Purchase-to-Pay: The Definitive Guide for 2025
Published on:27 November 2024
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How much time and effort are your current Purchase-to-Pay (P2P) processes draining from your team?
Managing procurement efficiently is crucial for smooth operations, yet the complexities of dealing with multiple vendors, processing countless invoices, and staying compliant can be overwhelming without the right systems.
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Manual workflows almost guarantee inefficiencies and bottlenecks.
For example, 63% of companies still use checks for at least 25% of payments, leading to higher costs and slower processing times.
The good news is that there is a solution.
Automating your Purchase-to-Pay (P2P) process can address these challenges, making operations streamlined, cost-effective, and scalable.
At Rillion, we specialize in helping businesses like yours automate P2P processes, giving you more control and insight into procurement activities. This article covers the key steps of the P2P process, the benefits of automation, and practical best practices to optimize your system.
What is the Purchase-to-Pay Process?
The Purchase-to-Pay (P2P) process is the complete cycle that begins when you identify the need for goods or services and ends when the supplier is paid.
If you’re running a mid-market company in industries like healthcare, manufacturing, or hospitality, having a streamlined P2P process is essential to managing procurement across multiple locations, sophisticated workflows, and a high volume of invoices.
By integrating procurement and accounts payable, your P2P process ensures seamless workflows, greater visibility, and stronger financial control.
Further reading: What’s the difference between Purchase-to-Pay and Procure-to-Pay?
Here’s a detailed breakdown of each step of the P2P process.
Identifying Needs
The process starts when someone in your company identifies a need for products or services.
This can range from office supplies and equipment to raw materials necessary for manufacturing. In larger companies, such as those with multiple locations or departments, identifying these needs can involve complex coordination.
A centralized P2P system helps you streamline this step by offering real-time visibility into inventory levels and past purchasing data, reducing redundant or unnecessary purchases.
Purchase Requisition
Once you identify the need, a formal purchase requisition is submitted.
This is an internal document sent to your procurement or finance team for approval. If your company is handling thousands of purchases annually, automating this step is crucial to prevent bottlenecks.
With P2P automation, the approval process can be customized to route requests to the appropriate decision-makers, speeding up procurement and ensuring compliance with your corporate budgets.
Supplier Sourcing
After approval, your procurement team begins sourcing suppliers.
For industries like healthcare, choosing the right supplier is critical as it impacts production schedules, quality standards, and costs.
Key factors to consider during this stage include supplier reliability, pricing, delivery times, and their ability to meet specific requirements like three-way matching.
P2P software integrates supplier performance data, allowing you to easily compare vendors based on past transactions, pricing agreements, and other key metrics.
Check out the article below for more healthcare-related content:
How Purchase-to-Pay Automation Improves Procurement in the Healthcare Industry
Purchase Order Creation
Once you’ve chosen a supplier, the next step is creating a purchase order (PO).
The PO serves as the official document sent to the supplier, detailing the products or services to be provided, quantities, and agreed-upon pricing.
In automated P2P systems, the PO generation is triggered automatically after supplier selection, reducing manual errors and ensuring that all purchasing terms align with your internal policies. The PO is then sent to the supplier for confirmation.
Receiving Goods/Services
Once the supplier delivers the goods or services, you need to verify that everything is correct. This includes checking that the products or services match the original order in terms of quantity and quality.
This is where three-way matching comes in—a critical feature of many P2P systems. Three-way matching automatically compares the purchase order, the goods receipt, and the supplier invoice to ensure there are no discrepancies.
This step is particularly important if you need tight quality control, like in manufacturing or healthcare, where mistakes in delivery could have significant operational impacts.
Invoice Approval
Once the goods or services have been verified, the invoice approval process begins.
You review the invoice from the supplier and match it against the purchase order and goods receipt to ensure everything aligns.
Manually, this step can be time-consuming, but with an automated P2P system, the approval workflow is much faster.
