The procure-to-pay cycle of a business is the process of integrating the procurement and accounts payable processes of the business for maximum effectiveness and efficiency. The procure-to-pay cycle for a business includes selecting products, enforcing compliance, ordering products, receiving products, reconciliations, invoice processing, and finally, payment processing. The cycle also involves getting proper authorizations and approvals during these steps.
A manual procure-to-pay cycle can take a lot of time to complete. Furthermore, a manual cycle can result in additional costs borne by the business and loss of potential savings. On the other hand, digitizing the procure-to-pay cycle of a business can create a lot of value for the business. There are many features that AP automation can provide. A list of these features can be viewed at https://iqinvoice.com/features/.Therefore, businesses using a manual procure-to-pay cycle must discover the value of digitizing procure-to-pay.
Some examples of values that are created by digitizing the cycle are as below.
In a digitized procure-to-pay cycle, procurement is automated. Requisitions are automatically generated within the system and orders are placed electronically in the supplier’s system. For suppliers that don’t have an electronic sale system, orders are automatically sent to them via email. Similarly, suppliers can also confirm the email digitally and the information is automatically received and updated within the system of the business.
A digital procure-to-pay cycle can also make the exchange of documents easier and reduce related costs. In a manual system, these documents are exchanged physically and needs to be shipped from one location to another. This costs the business both time and money to achieve. In a digitized process, documents can be exchanged electronically to save time and costs while reducing paper usage. The electronic exchange can be used within the business or can also be connected with the suppliers’ systems for seamless data exchange. Any data that is processed through the system is also automatically validated, converted from one form to another, and stored within the system.
One of the most time-consuming steps in the procure-to-pay cycle of a business is invoice processing. This is because when an invoice is received, it must go through different processes and must be cross-checked with other documents. In a manual cycle, due to the nature of the process, this step can take even longer. With a digitized procure-to-pay cycle, the time it takes to process an invoice is significantly reduced. The digitized system automatically matches the invoice with other documents and ensures the details on the invoice matches the details on other documents. Businesses can also find more information about how these invoice automation software work at https://iqinvoice.com/how-iq-invoice-works/.
Once an invoice is processed by the system, the system automatically sorts the invoices by their due dates and pays the invoices according to the working capital policies of the business. Some invoices may also come with an early payment discount. Due to the nature of the manual procure-to-pay cycle, these discounts are not realized within time. In a digitized cycle, the system automatically identifies any early payment discounts on invoices and determines whether the discount should be availed according to the policies of the business. Furthermore, the process of manual payments, such as by cash or by cheques, is eliminated as the system directly transfers the cash to the suppliers’ accounts.
In a manual procure-to-pay cycle, a business must dedicate resources towards reconciling records received from suppliers with the records within the business. This can take a lot of time and effort. Furthermore, due to the nature of manual systems, each reconciling item must be traced individually and it can take a lot of time to identify any of these reconciling items. In a digitized process, a business does not have to worry about reconciliations as it is done automatically by the system. The system also receives records directly from the suppliers and identifies any errors within time so they can be rectified promptly.
In a paper-based procure-to-pay process, audit trails are kept on papers. In case the business needs to track any information, it may take a long time to find its origin. In a digitized cycle, however, keeping audit trails is fully automated. Businesses don’t need to manually keep trails as the system automatically maintains them. Furthermore, tracking something within the system becomes very easy due to the digitization of all the information within the system. The automated system also makes the process of approving and authorization much easier and transparent.
The procure-to-pay cycle of a business is about integrating the procurement process of a business with its accounts payable process. However, a paper-based procure-to-pay process can often be ineffective. By digitizing the process, a business can make the process more efficient and effective. The value of digitizing the procure-to-pay process cannot be neglected. It can provide value in procurement, exchange of documents, invoice automation, electronic payments, reconciliations, and audit trails.