Purchase to pay overview

What is purchase-to-pay?

Purchase-to-pay is the entire process from purchase request to payment. It includes:

submitting and approving purchase requests;
ordering goods or services;
matching orders, receipts, and invoices;
approval processes;
invoice processing;
and finally, preparing them for payment.

It sounds straightforward, but as soon as multiple departments, systems, and people are involved, it quickly becomes complex—especially when expense reports, contracts, and exceptions come into play.

It’s therefore not surprising that many organizations struggle to optimize and automate this process. In addition to the Procurement and Finance departments, every employee who submits expense reports, makes purchase requests, or approves invoices is involved in the purchase-to-pay process.

This often results in a confusing and time-consuming process, in which every human action is prone to error.

Why Things So Often Go Wrong in Practice

You may recognize these scenarios:

An invoice arrives, but no one knows who placed the order.
The order was placed without approval, but the supplier still wants to be paid.
Finance doesn’t find out about an expense until the invoice arrives.

The result? Wasted time, frustration, the risk of errors, and an audit that feels more like a scavenger hunt than an actual review.

The Power of P2P Automation: From Insight to Impact

By automating the purchase-to-pay process, control is shifted to an earlier stage. Authorization takes place before the order is placed, not just when the invoice arrives.

With a purchase-to-pay solution, all purchase requests follow a structured path through the system. A purchase-to-pay solution increases the efficiency and accuracy of the purchasing and payment process. It minimizes manual tasks, improves control over expenses, and reduces the risk of errors.

And if the invoice matches exactly what was ordered and delivered, why would you even need to look at it?

Which subprocesses fall under purchase-to-pay?

Purchase-to-pay consists of a series of different processes:

Invoice processing
Expense report processing
Contract management
Procurement management
E-invoicing

Although invoice processing is almost always mentioned first when discussing the purchase-to-pay process, it is actually the final step in a series of subprocesses. After all, each of these subprocesses ultimately results in an invoice.

An Overview of the Purchase-to-Pay Process

If you’ve automated purchase-to-pay, the process looks like this:

Expense reports are processed as invoices and thus enter the processing workflow at that point. A major advantage of this is that the expenses incurred are visible to Finance from that moment on. Often, Finance doesn’t become aware of the expenses incurred until the manager or budget holder has approved the expense report and forwarded it to Finance for payment.

Learn more about the transformation from digital invoice processing to an automated purchase-to-pay process

Benefits of a seamless purchase-to-pay process

A seamless purchase-to-pay process ensures that Finance has much greater and much earlier insight into financial obligations.

This includes both committed obligations made via a purchase request and fixed costs that can be easily traced back to a contract. It also provides much earlier insight into costs advanced by employees.

And with insight into upcoming costs, Finance can make much more accurate forecasts, respond to current developments, and provide management with well-founded advice.

Moreover, a well-designed and flexible process is also a compliant process—one that makes it easier to meet requirements and demonstrate compliance. Every step is logged; you can see exactly the path a purchase request or invoice has taken and who approved it.

And if an audit is conducted by accountants or other agencies? Then your finance department won’t have to lift a finger, because you no longer need to dig through the paper archives to match the purchase order to the invoice. It’s a breeze!

A well-designed P2P process delivers more than just peace of mind:

Lower operational costs due to reduced manual processing.
More frequent use of payment discounts thanks to faster processing and payment.
Fraud prevention through automatic checks on invoice data.
Audit-proof processes thanks to logging and traceability.

Why should you automate purchase-to-pay?

Do you find that you have little or no control over expenses?
Does your finance department frequently receive calls from suppliers asking about the status of invoice payments?
Is your finance department overwhelmed with manual tasks, leaving little time to apply their knowledge and expertise to help the organization move forward?

Automating the purchase-to-pay process provides insight into expenses and liabilities, and you always have visibility into the status of invoices. Automating purchase-to-pay also reduces manual effort, minimizes errors, and speeds up the process from purchase to payment.

Real-World Example

Organizations we visit to discuss their purchase-to-pay process often cite the following problem:

“What we often run into is that unauthorized orders are placed. Then we receive an invoice for an order that really shouldn’t have been placed in the first place. But once we’ve received that invoice, there’s obviously no way to reverse it.”

By automating the entire purchase-to-pay process—not just invoice processing, but also the steps leading up to it—you can prevent these problems and avoid unpleasant surprises.

"Since we’ve now automated the entire procurement process, we’ve moved the authorization step forward. This minimizes the risk of incorrect orders and unauthorized expenditures. Bringing the authorization process forward and matching purchase orders with invoices ensures that, once the invoice has been received, no further authorization is needed. This makes the process fast and smooth!”

If the invoice matches exactly what was ordered (after approval), no one needs to review the invoice anymore.

Read the full case study on Orange Cyberdefense

Purchase-to-pay software

Purchase-to-pay software automates the entire process—from pre-approving purchase requests, processing invoices, matching purchase orders to invoices, and, if necessary, matching invoices to contracts, all the way through to verifying, approving, and preparing invoices for payment.

When you automate the entire purchase-to-pay process, expense authorization occurs earlier. This minimizes the risk of erroneous orders and unauthorized expenses.

You’ll move from “just placing an order” to strategic expense management.

Which purchase-to-pay subprocesses can you automate?

The way orders are placed
How contracts are managed
The way expense reports are submitted and processed
How invoices are received
Invoice processing

What requirements must a purchase-to-pay solution meet?

If you’re considering implementing a (new) purchase-to-pay solution, there are a number of general requirements and basic functionalities that the solution must meet.

Of course, there’s no such thing as a one-size-fits-all solution, so please view these requirements and functionalities primarily as a starting point for defining your own needs and requirements.

General requirements for a purchase-to-pay solution

User-friendliness
Workflow flexibility
Integration capabilities with external systems
Automatic creation of an audit trail
Separation of duties
Digital archiving

Key core functionalities in purchase-to-pay software

Creating and submitting a purchase request
Routing and authorizing a purchase request
Automatic ordering
Creating a financial obligation
Invoice receipt
Invoice receipt and recognition
Order matching
Internal communication
Payment Authorization
Contract Management
Budget monitoring

In conclusion: optimize first, then automate

Automation is not a silver bullet. If you automate a messy process, you’ll end up with automated mess. So start by streamlining your processes. Only then will automation truly shine.

Learn more about where to optimize in the purchase-to-pay process in the white paper “Flow in Finance: The Next Step in Your P2P Process”

Purchase to Pay