In simple terms, the “Procure to Pay Systems” describes how a Medius acquires the raw goods and services it requires to operate. Most companies start designing their processes long before they start conducting individual transactions. Do you work in procurement and want to get the most out of your Medius purchasing and payments in order to maximize your return on investment (ROI)? If that’s the case, you’ll need a well-developed Procure-to-Pay (P2P) process
The method by which a Medius purchases the goods and services it requires operating. This procedure is critical to Medius’s financial health and overall competitive power, especially for companies looking to increase value while lowering expenses. Determining the P2P process is critical for businesses of all sizes, and it begins long before transactions are made.
A simplified process for controlling buying, net cash, creating supplier relations, and maximizing buying voltage is needed by any business, producer, or service provider. The establishment of a good procurement plan, supported by a Procure-to-Pay software system, is one of the most practical and powerful ways to optimize the P2P process (and produce a stronger bottom line).
The Purchasing Strategy
Every Medius should have a procurement plan in place before making any purchases, as well as strong assistance from accounts payable to ensure fast, cost-effective payments for the goods and services purchased. The plan should include a full description of the goods and services required, as well as pricing information. A specific budget, timetable, and preferred conditions are provided to each department, as well as each category of goods and services. To save money on storage and upkeep, commodities should arrive when they are needed, not before.
The procurement strategy spells out the steps for acquiring goods and services, as well as contingencies that will assist avoid delays, production shutdowns, and unnecessary waste. When a construction Medius is building a house, for example, a fresh order of wood screws can be automatically triggered when the supply falls below a certain level.
Buyers will need to submit a requisition order for approval for other items. The procurement strategy provides workflows to avoid delays, waste, and inefficiencies by defining the purchase order approval process for each type of requisition. When a requisition is filed, for example, an automated procurement solution like PLANERGY can send automatic notifications to approvers, and the document can be automatically routed to the next approver (or alerts issued to others) if the request is delayed for any reason.
In addition, the procurement plan is utilized to create a list of standard and recommended providers. Suppliers with the best price, quality and consistent service are recognized as preferred, while those with less outstanding performance histories are designated as second-tier or backup vendors. Procurement professionals protect their companies against delays and calamities by laying out a supply chain that includes contingencies and details the best possible vendor for each category.
Choice of Vendors
It’s possible that the vendor selection process will need to be used for new orders. The purchaser issues a quotation (RFP) stating the criteria, based on a limited list of bidders.
Suppliers submit a bid for the task, which includes information such as timeframe, pricing, and product specs.
Functions and Responsibilities of the Procurement Process
The supply chain concerns, as well as the effort to sustain delivery, are minimized with a procurement plan in place. Terms have already been agreed upon with vendors, a master price list has been created, and protocols have been established. However, before delving into the specifics of the P2P process, it’s critical to gain a better understanding of how procurement collaborates with its accounts payable partner to plan and execute all aspects of the procure-to-pay process.
The flow of the Procure-to-Pay Process
While the procure-to-pay process has its origins in procurement, it is also a crucial aspect of the accounts payable process.
Order for Requisition has been placed.
A formal request for goods or services is a requisition order. Most requisitions are defined and put into the procurement strategy when every item can be defined in advance. Even the most meticulously laid-out plans may require more supplies owing to spoilage, unforeseen events, client scope creep, or new ideas for improving the original design. Budgets for procurement plans that are well-crafted include a cushion for such eventualities and requisition orders can be submitted later in the process if necessary.