Every\norganization needs to purchase the raw materials and services needed to\noperate. To ensure an optimal return on investment (ROI), you need a well\nthought out and verified Procure-to-Pay (P2P) process that connects the\nprocurement function with the accounts payable department seamlessly. <\/p>\n\n\n\n
An efficient P2P\nprocess is imperative to the financial health and competitive strength of an\nenterprise. When setting up such a process, the focus should be on building\nvalue while reducing costs. Whatever be the size of the company, defining the\nP2P process is imperative.<\/p>\n\n\n\n
All\nmanufacturers, retailers, and service providers need a reliable P2P process to\nmanage purchasing and cash flow. Developing a strong procurement plan helps in\noptimizing the P2P process.<\/p>\n\n\n\n
Challenges faced by businesses following the\nconventional P2P process<\/strong><\/p>\n\n\n\n The manual P2P\nprocess was fraught with several issues, making lots of data inaccurate and\nleading to fund leakage. From the days when every detail was diligently entered\ninto bulky registers by bespectacled clerks to ERPs, the P2P process has come a\nlong way. Yet, the fundamentals remain unchanged. Optimum procurement is hinged\nto a carefully chosen set of processes. <\/p>\n\n\n\n You have to make sure that things go well at every level \u2013 from contract management to supplier relationship management. The following are the problems in the traditional P2P process. <\/p>\n\n\n\n 1. Compliance with Government and industry regulations<\/strong><\/p>\n\n\n\n Your P2P process\nneeds to comply with the Government and industry regulations. However,\ncontinual training and re-training of staff regarding the often changing\nregulations are never easy. It is not uncommon for most companies to be at odds\nwith regulatory agencies despite their best efforts to be at the right side of\nthe law.<\/p>\n\n\n\n The scope of\ncompliance also includes economic sanctions that may be imposed by the\nGovernments to restrict the flow of goods\/services to or from certain\ncountries.<\/p>\n\n\n\n On the other\nhand, you also have to keep your P2P process aligned to the broader company\npolicies as uncontrolled spending has to be kept in check, else it can create a\nhole into the cash flow, thus reducing your working capital.<\/p>\n\n\n\n 2. Fraud risks<\/strong><\/p>\n\n\n\n A long supply\nchain, with a continued inflow of goods and services, always carries a risk of\ninvoice frauds, money laundering, etc. Leaving these risks undetected and\nunmanaged can seriously damage your bottom line.<\/p>\n\n\n\n Types of frauds include: <\/strong><\/p>\n\n\n\n a) Financial \u2013<\/strong> You have to keep tabs on several types of financial frauds that may include falsified transactions and\/or inappropriate payments. Billing frauds and inventory frauds are very common. The former occurs when a vendor issues multiple invoices for work that was incurred only once or submits false\/inflated invoices. The latter may involve the theft or misstatement of inventory items.<\/p>\n\n\n\n b) Misrepresentation of goods\/services \u2013<\/strong> This is a situation when a vendor advertently represents wrong or fraudulent information regarding the products\/services offered. For instance, a vendor may deliver products\/services that do not meet your contract specifications, and then hide or misrepresent the facts in their full knowledge.<\/p>\n\n\n\n c) Briberies \u2013<\/strong> Vendor organizations, their employees, or your own staff may get involved in bribes or kickbacks in several forms like cash, favors, gifts, etc. For personal aggrandizement, they may overpay for certain goods\/services, onboard an unqualified supplier, or accept goods\/services of substandard quality.<\/p>\n\n\n\n 3. Procedural inefficiencies<\/strong><\/p>\n\n\n\n For almost all\nenterprises, procuring is a manageable blend of planned purchases and urgent\nones. For an efficient system, they have to give attention to robust process\ndevelopment that would include approval hierarchies and contingency plans. You\nneed to move away from strategic spending and avoid last-minute buys.<\/p>\n\n\n\n The challenge is\nto put in place a system that enables you to derive value from early payment on\nscheduled buys, vendor incentives, and negotiated discounts. Unplanned\nprocurement results in uncertain vendor reliability and inconsistent delivery\nschedules. You may also end up facing supplier-related issues like inadequate\npolicy and capacity.<\/p>\n\n\n\n 4. Lack of Adoption<\/strong><\/p>\n\n\n\n Suppliers today\nexpect a simple, intuitive, and seamless experience on the procurement systems.\nIn case your ERP (enterprise resource planning) system doesn\u2019t meet their\nexpectations, they may not be too happy using it. Many procurement software\nsystems come heavy on complexities and list of features, but lack an easy\ninterface, making it hard to adopt.<\/p>\n\n\n\n You need to take\ninto account ease of use when getting procurement software. It will ensure you\ndon\u2019t end up facing what is termed \u2018lack of adoption\u2019.<\/p>\n\n\n\n 5. Slow invoice processing time<\/strong><\/p>\n\n\n\n Though most\ncompanies use digital ERP systems for P2P, there are some that are still stuck\nto manual routing, processing, and sign-off procedures, which slows down the cycle\nsignificantly. Companies following manual processes fail to take advantage of\nearly payment discounts and may even find themselves doling out late payment\npenalties. Such continued hiccups may ruin these companies\u2019 relationships with\ntheir suppliers.<\/p>\n\n\n\n Retrieving data\nalso becomes hard for these companies. As invoices and POs are all stored and\nrecorded manually, retrieving any data becomes almost impossible when any\nspecific information is required.<\/p>\n\n\n\n 6. Inaccurate information<\/strong><\/p>\n\n\n\n Reliance on\nmanual data entry makes the information error-prone. Companies relying on the\nage-old system even in the age of technology are most likely to face hassles\nbecause of inaccurate data entry. It may even impact their working capital and\nalso get them into legal trouble. Wrong data entries would fail to meet\nregulatory compliance, which forces these enterprises to get external audits of\nthe data.<\/p>\n\n\n\n No need to\nmention that processing errors require resolution, scaling up the cost per\ninvoice. The organizations also have to arrange for physical storage of\ninvoices and purchase orders (POs).<\/p>\n\n\nConnect with our experts to identify your blockchain implementation use-case<\/h2>\n\r\n\tSchedule Free Demo<\/a>\r\n\r\n<\/div>\n\n\n\n