appropriate level of authority.

Step 10

Following approval from the delegated authority, payment is released to the supplier, which is the last step of the p2p cycle.

Steps 1 to 6 corresponds to the procurement part and steps 7 to 10 correspond with the payments part – this is the p2p process, which is obtaining something and making the payment from the same.

Processing of an invoice – before entering the data, the invoice is reconciled with other related documents, such as the purchase order, or the quality report prepared during goods received.