Procure to Pay Business Process
August 11, 2011 Leave a comment
ERP softwares/solutions provide effective solutions for Business Processes that enterprises uses. The major players in the ERP Arena are SAP and Oracle. Many large corporations implement some of the other form of the ERP Solution. Of the many processes that are implemented using ERP software packages – P2P or PTP or Procurement Business Process comes to my mind (there is others, OTC – Order to Cash, PP – Produce Product, LP – Lead People etc). Want to share in brief the steps in the Business Process as implemented by SAP or Oracle.
The steps in Procure to Pay (P2P) – cycle consists of following:
- Create Purchase Requisition
- Approve Purchase Requisition
- Create Purchase Order
- Approve Purchase Order
- Receive Goods/Services
- Receive Invoices
- Record/Approve Invoices (3 – way match with Invoice, PO and GR quantity/value match)
- Make Payments for the Invoices
The above are the standard process steps for the Procure to Pay cycle. there are paths for exceptions in steps as well (e.g. Invoice not matching with Goods Receipt or Purchase Order etc). This is a integrated business process scenario – with integration from Finance/Purchasing (MM).
The purchase requisition step (1 &2) – creates requests for Purchase – which could lead to creation of the Purchase Order and subsequent Approval (steps 3/4). No Accounting entries occur in the system so far. After supplier receives PO – and delivers the goods – the liability is created for the Good received (step 5). Supplier sends invoice and after match (checking) – it is entered into the system (creating accounting entry as well – step # 6/7). On due date – Payments are made to supplier (step # 8)
This is the entire P2P business process in brief. There are other things related to sourcing strategy functionalities that is provided with reporting etc to help the Management make effecient and informed decisions (beyond scope of this article). The figure below illustrates the P2P Business process as well.
Image: www.cps.edu (Click on the image to view larger image)
Implementation of this scenario as part of Supply Chain Optimization helps corporates make huge savings and reduce waste and reduces cycle time and improves supplier relationships.