What is a Procure-to-Pay Process?
The Procure-to-Pay (P2P), or Purchase-to-Pay Process Simply Explained
The Procure-to-Pay (P2P) process, also known as Purchase-to-Pay , is an end-to-end business process that includes all steps from purchasing to payment. This process deals with the procurement of goods and services, from the identification of needs within an organization to the final payment to the suppliers.
Below you will find the most important steps of the Procure-to-Pay process and where you can accelerate the flow with EDI.
Key Takeaways
- Procure-to-Pay (P2P), also known as Purchase-to-Pay, covers the complete purchasing journey—from identifying a need to paying the supplier
- The main P2P cycle include request, purchase, receipt, billing, payment, registration.
- P2P automation reduces manual work, errors, and processing times while improving visibility and accuracy.
- An optimized P2P process supports better cost control, purchasing compliance, and supplier relationships.
Procure-to-Pay Request
Identifying the P2P Request
The process begins when an organization identifies a need for goods or services. This may be the result of internal demand, project requirements or regular operational needs.
Creating the P2P Request
A purchase request states the details of the goods or services required, including quantities, specifications and other relevant information.
Approving the P2P Request
The purchasing request is submitted to the appropriate decision makers within the organization. This ensures control and compliance with purchasing policy.
Purchasing in the Procure-to-Pay Process
P2P Supplier Selection
The process begins when an organization identifies a need for goods or services. This may be the result of internal demand, project requirements or regular operational needs.
P2P Order Creation
A purchase request states the details of the goods or services required, including quantities, specifications and other relevant information.
Source-to-Pay (S2P): Explore the Complete Source-to-Pay Process
Discover how the Procure-to-Pay (P2P) process fits within the broader Source-to-Pay (S2P) cycle.
Receipt in the Procure-to-Pay Cycle
Receiving Goods and Services in P2P
When the supplier ships the goods, this will be reported via EDI with a Dispatch Advice (DESADV). Once the goods have been delivered or the services have been provided, this is registered in the system by means of an acknowledgment of receipt. To confirm receipt of the goods by the company, the Received Advice message (RECADV) will be sent. This step is crucial because it forms the basis for invoicing.
Billing in the Procure-to-Pay Business Process
P2P Invoice Verification
The process begins when an organization identifies a need for goods or services. This may be the result of internal demand, project requirements or regular operational needs.
P2P Invoice Approval
A purchase request states the details of the goods or services required, including quantities, specifications and other relevant information.
Payment & Registration in the Procure-to-Pay Journey
After approval of the invoice, payment will be made to the supplier within the agreed payment term. The Procure-to-Pay or Purchase-to-Pay process is completed with the financial reconciliation of all transactions.
Reporting and analysis of the Procure-to-Pay or Purchase-to-Pay process can provide valuable insights for optimizing future purchasing decisions.
Would you like to learn more about Procure-to-Pay ?
EDI FAQ
Companies can save time and costs by no longer having to retype data, thus avoiding errors. An optimal EDI connection will help improve customer service. Suppliers who use EDI have a stronger competitive position compared to peers who have not yet adopted EDI. Finally, the use of paper can be greatly reduced or even eliminated.
An EDI service provider is a service provider that sells the software and tools to exchange EDI, but also offers additional EDI services such as mapping or translation services to get messages into the right formats; or archiving of the messages. In addition, the EDI service provider also provides the platform or network on used to exchange EDI messages and will monitor the smooth exchange of messages 24/7.
The communication protocol is going to determine the way the connection is set up to exchange EDI messages. The most commonly used protocols are AS2, SFTP, HTTPS and APIs.
EDI solutions are available in different types depending on a company's EDI adoption rate. For companies that were not yet doing EDI and want to start with it, WebEDI is an ideal entry-level solution. Companies that exchange a lot of EDI are more likely to choose an integrated solution with their ERP, whether or not fully outsourced to an EDI service provider.
Many industries have their own standards, which were agreed upon and accepted internationally. For example, in retail and in healthcare the GS1 standard is used, in the automotive industry the standard is determined by ODETTE and in air cargo IATA.
Once you have determined the standard you will use, you need to check if your system can handle this standard. If not, you can use message mappings to ensure the standard will work with your internal systems.
EDI can be used in all industries. We see that in some industries the use of EDI has been given an extra boost by standardization organizations, for example GS1 in retail and IATA in the air industry. Sometimes companies will also require their suppliers to engage in EDI. In addition, there are quite a few government agencies such as customs and port authorities that require declarations to be sent electronically via EDI.
Industries where there is a high EDI adoption rate include retail, eCommerce, manufacturing and distribution, logistics, etc.
