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5 Areas to consider when Implementing Purchase to Receipt Processes/Systems

Many organisations implement procurement systems and focus their main attention on the Purchase to Pay or P2P processes and systems. This article discusses the 5 top areas to consider when implementing the Purchase to Receipt process and system.



The purchase to receipt cycle has the following process areas:

  1. The creation of the purchase request

  2. Approval of the purchase request

  3. Purchase Order Creation

  4. Confirmation of the Purchase Order


1 Make the creation of the purchase request as simple and easy as possible:

Most businesses follow a UNSPSC commodity structure for their categorisation of goods and services. Some businesses base their categories on it. One of the pain areas is defining this structure as accurately as possible because there are financial codes mapped to them in the background. In a lot of the cases, purchase requesters find it difficult to identify the correct commodity (category) when raising purchase requests. It is important to implement procurement systems that can automatically select the category or direct the requester through a number of conditions to the right category. This will make the user experience a lot smoother and help decrease the time taken to raise a purchase request.


2 Approval Workflow:

I have come across many complicated approval processes and scenarios. We all know that there are various approval processes Deployed based on business requirements and the industry. Some of them are legislative and cannot be removed but a lot of them relate to the culture and historic ways and practices.

Make the approval process as simple as possible where the system automatically determines the approvers. Implement systems where approvals via email update the purchase requests. In some businesses, where I have implemented procurement systems, self-approval limits have helped fast track approvals for small value purchases or commodities.


3 PO Creation:

Once a purchase request has been financially approved, there are 2 main ways a PO is created.

  1. Manually

  2. Automated by the system

If the front end process allows requesters to enter a supplier for free text purchasing, then most companies send the request to the buyer community to create a PO. This means the process is manual and requires human intervention. It can sometimes be advantageous to build an approval step for the buyer process and the PO creation becomes automated based on the buyer amending and approving the purchase request

Typically catalogue requests auto-generate a PO because contracts are in place with the supplier. The more catalogues that are in place, the easier the purchase request process becomes.


4 The use of Catalogues:

One of the goals that should be set by organisations and procurement teams is to enable more catalogues. The directive from procurement heads is always to agree supplier catalogues to reduce overheads from the relevant procurement buyers. This enables the buyers to focus on supplier performance and other value added tasks.


5 Confirmation practices:

Many organisations that implement procurement and finance ERP systems tend to switch on the 3 way matching process for invoicing. This basically means invoices will not get paid until an associated confirmation has been created in the procurement system. Many requesters forget to confirm their PO’s and the result is that invoices get stuck and cannot get paid. This leads to delays in payment and unhappy suppliers.

There are many ways to be more proactive. You could deploy a system that sends out reminder emails to confirm PO’s, but most people may choose to ignore or incorrectly process the confirmation. For low value and high volume categories, automate the confirmation based on a thresholds, set some suppliers up as 2 way match where no confirmation is required or set up suppliers as self-bill, which means the supplier does not need to send invoices. The system will create the invoice based on the confirmation. Again, there is dependency on the requester creating the confirmation.

Automation is good as long as it accurately reflects what the organisation is purchasing. My experience suggests the above works ok for simple procurement but when it comes to ordering services where the prices and quantities change on a regular basis, then the rules do not work as efficiently. Organisations need to understand the percentage of spends on the simple procurement commodities versus the more complex stuff and then decide to find proactive ways to resolve them.



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© 2018 - Nadeem Surve. Created by Arctic Spire

Contact

Nadeem Surve

Principal SAP Source to Pay Consultant

Director - Revolution Global Services Limited

info@nadeemsurve.com

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