The Procure to PayProcess Flow

And just like most procurement processes, even the procure-to-pay process has to follow a flow as well. Procurement managers can choose to complete as to which stage of the procure-to-pay process they want to finish. Procurement software tools are most helpful during this stage since these programs allow the procurement team to disseminate the important tasks to each member of the team while the automated software takes care of the rest.

For the most basic procure-to-pay process flow, the entire process flows like the following:

1. Identifying Needs

The first step of the procure-to-pay process is to check and define the business requirements with the help of cross-functional stakeholders. Once there is a valid need, procurement teams can then sketch out the specifications needed for the goods/products and terms of references for the service 

2. Creating Requisitions

Once the specifications are created, a formal purchase requisition is created. The requester submits the filled-out purchase requisition forms after making sure that all necessary administrative requirements are met. 

3. Purchase Requisition Approval

The submitted purchase requisitions are then reviewed by the procurement department heads for approval. These guys can either approve or reject the purchase requisition once the need is evaluated and the budget is also verified. Any incomplete requisition forms are bought back to their creator for re-editing.

4. Creating a spot-buy/PO

If the requested goods are items that have certain characteristics like unmanaged category buys, one-time unique purchases, or low-value commodities, then buying on the spot can be done. 

5. Purchase order approval

Purchase orders are now sent through an approval loop to ensure the legitimacy and accuracy of specifications. Approved purchase orders are then dispatched to vendors. After reviewing the purchase order vendors can either approve, reject, or start a negotiation. When an officer approves a purchase order, a legally binding contract is activated.

6. Goods receipt

Once the supplier delivers the promised goods/services, the buyer inspects the delivered products or services to ensure that it complies with the contract terms. The goods receipt is then approved or rejected based on the standards specified in the purchasing contract or purchase order.

7. Supplier performance

Based on the data obtained from the previous step, the supplier performance is evaluated. A number of factors like quality, on-time delivery, service, contract compliance, responsiveness, and Total Cost of Ownership (TCO). Non-performance is flagged in existing rosters and information systems for future reference.

8. Invoice approval

Once a goods receipt is approved, a three-way match between the purchase order, the vendor invoice, and the receipt of the goods is performed. If there are no discrepancies found, the invoice is approved and forwarded to the finance team for payment disbursement. 

9. Vendor payment

Upon receiving an approved invoice, the finance team will process payments according to the contract terms. Any contract changes or reviews of liquidated financial security will be taken into account. A payment made to a supplier will fall into one of the following five types: advance, partial, progress or installment, final, and holdback/retention payments.