Procure to Pay (P2P) process: What is it?
The Procure to Pay (P2P) process is a sequence of supplier management activities, from purchasing to payment, integrated into a streamlined process flow. This procurement process is tightly controlled across the entire procurement lifecycle using P2P procurement software, encompassing all stages from identifying procurement needs, supplier evaluation, to payment to suppliers. P2P software establishes workflows to ensure that enterprises procure necessary goods and services efficiently, save costs, and strictly adhere to established regulations.
Benefits of establishing P2P procurement approval processes:
Cost savings in procurement: P2P procurement software enhances budget management and expense tracking in real-time. Departments can review and approve expenses prior to purchasing, ensuring maximum compliance.
Efficient procurement process management: The P2P process aids enterprises in effectively managing procurement workflows, thereby saving time for personnel, reducing costs, and minimizing risks for the business.
Enhanced transparency: P2P processes enable enterprises to closely monitor procurement activities, manage process gaps, negotiate prices with partners until payment and acceptance. Effective supplier management ensures compliance with legal regulations and company procurement policies.
Improved quality of goods and services: P2P processes assist enterprises in selecting reputable suppliers through statistical reports generated by P2P software, ensuring high-quality inputs for goods and services.
Building a strong relationship with suppliers: The P2P process helps businesses establish long-term and effective cooperation with suppliers. This includes receiving more support from suppliers, priority in cost discounts, support timelines, and product quality.
Analyzing procurement expenditure reports: Providing details on purchase order contracts, evaluating and managing suppliers on P2P software. This tool assists in financial data analysis during procurement, providing an overview of daily procurement costs.
Enhancing workforce efficiency, minimizing risks: Control over the P2P procurement system simplifies employee procurement processes. The P2P procurement software allows for quick, effective drafting of contracts, price quotes, purchase requests, supplier evaluations, and comment exchanges.
Procurement approval process steps within the enterprise
Step 1: Identifying needs, initiating purchase requisition
- Analyze and collect material, goods, and service usage needs from various departments within the enterprise.
- Detailed procurement planning, including quantities, types, necessary technical specifications.
- Send request for quotation (RFQ) to potential suppliers.
- The procurement plan must be approved by relevant and authorized departments (previous approved proposal).
Step 2: Creating and approving purchase requisition (Approval)
- Prepare a purchase requisition form (Purchase Requisition) as per the customizable template on P2P procurement software.
- Compare price quotes from suppliers, provide complete information on materials, goods, and services needed, including quantities, types, technical specifications.
- State the purpose of usage and estimate procurement costs, sending them to relevant parties, department managers for review and approval. In the P2P software, managers can view price comparison tables among suppliers to assess the rationality of this procurement request, approve it, or return it to step 1 for additional information from staff.
Step 3: Selecting suppliers
- Based on the comparison table of quotations from suppliers on P2P software, employees and managers evaluate potential suppliers based on criteria such as supply capacity, price, product quality, brand reputation,... according to the company's procurement regulations, and choose the final supplier to place the order.
Step 4: Placing the order (Purchase Order - PO):
- Prepare a Purchase Order (PO), along with a procurement contract and send it to the selected supplier.
- Clearly state detailed information about the materials, goods, and services to be purchased, including: quantity, type, technical specifications, price, delivery time, payment terms,...
- Sign electronic contracts or purchase orders with the supplier.
Step 5: Order Tracking
- Monitor supplier's delivery progress closely.
- Send reminders to suppliers for timely deliveries as per agreement.
- Continuously update information on order status.
- Record invoices.
Step 6: Inspection and Acceptance of Goods
- Thoroughly inspect quality, quantity, and type of goods upon receipt.
- Prepare a goods receipt and acceptance report.
- Approve payment to the supplier if the goods meet contract requirements. Financial reporting:
- Purchase and payment transactions are recorded in the company's financial system, ensuring accurate and transparent accounting records for cash flow control.
Step 7: Payment to Supplier
- Prepare payment request according to company's standard template.
- Make payment to the supplier through agreed upon payment methods in the contract.
- Maintain complete records and payment documents for future reference.
Step 8: Evaluation and Feedback
- After completing the procurement process, businesses can evaluate supplier performance and procurement processes to learn from and improve.
- These steps help the P2P procurement process to be systematic, transparent, and efficient, thereby enhancing financial management and supporting business operations effectively.
- Scoring suppliers on P2P procurement software helps businesses select reputable suppliers at reasonable costs.
