For businesses to succeed, they must make the most of their resources. One practical way to do this is by implementing an effective procure-to-pay (P2P) process.
We recently sat down with Ryan Ollivier, partner at Moss Adams, to discuss the P2P process and how businesses can use it to achieve greater success.
"Businesses with good procure-to-pay processes can operate more efficiently, cut down on maverick spending, and get better pricing from their vendors. They’re also better prepared for audits, acquisitions, or public offerings that may happen down the road." – Ryan Ollivier
Throughout our conversation, Ryan shared valuable insights on common challenges, best practices, and strategies for improving efficiency. In this article, we break down the key takeaways from our discussion and explore how businesses can put them into action.
Common P2P Problems
It’s easy to overlook the importance of an effective P2P process until issues arise. Oftentimes, businesses can get by without a lot of formality around how money is spent, especially when they’re small and don’t have a lot of transactions. However, as they grow staying on top of spending becomes increasingly difficult and issues begin to emerge.
Some common problems businesses face when they don’t have an effective P2P process include:
Unauthorized Spending. Employees purchase goods and services without proper approval, leading to unnecessary, duplicate, or fraudulent purchases.
Lack of Visibility. Businesses can’t see incurred liabilities until bills come in or payments are due, making it difficult to forecast, plan, and make informed decisions.
Lost Discounts. Employees may purchase goods and services from different vendors, missing out on discounts and other benefits from collective purchasing.
Business Interruptions. Inadequately managed suppliers can cause disputes and delays that negatively impact business operations.
Without a well-structured P2P process, these issues can quickly escalate, causing serious financial and operational setbacks for the business.
“If you don’t have a solid procure-to-pay process in place, it’s hard to ensure spending is properly approved which can result in wasteful spending or even fraud. It’s also difficult to have a good handle on outstanding liabilities which can lead to surprises and audit issues.” – Ryan Ollivier
Incorporate P2P Best Practices
P2P processes will differ from business to business depending on their size, the kinds of goods or services they purchase, and other business factors. Despite this, there are some common elements that should be incorporated into developing any P2P process.
Use the following P2P best practices to develop an effective P2P process:
Understand P2P Needs. Gain a clear understanding of the business’ needs and how they are being met to facilitate the design of P2P processes that align with those needs.
Establish P2P Policies. Develop and implement written P2P policies that facilitate appropriately approved spending and align with business objectives. These policies should be practical and easy to understand.
Document P2P Process. Documenting the P2P process makes it easier to understand and identify opportunities for improvement. Diagrams, flowcharts, and written narratives are useful in documenting the P2P process.
Automate P2P Workflows. Using technology to automate repetitive steps and enforce policies saves time and encourages compliance. Selecting the right technology is critical for success.
By following these best practices, businesses can make the most of their P2P process and reap benefits, like faster processing, better pricing from vendors, and less wasteful spending.
”A huge part of our business is helping clients optimize their processes. I would say 90% of the time we find significant opportunities for improvement where businesses can immediately start saving money.” – Ryan Ollivier
Leverage P2P Technology
Software can automate all aspects of the P2P process, making each step more efficient.
Common features found in P2P software include:
Purchase Requisitions. Allows employees to submit requests for goods and services, facilitating clear communication and proper documentation.
Purchase Orders. POs can be automatically generated from purchase requisitions or created independently from templates and prepopulated lists, providing accuracy and efficiency.
Approval Workflows. Automated approval processes ensure that purchase requisitions, purchase orders, and bills follow proper authorization channels, reducing delays and preventing unauthorized spending.
Receiving. Streamlines the verification and recording of received goods or services for accurate tracking.
3-Way Match. Automates the matching of vendor invoices to purchase orders and receiving transactions, identifying discrepancies, and preventing improper payments.
Vendor Management. Centralized vendor management tools maintain supplier information, track performance, and facilitate compliance with procurement policies.
Reports. Real-time reporting provides insights into spending patterns, helping businesses track expenses, identify cost-saving opportunities, and improve financial planning.
Budgets. Integrated budgeting tools monitor spending against allocated funds, flagging unusual or unplanned expenses before they become an issue.
Choosing the right P2P software can have a significant impact on a business’ success. With numerous options available, it’s essential to research different products, understand what sets them apart, and determine which solution best aligns with your needs.
Important factors to consider when looking for P2P software include:
Features. The software should include the essential features required for your business, with additional capabilities that can provide extra value.
Ease of Use. A complex system can lead to low adoption rates and inefficiencies. Assess how intuitive the software is for your users, as well as how easy it is to implement and maintain.
Cost. Consider subscription fees, implementation costs, ongoing support, and other potential hidden costs to understand the total cost of ownership.
Scalability. As your business grows, your P2P needs will evolve. Ensure the software can scale with your operations, handle increasing transaction volumes, and integrate with other systems.
Many resources are available to research P2P software products. Vendor websites provide product information and are a good place to start. Online marketplaces or software product review sites, like Capterra and G2, also have product information, including user reviews and comparison tools. Third-party consultants with experience evaluating, selecting, and implementing business software can also be valuable.
“There are a lot of great tools out there that can help businesses better manager their procure-to-pay process. Many are inexpensive, easy to use, and can scale to meet the needs of the business as it grows.” – Ryan Ollivier
As the business landscape becomes increasingly competitive, businesses that optimize their resources by implementing an effective P2P process will come out ahead.
About Ryan Ollivier
Ryan Ollivier is a partner with Moss Adams who has worked in both financial and operational roles across multiple industries since 1999. He’s experienced in assisting companies with their implementations of new accounting standards, evaluating and concluding on technical accounting issues, improving operational effectiveness, creating budgets and financial forecast models, and managing finance and accounting teams.