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Understanding the Benefits of P2P for Indirect Spend

Understanding the Benefits of P2P for Indirect Spend

P2P, or Purchase to Pay / Procure to Pay, is one of many industry terms referring to systems that link purchasing to accounts payable. An efficient P2P system can improve your company’s risk management, compliance, cost control and bottom line.

What Is P2P?

P2P refers to fully integrated business processes that covers the end-to-end activities of requesting (or requisitioning), receiving, and paying for goods and services. Procure to pay solutions use a supplier and/or a multi-enterprise network allowing suppliers to submit invoices electronically.  In addition to e-procurement functionality, P2P systems provide invoice matching and processes for returned goods. When you hear people use the term in the industry, they are usually referring to the technology or system set in place to manage these activities.

When Should a P2P Process Be Implemented?

As businesses grow, many start to experience accounting failures that make change necessary. It becomes increasingly difficult to manage all of the different suppliers, making it crucial to find a way to manage it. Unmanaged and disconnected purchasing to accounts payables increases the cost of paying invoices highlights the need for a new integrated system.

A deficiency in any activity involved in the P2P process will cause profit leaks and inefficient invoice processing. Leaving these unmanaged can greatly affect how a company does business and the relationships it has strived to build with its customers and suppliers.

What Are the Major Benefits of P2P?

P2P helps give a company insight into saving money, achieving better compliance, implementing more efficient processing, and forming stronger business-to-business relationships. It allows a business to catch deficiencies in any of their procedures. But whether a company has started to experience deficiencies or not, there are some huge benefits to implementing a proficient P2P system.

The key benefit of P2P systems is better internal processes for ordering and managing spend. With a good P2P system in place, a company will experience increased accuracy reconciling purchase orders with invoices, lowering the risk of overpaying or duplicating invoices. Businesses frequently paying these duplicate invoices will experience a profit leak and will need a system in place to counter this leak.

P2P can offer a powerful perspective cutting back on unnecessary expenses. A P2P system can help you see if there were any missed opportunities for early payment or bulk order discounts. This highlights money the company had potentially lost. It can also point out the possibility of better negotiations because of past on-time or early payments. Every opportunity for savings increases profit margin.

What are some additional benefits of P2P?

These systems make it easier to reconcile statements to budgets. Typically at month end or quarter end, the accounting department will be working overtime to close out their books. This last-minute effort is inevitable, but a P2P system will streamline the purchasing accounts closure. A good P2P system will help eliminate serious costly accounting mistakes.

The other huge benefit of a P2P system is that it allows a company to better organize their suppliers. Large companies may work with dozens of suppliers for each of the thousands of goods being purchased in order to get the best prices on the goods they need. A P2P system helps organize those more efficiently to cut down on mistakes made in ordering and communication.

What Is Needed to Implement a P2P Process?

P2P processes are a form of innovative technology that involve the purchase of a special software system. This system will simply need to be onboarded within the company’s computer network. It is usually designed to be installed by a company’s technology team, but it can also be done by the supplier of the program. It can also be outsourced to the vendor or special technology team if desired.

Once the system is installed, special instruction may be needed to make sure everyone involved knows how to use it properly. Most vendors conduct special training for employees, but a company’s technology team may also have the information necessary to fully implement the program. Without properly implementing a P2P system, many invoices can fall through the cracks of the system creating many costly issues.

Conclusion

Purchase to Pay can help improve internal financial control and management of indirect spend. However, it doesn’t provide the ability to manage On-Time Delivery nor does it provide real-time delivery visibility. P2P’s benefits are derived from the end-to-end integration of purchasing with accounts payable. Implementing both P2P and On-Time Delivery Visibility gives a company complete control of both their financial/accounting side as well as the operation side of their indirect supply chain.


About Lumatrak

Lumatrak provides a full range of real-time On-Time Delivery Control tools to help better manage supplier and delivery performance from order to the final mile of your indirect goods delivery. Provided in the cloud through its Software-as-a-Service (SaaS) offering and already connected to vast numbers of manufacturers and contractors, Lumatrak’s solution can be quickly implemented to complement and enhance any ERP, Strategic Sourcing and Procure-to-Pay systems.

To learn more about how a better GNFR-delivery management solution could save your company both time and money, contact the team at Lumatrak today.


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