Glossary
Procure-to-Pay (P2P)
Procure-to-Pay is the end-to-end process that covers everything from identifying a need to purchase goods or services through to paying the supplier. It spans procurement, receiving, invoice processing, and accounts payable.
What It Is
The procure-to-pay process connects two departments that often operate in silos: procurement and finance. Procurement identifies what the business needs and selects suppliers. Finance ensures invoices are accurate, approved, and paid on time. P2P is the series of steps that converts a business need into a completed supplier transaction.
P2P is also known as purchase-to-pay. It is not a single technology but a workflow that may involve procurement platforms, ERP systems, invoice automation tools, and payment infrastructure, often connected through integrations.
At the end of the P2P cycle, approved invoices can be turned into working capital instruments through early payment programmes, dynamic discounting, and reverse factoring.
The Full P2P Process
Step 1: Needs Identification
The business identifies a requirement: raw materials, services, equipment, or other goods. Budgets are confirmed and approval thresholds are checked before sourcing begins.
Step 2: Supplier Sourcing
Procurement teams identify qualified suppliers, issue Requests for Quotation (RFQs), evaluate responses, and select the best-fit vendor based on price, quality, lead time, and relationship.
Step 3: Purchase Requisition
An internal request is raised by the requesting department, approved by budget holders, and passed to procurement for PO creation.
Step 4: Purchase Order (PO) Creation
A formal Purchase Order is issued to the supplier, confirming item descriptions, quantities, prices, delivery dates, and payment terms. The PO is the contractual commitment.
Step 5: Goods Receipt
When the supplier delivers, the receiving team checks that goods or services match the PO. Any discrepancies are flagged immediately.
Step 6: Invoice Receipt and Processing
The supplier issues an invoice. The AP team receives it, extracts data (manually or via OCR automation), and initiates the matching process.
Step 7: Three-Way Match
The invoice is reconciled against the PO and the goods receipt. All three must align on quantity, price, and supplier details. Exceptions are routed for review.