What is procure to pay, and how does it work?

Procure-to-pay, commonly abbreviated as P2P, refers to the integrated process an organization uses to purchase goods or services and pay suppliers. It encompasses every step from vendor selection through to the final payment. This end-to-end workflow begins with identifying a need and ends with settling the supplier's invoice.

You'll also hear the term purchase-to-pay used interchangeably with procure-to-pay. Both mean the same thing. Some people casually call it “req-to-cheque,” and you might encounter the term eProcurement when discussing digital versions of this process. They're all talking about the same fundamental workflow.

P2P forms part of the broader procurement management process. It specifically integrates procurement activities like ordering and receiving goods with accounts payable activities like invoice approval and payment. The goal is straightforward. Organizations want to streamline and automate these linked steps to work more efficiently and spend less time on administrative tasks.

The procure-to-pay cycle comprises a sequence of standard steps that an organization follows to requisition, order, receive, and pay for goods or services. While specifics vary by company, the fundamental workflow remains consistent across most organizations. Each step flows into the next as part of one integrated process.

Need identification and requisition

A department or manager identifies a need for a product or service. They make the ask by creating a purchase requisition and submitting it for approval. This ensures the request aligns with budgets and policies before moving forward. Without this first step, companies risk uncontrolled spending and budget overruns.

Supplier selection

The procurement team evaluates and selects an appropriate vendor. This might involve choosing from an approved supplier list or obtaining quotes to find the best value. Smart supplier selection drives cost savings and ensures quality standards are met.

Purchase order issuance

Once the requisition is approved and a vendor chosen, a purchase order (PO) is generated. The PO details the item, quantity, price, and terms. It's sent to the supplier as a formal order and creates a legal commitment between buyer and seller.

Receiving goods or services

The ordered goods or services arrive at the organization. The receiving team confirms the delivery matches the PO in terms of quantity and quality. They create a goods receipt record that becomes important for the next steps.

Invoice processing and matching

When the supplier's invoice arrives, accounts payable verifies it by matching it against the PO and the receipt in what's called a “two-way match.” This ensures consistency across all documents. Any discrepancies are flagged and resolved before approval.

Payment authorization and execution

After approving a correct invoice, payment is scheduled and issued to the supplier per agreed terms. This step updates the accounts payable records and concludes the transaction. Following these steps diligently helps organizations avoid common errors like duplicate orders or late payments.

Implementing a robust P2P process isn't just adding more administrative work. It has direct impacts on a company's financial health and operational performance. The right P2P approach leads to measurable improvements in cost control, compliance, and productivity.

Efficiency and speed

Automation in P2P eliminates manual paperwork and reduces processing times. Orders are placed and received faster, and invoices are processed with fewer delays. This streamlining means your teams spend less time on routine tasks and more time on strategic work.

Cost savings

P2P processes enforce purchasing policies, such as buying from preferred suppliers at negotiated rates. This prevents maverick spending and leverages volume discounts. Organizations typically see significant cost reductions within the first year of implementing structured P2P processes.

Improved financial control and visibility

P2P processes give finance teams real-time visibility into spending. Every transaction is tracked and categorized. This transparency helps managers make data-driven decisions and stay within budget constraints.

Error reduction

Features like two way matching and electronic approvals drastically reduce errors. You'll see fewer duplicate payments and billing mistakes. Fewer errors mean less rework, fewer audit issues, and more trust in your financial data.

Compliance and audit readiness

A standardized P2P process enforces compliance with internal procurement policies and external regulations. It creates an audit trail for each purchase. When audit season arrives, you have all the documentation ready and organized.

Supplier relationship management

When the P2P cycle runs smoothly, suppliers get paid on time and discrepancies are minimized. Vendors trust they'll be paid correctly and promptly. This reliability improves goodwill and often leads to better service or preferential terms.

A strong P2P process helps organizations save money, avoid risks, and build more strategic supplier partnerships. It keeps procurement activities aligned with company goals while reducing administrative burden.

Despite its clear structure, the P2P process can face obstacles if not managed well. Many organizations encounter similar pitfalls that undermine P2P efficiency and control. Understanding these challenges helps you prevent them before they become costly problems.

Manual processes and fragmentation

Over-reliance on manual workflows like paper invoices and spreadsheets leads to errors and delays. Different departments often use different tools or processes. This lack of standardization creates bottlenecks and inconsistent data that make reporting nearly impossible.

Policy non-compliance

Employees sometimes bypass procurement rules. They might choose unapproved suppliers or rush purchases without proper approvals. These maverick spending instances violate internal controls and can result in higher costs or even fraud. Enforcing compliance at each step remains a constant challenge.

Lack of visibility

In complex organizations, the end-to-end P2P cycle can become opaque. Siloed processes make it hard to track where an order or invoice stands. Limited visibility means management might not catch issues until they become costly problems.

Invoice and data errors

Missing or incorrect data causes invoice mismatches and payment errors. A miskeyed figure or lost paperwork can delay an entire payment cycle. These errors slow the process and strain supplier relations when payments are delayed.

Fraud risks

If not properly secured, the P2P cycle is vulnerable to vendor fraud schemes. Scammers might impersonate suppliers and submit fake bank details to divert payments. Without proper controls, such as verification of supplier information and dual approvals, companies risk paying the wrong party.

Payment delays

Inefficient approval workflows lead to late payments, incurring fees and souring vendor relationships. Delays often stem from too many approval layers or poor communication between procurement and finance. Late payments damage your reputation and negotiating power with suppliers.

These issues erode the benefits of P2P, increase costs, and introduce unnecessary risks. They also reduce trust in the process and make it harder to achieve procurement goals.

