In  accounts payable,  the purchase-to-pay (P2P) cycle is absolutely crucial for your small business!

“Have you ever found yourself struggling to keep track of all the different invoices and bills your company has to pay? Or perhaps you’ve had trouble coordinating the purchase of goods and services with different departments or vendors. If so, you’re not alone. The Accounts Payable (P2P cycle) provides the answers to these and other queries. The P2P cycle can be a complex and time-consuming process, but it doesn’t have to be.

Whether you are just starting out in business or are looking for ways to improve your financial management, we hope that this blog will provide valuable insights and guidance on the role of P2P in modern business for better efficiency and improved  cash flow forecast .  Start reading now.

What is the Procure-to-Pay Cycle?

The  accounts payable  cycle is the overall process of managing a company’s financial obligations to its suppliers, while procure-to-pay is a specific part of the accounts payable cycle that involves purchasing goods or services and paying for them. This process typically involves several steps, such as identifying a need for a particular good or service, issuing a purchase order to a supplier, receiving the goods or services, and then paying the supplier for those goods or services.

The goal of the procure-to-pay cycle is to ensure that the business can acquire the goods and services it needs in a timely and cost-effective manner, while also managing its financial obligations to its suppliers in a responsible and organized way. This can help to improve the overall efficiency and profitability of the business.

A fundamental procurement procedure called procure-to-pay (P2P) often referred to as purchase-to-pay (P2P), is made to find and pay for the services and/or raw materials that a company needs to generate complete linked items.

The Entire Procure-to-Pay Process

The procure-to-pay procedure is outlined in the next few steps. However, it is fairly unusual for businesses to further divide each of these stages into smaller ones.

Step 1: Determination or Requirements


Order placement is the first step in the procure-to-pay process. The procurement and sourcing teams receive internal requests from many areas of the company. This request for resources is referred to as a “requisition order.” Orders can be placed via an organization’s ERP system’s various features or the procure-to-pay site. A central P2P platform will make it easier to keep track of orders.

Step 2: Source Determination


Source determination refers to the process of identifying and selecting the most appropriate suppliers for the goods and services that a company needs. This process typically involves a number of steps, including evaluating potential suppliers based on criteria such as their ability to meet the company’s requirements, their prices, and their past performance.

Step 3: Vendor selection


Requisitions must first receive the Chief Procurement Officer’s approval before being processed and delivered to the vendor. These requisitions can then be presented to approved suppliers who have already been screened and investigated during the supplier step after approval.


To fulfill the requisitions, these suppliers will be contacted. Typically, they are already well familiar with the buyer’s procurement systems.

Step 4: PO processing


PO is involved in managing and tracking the purchase orders that a company issues to its suppliers. Once the purchase order has been sent to the supplier, it is typically entered into the company’s procurement or enterprise resource planning (ERP) system, where it can be tracked and managed throughout the P2P cycle.

As part of the purchase order processing, the company may also need to manage any changes or updates to the purchase order, such as changes in the quantity or delivery date of the goods or services being procured.

In addition, the company may need to reconcile the purchase order with the supplier’s invoices to ensure that the goods or services were provided as specified in the purchase order and that the correct prices were charged. it helps ensure that the company is able to obtain the goods and services it needs in a timely and efficient manner.

Step 5: Order Monitoring


Order monitoring is a process of tracking and managing the status of a company’s purchase orders throughout the P2P cycle. This typically involves using the company’s procurement or enterprise resource planning (ERP) system to monitor the status of each purchase order, including information such as the expected delivery date, the number of goods or services being procured, and the current status of the order (e.g., pending approval, in progress, or completed).

Step 6: Goods Receipt


After that, the vendor fulfills the PO. They provide the customer with the specified goods. Acknowledging the receipt of the items, inspecting them, and adding them to the inventory.

The order confirmation and the advanced shipment notice (ASN) are two documents that frequently go with the receipt of goods.

Step 7: Invoice Verification


Invoice verification is an important step in the P2P cycle, as it helps ensure that the company is only paying for the goods and services that it has actually received. By verifying the accuracy of the invoices, the company can avoid overpaying for goods or services, or paying for goods or services that were not delivered as agreed.

The invoice verification process typically involves a number of steps, such as checking the invoice for any errors or discrepancies, comparing the invoice to the purchase order and other relevant documentation, and reconciling any differences that may be identified. In some cases, the invoice verification process may also involve obtaining approval from the appropriate parties within the company, such as the finance department or the department that requested the goods or services.

It helps ensure that the company is able to accurately track and manage its spending on goods and services, and avoid any potential errors or overpayments.

Step 8: Payment


The final step of the procure-to-pay cycle involves paying the invoice. The accounting division of an organization typically approves this.

How to improve cash flow with the P2P cycle

There are several ways that a company can improve its cash flow through effective management of the procure-to-pay (P2P) cycle:



1.Reduce lead time:

By reducing the time it takes to complete the P2P cycle, a company can minimize the amount of capital tied up in unpaid invoices and bills. This can be achieved through streamlining processes such as vendor selection, purchase order creation, and invoice processing.

2.Negotiate better terms with suppliers:

By negotiating longer payment terms or bulk discounts with suppliers, a company can free up cash that would otherwise be tied up in paying invoices.

3.Implement an electronic invoicing system:

By switching to electronic invoicing, a company can reduce the time and effort required to process invoices, freeing up cash that would otherwise be tied up in manual processes.

4.Monitor and manage accounts payable:

By closely monitoring AP and taking steps to reduce the amount of time it takes to pay invoices, a company can improve its cash flow and avoid late payment penalties.

Why it’s crucial to use procure to pay

Control and visibility over a transaction’s whole lifespan are provided through procure to pay. Additionally, the process involves a variety of organizational areas, including purchasing, production, accounting, etc.

Effective management of the P2P cycle is essential for any business and can help a company to operate more smoothly and efficiently, while also building strong, mutually beneficial relationships with vendors.

Manually carrying out P2P cycle duties can result in inefficiencies such as delayed or duplicate payments, payments done without internal approval, inaccuracies in documentation, and more. The accounts payable (P2P) procedure is necessary to be streamlined and automated with the aid of best-outsourced accounting services. The top Procure-to-Pay software like Oracle NetSuite and QuickBooks are mainly used in outsourcing accounting services for small businesses.


The P2P cycle begins with the identification of a need for a particular good or service, and involves sourcing and selecting suppliers, placing an order, receiving the goods or services, processing the invoice, and paying the invoice. By streamlining and optimizing these processes, a company can reduce lead times, negotiate better terms with suppliers, and minimize the risk of errors or fraud.

You may easily concentrate on your main company operations and expand your business with the best strategies by using  IBN Tech’s  outsourcing bookkeeping services.  IBN Tech  has experience with this accounting program that can greatly simplify your life. Please get in touch with us right away if you want to outsource the procure-to-pay software or to talk with a professional about it.

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