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Finance and Accounting
Procure-to-pay (P2P) is undoubtedly one of the most critical processes for modern organisations as it allows them to procure the necessary goods and services to support their operations. An effectively managed P2P process can not only help save costs but also improve efficiency for an overall better performance.
However, businesses today have to navigate a plethora of risks in procurement – from errors in invoicing and payments to the financial stability of suppliers – to ensure effective P2P cycle management. Although many of these risks are rooted in a lack of data and transparency, inefficient communication, and redundant manual tasks, leveraging automation tools can facilitate effective procurement risk assessment and management.
Key risks in the procurement process
Comprising five stages – namely requisition, purchasing, receiving, invoice, and payment processing – the P2P process relies on effective contract management and supplier collaboration. However, various risk factors at different stages can disrupt the P2P cycle.
Some of the key risks in the procurement process you must be aware of include:
Duplicate suppliers
A duplicate record of a supplier – their name, address, or bank account – can increase the risk of duplicate payments, especially if you are dealing with high transactional volumes or operational complexities. This can lead to significant financial losses and difficulty recovering the lost payment.
Incomplete or inaccurate supplier information
Incomplete, inaccurate, or invalid supplier information is one of the biggest risks in today’s data-driven world, as it can disrupt communication, resulting in a loss of revenue for you.
Errors creating POs
Errors like creating PO after transaction or splitting large orders across multiple POs can indicate a lack of effective P2P process workflow, resulting in challenges predicting liabilities, forecasting expenses, detecting fraud, or preventing non-compliant purchases.
Using non-preferred vendors
Lack of clear guidelines or communication can result in using non-preferred vendors, requiring you to pay a much higher cost than the negotiated rate – thus resulting in a loss for the business.
Invoice processing and three-way match
A three-way matching protocol – verifying a match between the PO, goods received, and invoice – before approving payment is crucial. Many ERP systems have set tolerance limits to three-way match to process payments automatically and avoid slowdowns. However, a change in these tolerance limits – by error or purpose – can mean payment processing even at undesirable costs. Without an effective governance system monitoring these tolerance levels, the payment processing stage of the P2P cycle can experience significant disruptions.
Duplicate payments
Duplicate payments could be the result of many issues, from typographical errors or duplicate supplier information to attempts of fraud. Such errors can cause cash leakage, costing your business millions annually.
Harnessing automation to manage risks in procurement
Many of the above risks in procurement are rooted in errors and inefficiencies. Fortunately, you can minimise or eliminate most – if not all – of these risks with the strategic use of automation tools to improve control and visibility into the P2P cycle.
Here are some examples of how automation tools can help safeguard the P2P process in accounts payable:
Structured and standardised workflows
Automation tools make it easier to visualise, organise, and standardise P2P workflows to ensure structure and consistency in the procurement process. This facilitates greater control and visibility across the P2P cycle for effective procurement risk assessment and management.
Streamlined data and seamless communication
Data flowing through different systems and silos can interrupt communication, create blind spots and lead to process fragmentation. Automation tools can help integrate different process components for a seamless P2P ecosystem that is consistent, reliable, and error-proof.
Automated error-prone and resource-intensive tasks
Error-prone repetitive manual tasks are the biggest source of procurement risks. Leveraging automation tools to eliminate such resource-intensive tasks can ensure there are no bottlenecks, process frictions, or errors in the P2P process.
An added layer of visibility
Process blind spots and lack of accountability are the biggest sources of risk in the P2P process. Automation tools can help remove these blind spots by adding a layer of visibility to the process, making it easier to access the necessary data, and enforcing role-based permissions to ensure accountability through audit logs.
Smarter strategic decisions
AI-enabled process automation can help you draw valuable insights from months or even years of purchase data to make smarter strategic decisions to optimise your P2P cycle and eliminate any potential risks.
How can Infosys BPM help?
The P2P process in accounts payable is one of the most crucial processes that support the operational efficiency of modern businesses. Leveraging the capabilities of artificial intelligence, machine learning, and robotics process automation can be a great way to transform your P2P cycle and integrate digital accounts payable processes in your AP workflow. Infosys BPM can not only help you leverage the best-in-class technology solutions but also reduce the cost of invoice processing, improve operational efficiency, reduce (or eliminate) manual errors, and provide an overall better P2P outsourcing experience.
