Purchase-to-Pay (P2P): From Demand to the Paid Invoice
The operational procurement process in seven steps
Purchase-to-pay, or P2P for short, is the operational procurement process from the demand through purchase order and goods receipt to payment of the supplier invoice. Procure-to-pay refers to the same process.
- Demand and purchase requisition
- Approval and purchase order
- Goods receipt and invoice verification
- Payment
What Is Purchase-to-Pay?
Purchase-to-pay (P2P) is a company's operational procurement process: from the demand through purchase requisition, approval, purchase order and goods receipt to verification and payment of the supplier invoice. The term describes a process that involves business departments, purchasing and accounts payable, not a specific piece of software. Procure-to-pay refers to the same process.
- DemandOvenca
- Purchase requisitionOvenca
- ApprovalOvenca
- Purchase orderERP
- Goods receiptERP
- Invoice verificationERP
- PaymentERP
Handover of the approved requisition or purchase order to the ERP via OCI, cXML or API
Purchase-to-Pay and Procure-to-Pay: Two Names for One Process
Purchase-to-pay and procure-to-pay are used interchangeably, and both are abbreviated P2P. Purchase-to-pay is common in German-speaking countries, while procure-to-pay prevails in English. There is no difference in substance: both terms mean the path from demand to payment.
Occasionally you will also see requisition-to-pay (R2P). The term corresponds to P2P and emphasizes the purchase requisition as the starting point.
The Purchase-to-Pay Process in Seven Steps
The number of steps is counted differently depending on the source, but the sequence is the same everywhere.
Demand
A department needs a product or service. The requester searches the catalog or describes the demand in free text if there is no matching item.
Purchase requisition
The demand becomes a purchase requisition with quantity, date, delivery location and account assignment. It is an internal document and does not yet commit the company to the supplier.
Approval
The requisition is routed to the responsible approvers by value, cost center or material group. The approval matrix defines who may approve up to which amount.
Purchase order
The approved requisition is converted into a purchase order and sent to the supplier. Only the purchase order is the binding order.
Goods receipt
The delivery is accepted and posted with reference to the purchase order. For services, service entry takes its place.
Invoice verification
The supplier invoice is matched against purchase order and goods receipt. If quantity and price agree, it can be released for payment without queries.
Payment
Accounts payable pays according to the agreed payment terms and posts the transaction. This completes the process.
Purchase-to-Pay, Source-to-Pay and Order-to-Cash Compared
Source-to-pay is the broader term: it includes strategic purchasing, which takes place before the first demand arises. Order-to-cash, by contrast, describes the sales side. What is purchase-to-pay for the buying company is order-to-cash for the supplier.
| Criterion | Purchase-to-pay (P2P) | Source-to-pay (S2P) | Order-to-cash (O2C) |
|---|---|---|---|
| Perspective | Buying company | Buying company | Selling company |
| Starts with | Demand and purchase requisition | Demand analysis and supplier search | Customer order |
| Ends with | Paid supplier invoice | Paid supplier invoice | Incoming payment from the customer |
| Scope | Operational purchasing and invoice handling | Strategic and operational purchasing | Order processing, delivery, billing |
| Parties involved | Requesters, operational purchasing, accounts payable | Additionally strategic purchasing | Sales, logistics, accounts receivable |
Typical Weak Points in the P2P Process
Most disruptions arise at the beginning of the process and only become visible at the end, when the invoice does not match the purchase order.
- Free-text orders: without a catalog item, price, supplier and material group are missing. Purchasing has to ask, and the order is hard to analyze later.
- Maverick buying: departments order directly from the supplier, bypassing the process. Negotiated terms and approvals are circumvented.
- Invoices without an order reference: if the purchase order number is missing, the invoice cannot be matched automatically and has to be assigned and checked manually.
- Manual re-entry: demand reported by email or spreadsheet is entered a second time in the ERP. This costs time and leads to transfer errors.
- Stalled approvals: without a substitution rule, the requisition waits until someone chases it.
Which Systems Carry the P2P Process
In most companies the ERP holds the documents of the process: purchase order, goods receipt, invoice and payment. The steps before that, namely search, cart, purchase requisition and approval, often run in an upstream procurement platform, because this is where many occasional requesters, many suppliers and many catalogs come together.
In indirect procurement in particular, with many small orders of the same kind, this upstream part determines how many transactions run through without rework.
Related Terms and Matching Ovenca Modules
- Source-to-pay
The detailed guide: P2P plus sourcing, contract and supplier management.
- Purchase requisition
The document with which the P2P process formally begins.
- Approval matrix
Who may approve a requisition up to which value.
- Free-text order
Ordering without a catalog item and the consequences for the process.
- Maverick buying
Purchasing that bypasses the process and how to reduce it.
- Catalog Shop
Search, cart and purchase requisition for requesters.
What Makes a P2P Process Robust
Three prerequisites that are created at the beginning of the process and carry through to the invoice
Catalog Instead of Free Text
Anyone ordering from an approved catalog takes item, price, supplier and material group from maintained data. The purchase requisition is therefore complete before purchasing sees it.
- Negotiated prices in the requisition
- Supplier and material group predefined
- Fewer queries from purchasing
Approval Before the Order
Approval belongs before the purchase order, not before the invoice. Clear rules by value, cost center and material group ensure that requisitions reach the responsible people without detours.
- Rules by value and cost center
- Substitution during absence
- Traceable decisions
Order Reference Through to the Invoice
Every follow-on document refers to the purchase order: goods receipt, invoice and payment. Only then can the invoice be matched against purchase order and goods receipt without anyone having to search.
- Purchase order number on the invoice
- Goods receipt with reference to the order
- Data entered only once
Which Part of Purchase-to-Pay Ovenca Covers
Ovenca covers the upstream part of the P2P process in front of the ERP: from the catalog to the handover of the approved requisition or purchase order. Goods receipt, invoice verification and payment remain in the ERP.
- Catalogs and Supplier Connection
- In Catalog Management, supplier catalogs are imported, validated and approved. Through the Vendor Portal, suppliers maintain their catalogs themselves; purchasing reviews and approves them.
- Search and Cart in the Catalog Shop
- Requesters search across all approved catalogs and level 2 punchout catalogs and place catalog, punchout and free-text items in one shared cart.
- Purchase Requisition and Approval
- The cart becomes the purchase requisition. It runs through multi-level approvals by value, cost center or category.
- Handover to the ERP
- Ovenca hands approved carts, purchase requisitions or purchase orders over to the ERP via OCI, cXML or API, without re-entry.
- What Remains in the ERP
- The ERP remains the leading system for purchase order, goods receipt, invoice verification and payment. Invoice receipt, invoice verification and payment transactions are not part of Ovenca.
Purchase-to-Pay: Questions and Answers
Related pages
Find Out Where Ovenca Fits into Your P2P Process
In a conversation we go through your steps from demand to the handover to the ERP and tell you openly which parts Ovenca takes over and which remain in the ERP.