11 Common Purchase-to-Pay Challenges (and How to Overcome Them)
Published on:2 December 2024
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Purchase-to-Pay (P2P) is key for smooth procurement, invoicing, and payment operations.
But many mid-market businesses like yours encounter persistent challenges that slow down efficiency.
Whether it’s dealing with data silos, bottlenecks in supplier onboarding, or managing compliance, these obstacles can negatively impact your bottom line if left unresolved.
In this article, you’ll learn about 11 common Purchase-to-Pay challenges and get practical solutions to overcome them, making your P2P process more efficient, cost-effective, and scalable.
Let’s get started.
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The Most Common Purchase-to-Pay Challenges
1. Invoice Matching Discrepancies
One of the most time-consuming parts of the P2P process is matching invoices with purchase orders and delivery receipts. Manual matching is prone to errors, leading to invoice discrepancies that delay payment cycles.
How to Overcome It
Implement payment automation to handle three-way matching, which instantly cross-references purchase orders, receipts, and invoices to flag discrepancies. This helps reduce delays and errors while preserving supplier relationships.
Automation also minimizes the invoice error rate, cutting it from an average of 2% in manual systems to as low as 0.8%.
2. Long Approval Workflows
Approval delays are a common bottleneck, especially when manual workflows require multiple levels of review. These delays often result in late payments, which strains supplier relationships.
How to Overcome It
Automate your approval workflows to eliminate manual handoffs. Set up customized routing rules that direct approvals to the correct person instantly, allowing real-time notifications to reduce waiting times.
3. Lack of Control Over Indirect Spend
Indirect spend can spiral out of control when employees purchase from unapproved vendors at non-negotiated prices. This lack of oversight often leads to inefficiencies, inconsistencies, and higher costs.
How to Overcome It
Implement a P2P system to centralize procurement and ensure purchases go through approved vendors at agreed prices. Enforce a pre-purchase approval workflow to prevent unauthorized spending and consolidate supplier relationships to reduce active vendors, achieve better cost control, and streamline indirect spending.
4. Manual Payment Bottlenecks
Relying on manual payment methods, especially paper checks, is still common for many businesses. In fact, 63% of companies still use checks for at least 25% of payments. This reliance not only leads to high processing costs but also delays payment cycles and impacts supplier relationships negatively.
How to Overcome It
Implement automated payment solutions that eliminate the need for paper checks. By adopting types of payment automation like ACH or virtual cards, you can significantly reduce costs and ensure faster payments. Automation also helps streamline payment reconciliation, enhancing cash flow management and improving supplier relationships by reducing delays.
Read more: The difference between Purchase-to-Pay and Source-to-Pay.
5. Lack of Spend Visibility
A lack of centralized data prevents teams from gaining a complete view of purchasing activities, making it hard to manage budgets, control spend, and negotiate better vendor contracts.
How to Overcome It
Implement P2P automation software that provides real-time dashboards for spend analysis. This way, you gain comprehensive visibility into purchase order status, invoice processing, and vendor performance. Enhanced visibility enables better spend management and more strategic decision-making.
For example, here’s what Rillion’s real-time invoicing dashboard shows:
6. Manual Errors in Data Entry
Manual data entry is slow, labor-intensive, and prone to errors. Even minor mistakes can lead to costly consequences like overpayments, duplicate payments, or missed deadlines.
How to Overcome It
Automate data entry using Optical Character Recognition (OCR) and intelligent document processing tools that capture invoice data electronically. Automation reduces the need for human intervention, which also reduces the error rate and saves on costs associated with reprocessing.
7. Approval Delays Leading to Missed Discounts
Often, delayed approval workflows mean that companies miss out on early payment discounts offered by suppliers, reducing potential savings.
How to Overcome It
Automating your P2P system helps expedite the entire process, ensuring timely invoice approvals. Set up automated reminders for early payment deadlines so your finance team can prioritize payments that maximize discounts. Companies with highly automated systems typically capture between 85% and 95% of available discounts, significantly boosting cost savings.
8. Compliance Challenges
Staying compliant with various regulations like GDPR, HIPAA, or SOX can be cumbersome when documentation is spread across departments or stored manually.
How to Overcome It
Automation tools can assist by ensuring that all necessary documents are securely managed and accessible for audit purposes. Built-in compliance checks within P2P software reduce the risk of human error and ensure that necessary documentation is kept up-to-date.
Further reading: How Purchase-to-Pay Automation Improves Procurement in the Healthcare Industry
9. Supplier Relationship Strain
Manual processes often lead to late payments, inconsistencies, and a lack of transparency, which negatively impacts supplier relationships. Discontent suppliers may be less motivated to offer favorable pricing or payment terms.
How to Overcome It
Automate payment processing and leverage real-time supplier portals that allow suppliers to check payment statuses themselves. Reducing delays and providing transparency helps in building trust and maintaining strong supplier relationships.
10. Data Silos Across Departments
Data silos occur when information is stored in different systems across departments, leading to fragmented insights and miscommunication.
How to Overcome It
This one’s easy.
Integrate P2P systems with your existing ERP or accounting systems to ensure a seamless flow of data. Real-time integration helps prevent duplicate entries, ensures data accuracy, and supports cross-departmental collaboration.
11. Difficulty in Scaling Processes
Scaling manual P2P processes to accommodate business growth becomes challenging without automation, leading to inefficiencies and increased workloads for the AP team.
How to Overcome It
Invest in a scalable P2P automation solution. Automated processes can handle growing transaction volumes without the need to increase headcount, allowing your business to scale effectively while keeping costs manageable.
For example, a typical full-time AP employee can process around 10,800 invoices annually in a partly automated setup.
With full automation, that number jumps to 23,300 invoices per year.
Case Study: A Success Story of P2P Automation
Renta, a Finnish equipment rental company, faced challenges in managing their growing volume of invoices across multiple branches.
The manual processing of nearly 160,000 invoices annually led to inefficiencies and required significant labor.
To address these issues, Renta implemented Rillion’s automated AP solution, which integrated smoothly with their existing ERP. This change significantly reduced manual work, improved efficiency, and allowed for better oversight of invoice approvals.
“During such rapid growth of our business, we have had several ongoing projects at the same time.
Therefore it’s been crucially important that in addition to invoice processing, we are also able to implement purchases through Rillion’s system”
Conclusion
By identifying and addressing common challenges—like invoice matching discrepancies, long approval workflows, and lack of spend visibility – you can enhance your P2P process into a streamlined, strategic part of your business operations.
Automation is not just about replacing paperwork; it’s about making your entire procurement workflow more intelligent, scalable, and capable of driving long-term success.
Ready to optimize your P2P process?
Overcome Purchase-to-Pay Challenges with Rillion
Rillion is an accounts payable (AP) automation platform and we help businesses streamline invoice management, automate approval workflows, and optimize payment processes.
To explore how Rillion can benefit your organization, you can book a demo, where one of our experts will guide you through the platform and discuss solutions tailored to your needs.
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