Automated systems flag discrepancies immediately, preventing delayed payments or disputes with suppliers.
In fact, 40% of AP teams report that their inability to validate invoices quickly often causes late payments, which can harm vendor relationships and lead to additional fees.
Automating invoice approvals ensures that discrepancies are flagged earlier, significantly reducing the chance of late payments and preserving key supplier relationships.
Payment
The final step in the P2P process is making the payment to the supplier.
Once the invoice is approved, payment is processed according to the agreed-upon terms. Using electronic payments instead of manual checks is especially beneficial—you can process payments faster, more securely, and reduce administrative costs.
Automated P2P systems often integrate directly with ERP systems, ensuring that payments are made on time and accurately recorded in your financial systems. This not only ensures smooth supplier relationships but also provides you with better control over cash flow.
Automation also helps you capture more early payment discounts. On average, AP departments with high automation capture 85% to 95% of the discounts available to them, compared to just 58% for those still using manual or semi-automated processes.
By making timely payments, you not only maintain strong supplier relationships but also add value directly to your bottom line through these savings.
AP Managers: Here’s how to integrate payment automation with your AP processes.
Why Automate Your Purchase-to-Pay Process?
Automation isn’t just about cutting down paperwork.
(Although, that IS important!)
If you’re in a mid-market segment, automating your P2P can lead to tangible, significant improvements:
1. Save Time
You probably spend countless hours manually entering data, creating purchase orders, chasing approvals, and processing invoices.
AP staff often get bogged down with routine, repetitive tasks like matching purchase orders to invoices and tracking down missing approvals.
By automating the P2P process, data entry, purchase order approvals, and invoice matching become seamless and instantaneous. With automated workflows, approvals move much faster, and matching errors are flagged automatically.
Slow manual validation often causes late payments, which impacts vendor relationships and incurs additional fees. Automating these tasks could free up your AP team’s time, allowing you to focus on higher-value tasks like identifying savings opportunities or building stronger supplier partnerships.
2. Reduce Costs
Manual processes are prone to errors.
Inaccurate data entry or missed payment deadlines can result in costly mistakes like overpayments or late fees.
In addition, paper-based systems lead to unnecessary expenditures on checks, printing, and mailing. There’s also a higher chance of missing out on early payment discounts, which can significantly impact your bottom line.
Automation dramatically reduces human errors, ensuring that all data is accurate and payments are made on time.
Switching to electronic payments through automation not only reduces costs but also helps businesses cut back on paper, printing, and mailing expenditures, thereby saving resources across the board.
Here’s one example:
According to industry benchmarks, the average cost of processing an invoice through ACH is $5, compared to $10 for checks. That’s a 50% cost-saving for every transaction you make.
Suggested article: 7 Types of Payment Automation
3. Increase Efficiency
Approvals get delayed due to manual bottlenecks.
Purchase requisitions may sit on someone’s desk for days or weeks, waiting for approval, which slows down the procurement process. Manually processing thousands of invoices each year takes longer and can strain supplier relationships.
Approvals happen in real-time as the system automatically routes requisitions and invoices to the right person based on pre-set workflows. Invoices and purchase orders are processed instantly, allowing you to reduce approval times and improve on-time payments.
This ensures smoother operations without the need to expand your team, even as invoice volumes grow.
With a fully automated P2P system, your AP staff can process significantly more invoices per year.
For example, a typical full-time employee can process around 10,853 invoices annually in a partly automated setup. With full automation, that number jumps to 23,333 invoices per year.
This efficiency gain highlights how automation can help you manage growing transaction volumes without increasing headcount.
4. Improve Visibility
Manual tracking of orders and payments often leads to a lack of transparency.
You may struggle to track the status of orders, invoices, and payments.
Without real-time data, it becomes difficult to identify bottlenecks, track spending, or forecast future needs. This lack of visibility can result in poor decision-making.