Procurement experts recommend several proven practices to streamline the procure-to-pay cycle and mitigate common issues. Organizations that adopt these strategies typically see immediate improvements in their P2P outcomes.

Embrace automation and integration

Implement a dedicated P2P software or platform to automate repetitive tasks like invoice matching and approval workflows. Automation reduces human error, speeds up cycle times, and provides a centralized database for all P2P data. Ensure the P2P system integrates with your ERP and financial software for end-to-end visibility.

Standardize processes and policies

Develop a clear, standardized P2P policy that includes requisition approval hierarchy, preferred supplier lists, and spending limits. Enforce it across all departments. Standardization eliminates confusion and closes the loopholes that lead to maverick spending. Regular training and communication help ensure everyone follows the procedures.

Strengthen supplier relationships

Treat suppliers as partners. Maintain an approved supplier database and conduct periodic performance reviews. Open communication channels mean issues like delivery problems or invoice discrepancies get resolved collaboratively. Strong relationships lead to better terms and priority service from vendors.

Use two-way matching

Make it standard practice to match purchase orders and invoices before payment. This control mechanism catches inconsistencies and prevents overpayment or fraud. You only pay for what was actually ordered according to the agreed terms.

Monitor and analyze P2P metrics

Leverage reporting tools to track key metrics like average cycle time per purchase, number of invoice exceptions, and spend by supplier. Data analysis identifies bottlenecks and unusual spending patterns. If a particular approval step consistently causes delays, it needs process re-engineering. Continuous monitoring supports continuous improvement.

Cross-functional collaboration

Encourage regular communication between procurement, accounts payable, and other stakeholders. A collaborative culture ensures issues get identified early and resolved jointly. Procurement can help AP by providing timely goods-receipt confirmations. Finance can advise procurement on budget constraints. Both sides work in sync.

Companies that implement these practices achieve a more transparent and control-oriented P2P process. This means fewer delays, fewer surprises, and a higher likelihood of fully realizing negotiated savings and budgets.

The P2P process continues to change as new technologies and business priorities emerge. Procurement managers should be aware of the following key trends shaping the future of procure-to-pay.

Advanced automation with AI

The next generation of P2P solutions leverages artificial intelligence and machine learning to further automate key processes. AI can predict purchasing needs or flag unusual invoices for fraud. This makes the P2P cycle faster and smarter while reducing the manual oversight required.

Blockchain for transparency

Blockchain technology enhances security and transparency in the supply chain. In P2P, blockchain could create tamper-proof records of transactions and enable smart contracts that automate payments once conditions are met. This reduces fraud and increases trust between parties.

Cloud platforms and mobility

Cloud-based procurement software allows real-time access to P2P systems from anywhere. Mobile-friendly P2P apps mean approvals and orders can happen on the go, speeding up the process and improving user adoption. Expect to see more mobile and cloud integration for P2P workflows.

Data analytics and intelligence

Companies use advanced analytics to glean insights from P2P data. By analyzing spending patterns and supplier performance, organizations identify new savings opportunities and make more strategic sourcing decisions. Analytics also help in risk management by spotting anomalies or compliance issues early.

Sustainability and ethical procurement

There's rising emphasis on aligning P2P processes with sustainability goals and ESG criteria. Future P2P practices may involve vetting suppliers for sustainability, tracking the carbon footprint of purchases, or ensuring ethical sourcing as part of standard procurement criteria.

Enhanced supplier collaboration

Tools for Supplier Relationship Management (SRM) are becoming more sophisticated. This trend focuses on deeper collaboration through shared forecasts, coordinated inventory management, and innovation with key suppliers. All integrated through the P2P platform. Such collaboration leads to more resilient supply chains and mutual long-term benefits.

Keeping abreast of these trends helps procurement managers future-proof their P2P process. By adapting to new technologies and practices, companies ensure their procure-to-pay process remains efficient and competitive in the changing business environment.

When optimized, procure-to-pay can strengthen your company's financial performance and supplier network. From the moment a need is identified to the final invoice payment, each step in P2P plays a vital role in controlling costs and ensuring operational continuity.

We've covered how P2P encompasses all steps from procurement through payment. Doing it well yields efficiency and savings, but common pitfalls must be actively managed. The process works best when organizations combine automation with strong policies and supplier relationships.

Organizations that invest in refining their procure-to-pay process position themselves for smoother operations and stronger financial oversight in the long run. This means adopting automation, implementing best practices, and staying attuned to new trends. Improving P2P is an ongoing effort with high rewards. The companies that get it right spend less time on administration and more time on strategic initiatives that drive growth.

Brex makes P2P simpler by combining purchase cards with spend management software, automated bill pay, and AP automation software. Our platform gives you real-time visibility into spending while automatically enforcing your procurement policies. Purchase cards integrate directly with your approval workflows, creating instant audit trails for every transaction. Bill pay automation handles invoice processing and payments without manual intervention. The result is a P2P process that practically runs itself.

Sean Soper, Head of Accounting and Financial Operations at Alchemy, a web3 developer platform, says modern spend management is “procure-to-pay 2.0” because it brings a unified approach

“We were managing transactions with disparate systems, using a variety of different tools servicing different needs,” Sean said.” We had Bill.com for invoicing and our bank-issued corporate cards through Bank of America, and we used our payroll provider for reimbursements. So, all three various systems, none of which talked to each other. And while one system actually was connected to the HRIS because it was processing payroll — it had that hierarchy built in — the other two did not, so we didn't have corporate cards that could be governed by an issuance-and-approval workflow. So, having a unified approach to all of this with Brex is helping to bring that together, and it's really streamlined the process.”

Sign up for a Brex card today and see how much time your team gets back when procurement just works.