The Procure-to-Pay process flow Involves two modules, the Procurement and the Payables Modules. In a quick summary, this process flow involves capturing the demand of a product/service, facilitating quotations from suppliers, converting quotations into purchase orders, receiving material, and finally releasing the payment for the vendor.
The process begins with demand, and the demand is recorded in the form of a requisition. The requisition is utilized as a base for requesting supplier quotations. Supplier quotations then get entered and compared within the application. Based on analysis and best product and price choice, the organization will award a purchase order to the chosen supplier. The supplier will then ship and send the material (or provide the service) to the organization, and finally the organization will book the invoice to pay the supplier. Do note that the sourcing of quotations is not a mandatory step
in the process.
What is Procurement?
Procurement, or sometimes referred to as Purchasing, refers to a business practice of attempting to acquire goods and/or services to accomplish the goals of its enterprise. It is simply the process of identifying what the organization needs and buying it. The Procurement Modules' main end-users are called "Buyers".
Key Terminologies in Procurement
Purchase Requisition
- Purchase Request is a precise document generated by an internal or external organization to notify the purchasing department of items it needs to order, their quantity, and the time frame that will be given in the future.
- Executed by the End-Users of Each Department and sent to the Purchasing department.
Quotation
- Request For Quotation (RFQ) is the communication between customer and supplier asking the availability of the item and its corresponding price.
- Executed by Buyers to be sent to Vendors
Purchase Order
- A written authorization from a buyer, for a supplier to deliver specified goods or services to the buyer, at the price, quality level, delivery date, and certain other terms specified in the agreement. A purchase order is legally binding after the supplier counter-signs it.
- Executed by the Buyers and sent to the selling Vendor
What is Payables?
The Payables Application, sometimes referred to as the AP Module, is the module that is primarily involved with interfacing with Suppliers and paying Suppliers. Apart from the Procurement module, the AP module interfaces with multiple applications such as applications such as the Payments application for fund disbursement, Cash Management for bank statement reconciliation.
Key Terminologies in Payables
Suppliers
- Organizations or Entities that provide goods or services. Can be both Internal or External.
Payment Disbursement
- Provides funds for delivered goods or services to suppliers.
- Can also provide funds for Customer Refunds or Employee expense reimbursements in the form of a Payment Request
- Can be in the form of sending a physical check or electronic funds transfer (EFT)
Assets
- Acquired Physical Goods that have a direct impact to an organization's net worth such as buildings, furniture, computers, etc.
- Can be entered into the Payables module and will flow down to the Assets Module.
- Value can Depreciate/Appreciate over a period time, and can be decommissioned as well.
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