With automated P2P software, real-time dashboards and reporting provide complete visibility into every stage of the procurement cycle. For example, with Rillion, you can see where orders and payments are at any time, monitor supplier performance, and track spending against budgets.
5. Mitigate Risk
Manually managing supplier data and payments increases the risk of fraud and errors.
Without automated controls, incorrect payments may be made, or fraudulent transactions may slip through the cracks.
Additionally, maintaining outdated supplier information can lead to issues like duplicate payments or incorrect billing.
Automating your P2P process introduces built-in controls and compliance checks. Supplier data is automatically validated, ensuring that payments go to the right vendor, at the right time, for the correct amount.
Automation significantly reduces the risk of fraud by flagging unusual transactions, giving you confidence that your transactions are secure and compliant.
Manual invoicing processes have an average error rate of around 2%, which can be brought down to just 0.8% through automation.
This improvement means fewer financial errors, reduced need for corrections, and stronger financial control—all critical for maintaining trust with suppliers and regulatory compliance.
Best Practices for Optimizing Your P2P Process
To capitalize on the benefits of P2P automation, it’s important to follow a few best practices.
Centralize Vendor Management
Use a platform like Rillion Prime to consolidate vendor data in one place. This ensures all departments use accurate and up-to-date supplier information, reducing errors.
Automate Approvals
Set up automated workflows to handle approvals for purchase requisitions and invoices. This reduces bottlenecks and speeds up the procurement process.
Increase Transparency
Provide real-time access to procurement data through dashboards and reports. This ensures that all teams—from finance to procurement—can effectively track the P2P process.
Leverage Data for Decision-Making
Use the data gathered from your P2P system to optimize spending, identify inefficiencies, and improve supplier negotiations. Rillion’s analytics and reporting features provide insights for data-driven decisions.
Automate Compliance Checks
Automation tools help maintain compliance with regulations such as GDPR, HIPAA, or SOX by ensuring that necessary documentation is securely managed and easily accessible.
Conclusion
If you’re tired from managing high invoice volumes, numerous vendors, and complex procurement needs, it’s time to embrace automation.
Automating your P2P process can significantly reduce costs, improve efficiency, and give you better control over your finances. Take your AP department from a cost center to a profit center while gaining the transparency and control you need to drive growth and strengthen your business’s bottom line.
Automate your P2P Process 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, book a personalized demo. One of our experts will guide you through the platform and discuss solutions tailored to your needs.
AP Teams Also Ask
What are the challenges and risks involved in automating P2P, and how can they be mitigated?
Automating P2P poses several challenges, including ERP integration difficulties, change management resistance, and data migration issues. ERP integration might face compatibility issues, causing delays.
To mitigate this, choose a P2P solution that offers seamless integration capabilities.
Resistance to change can also be addressed through employee training and clear communication on the benefits of payment automation. Data migration risks like data loss or corruption can be minimized by working closely with the automation provider to ensure a secure and well-planned transition.
How does P2P automation integrate with existing ERP or accounting systems?
P2P automation integrates with existing ERP or accounting systems through APIs (Application Programming Interfaces) or native connectors.
This ensures that purchase requisitions, invoices, approvals, and payment information are seamlessly synchronized between the P2P platform and the ERP system. The biggest benefit of AP Automation and ERP integration is that it supports real-time data transfer, meaning updates made in one system are automatically reflected in the other.
This enables smoother workflows, eliminates duplicate data entry, and keeps financial information consistent and accurate across all platforms.
How can you ensure supplier adoption of a Purchase-to-Pay automation system?
Ensuring supplier adoption of a P2P automation system involves a combination of education, incentives, and support.
Educate suppliers on the benefits of using the system, such as faster payments and better visibility into payment status. Incentives, like prioritizing payments for suppliers who use the platform or offering discounts, can encourage adoption.
Additionally, providing easy onboarding, training resources, and continuous support helps make the transition smooth for suppliers. Implementing user-friendly self-service portals also eases adoption by reducing administrative hassle for suppliers.
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