What is a Procure-to-Pay Process?

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.

Purchasing needs identification:

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.

Purchase request:

A purchase request states the details of the goods or services required, including quantities, specifications and other relevant information.

Approval of the purchase request:

The purchasing request is submitted to the appropriate decision makers within the organization. This ensures control and compliance with purchasing policy.

Supplier selection and negotiation:

After the purchase request is approved, a suitable supplier is selected. Negotiations about prices, delivery terms and other contractual aspects take place.

Purchase order creation:

After approval with the supplier, a purchase order (with EDI an ORDER) is drawn up and sent. This document makes the purchase official and contains detailed information about the goods or services ordered.

Goods receipt and Services:

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 and Verification:

The supplier sends an invoice (INVOIC) based on the purchase order and acknowledgment of receipt. This invoice is verified to ensure that the goods or services delivered correspond to what was ordered and received. REMADV ( Remittance Advice) is an EDI document that the purchasing company sends to its supplier to inform them when and how much they will pay them for the goods or services received.

Approval of the invoice:

The invoice is approved for payment. This may include verifying the accuracy of the invoice and reconciling it with the purchase order and receipt.

After approval of the invoice, payment will be made to the supplier within the agreed payment term.

The P2P process is completed with the financial reconciliation of all transactions. Reporting and analysis of the P2P process can provide valuable insights for optimizing future purchasing decisions.

Optimizing and automating the Procure-to-Pay process with EDI not only helps organizations manage their expenses, but also contributes to efficient business operations, compliance with purchasing guidelines and cost control.

Ready to start automating your P2P process with EDI?