Choosing the best project procurement process management software
When an organization uses effective procurement process management software, it helps manage procurement quickly and efficiently, optimizing costs. Currently, there are many platforms on the market for building P2P procurement processes such as SAP Ariba, Oracle Procurement, Coupa, FPT Procurement... However, these platforms come with high implementation and development costs, including licensing fees, development personnel costs, system maintenance costs, and expansion and upgrade costs.
In terms of utility, P2P procurement software helps businesses save more. However, investing in software typically requires substantial initial costs, making it difficult for small and medium-sized enterprises (SMEs) to access. To meet market demands and enhance processes for SMEs, P2P procurement software on VT DPM was developed to efficiently support procurement processes at a reasonable cost, without the need for system investment, licensing fees, or development personnel. All processes can be set up quickly and easily for businesses of all sizes.
Reasons for using P2P procurement software on VT DPM
Cost savings: Unlike foreign software that requires investment in software licenses, development personnel, and server infrastructure, P2P procurement software on DPM operates and initializes on the Cloud at a cost-effective rate, starting from just 1.2 million VND.
No-Code/Low-Code application for dynamic process creation: Procurement processes can be easily created, customized, branched, or matrixed, allowing businesses to innovate their procurement processes without investing in an IT team for software development and upgrades. P2P procurement processes can be set up quickly, with users simply dragging and dropping attributes and configuring process steps to create flowcharts, branches, or matrices. This enhances self-service capabilities across departments.
Ease of upgrades: VT Thao's P2P procurement software is continuously updated and upgraded on an optimally designed Cloud platform, facilitating rapid expansion and upgrades.
Business cash flow management: Business purchasing activities are comprehensively reported and summarized in the BOD Dashboard, enabling detailed statistics on revenue, profit, operating costs, and profitability in real-time. This allows business owners to make quick and effective decisions without requiring departments to submit reports.
Considerations when evaluating and selecting procurement management software:
Procurement management software needs to be flexible and suitable for the scale of the business
P2P procurement software should be built based on the specific needs and scale of the enterprise, ensuring flexibility and alignment with the practical requirements of procurement operations. Especially for SMEs, the high initial investment costs make it challenging to own P2P procurement software. SMEs should consider P2P procurement software on VT DPM, which is evaluated to be efficient and cost-effective.
P2P procurement processes constantly evolve, so the software must be able to dynamically change processes in real-time according to practical needs.
Choosing P2P software with rigid processes that are difficult to change and customize, leading to high costs for upgrades and modifications to keep up with new processes, underscores the importance of a robust software foundation for easy customization and feature upgrades.
Process and procurement management software are continuously upgraded and updated
Currently, procurement management software on the market incurs significant costs for upgrades and maintenance. Therefore, selecting procurement software with reasonable costs while benefiting from regular updates and maintenance is a priority for businesses.
Continuous software upgrades: The software continuously introduces new features to meet changes in procurement processes within the enterprise, enhancing automation, transparency, and efficiency of the process.
Periodic evaluation: Conduct regular evaluations of the purchasing process to identify weaknesses and opportunities. VT Thao's P2P procurement software features customer evaluation and classification, enabling businesses to effectively choose suppliers.
Listening to feedback from employees and suppliers: The software includes commenting features to gather feedback and request additional documentation from those directly involved in the procurement process. This feedback is valuable for process improvement. The P2P purchasing process includes commenting features to tag relevant employees for evaluation and documentation supplementation as needed.
Employee training: Using traditional manual procurement procedures can burden employees due to complexity. Training employees on software ensures they can easily create procurement processes and use supporting tools, accelerating procurement processes by 3-5 times compared to traditional methods.
Compliance with legal regulations and internal policies: Procurement software helps employees strictly adhere to company policies and legal regulations. Implementing procurement software enhances compliance among stakeholders involved in the procurement process and addresses gaps in traditional procurement processes such as difficult cost control and supplier reporting.
Utilizing data analysis: P2P procurement software facilitates data analysis to monitor the performance of the procurement process. Data analysis helps identify trends and potential issues, enabling informed decisions for reasonable improvements. Evaluations such as which suppliers offer competitive pricing, execute contracts promptly, and provide the best quality goods and services are all reflected in the software's reports.
Encouraging creativity and continuous improvement: Creating a work environment that encourages employees to propose initiatives and process improvement solutions. Software must accommodate process innovation, making VT Thao's P2P procurement software an excellent solution that effectively meets the flexibility needs of all enterprise processes.