Best P2P practices and their benefits
Standardization
Standardized operations ensure that things are delivered to customers as effectively as possible. This entails smoothing out the operations from beginning to end. Safety, consistency, and quality are all improved through standardization. It provides seamless integration and optimized processes to improve supply chain management efficiency.
Without it, organizations risk treating every contract negotiation as a unique event, losing consistency in the process. This leads to delays in the P2P cycle and loss of valuable time. P2P standardization generates a chain that “runs itself,” which allows logistics managers to focus on high-level strategy, development, problem-solving, and networking rather than day-to-day operations.
An organization’s standardization strategy might include purchasing from standardized catalogs with standardized prices, using standardized supplier contracts, and systemized approval workflow.
On-time payment
Paying invoices on time is a key indicator of a healthy purchase-to-pay cycle and is the hallmark of a streamlined P2P process. If there are frequent issues involving late or missed payments, this is something that needs to be addressed.
Late payments can increase the costs of an organization through imposed penalties and fines. Moreover, it also deteriorates the relationship with suppliers, which can lead organizations to lose their competitive edge. On-time payment ensures that the suppliers receive their payment without any delay or discrepancies and the P2P cycle continues smoothly.
Setting goals
In order to make the P2P cycle successful, organizations need to know and communicate what is meant by success. This might mean different things to each stakeholder; that is why it is transformed into procurement goals through collaboration. Goals are set by implementing KPIs that ensure the P2P cycle is on track and identifies existing problems.
There is no perfect amount of elements for your KPI collection, but they should be small enough that you can rapidly refer to them once a day, week, or month to get a complete picture.
With the help of different KPIs, organizations can measure important metrics such as cost per invoice, first-time match rate, payment on time, days to approve an invoice, spend under management, and so on.
Aim for end-to-end visibility and control
A good P2P cycle should be able to provide organizations with full control and end-to-end visibility in their P2P process. This is achieved by closely monitoring each step of the process, capturing all relevant data, and organizing it in a centralized data management space where it can be reviewed, analyzed, and mined for actionable insights.
Through greater visibility and control, organizations can improve their business processes, long-term financial planning, and strategic decision making. But this type of deeper visibility is not possible without the help of automation.