The Procure to Pay Cycle is also referred as P2P, it is the process of obtaining the raw materials required for providing a service or manufacturing a product, and finally making the payment process. For every product manufacturing or service provider needs to follow this cycle, if they are to continuously manage their cash flow, build awareness with suppliers and make profits.
It involves three main applications in financial module, they are Purchasing Order (PO), Account Payables (AP), and General Ledger (GL).
During the purchasing order flow, three types of roles are involved. They are Requestor, Preparer, and Buyer.
Requestor – Who request for the raw materials
Preparer – Who prepares the documents
Buyer – Who purchases the materials
In purchasing order module it flows from Requisition, Request for Quotation, Purchase Order, Receipt, Invoice, and Payment which are explained briefly as follows:
Requisition: It is the first process, in which one of the purchasing documents will be prepared by the employee who needs the raw materials or services.
RFQ (Request for Quotation): Once the requisition process is approved, then preparer will prepare the RFQ documents and will forward to various suppliers. Suppliers will send their three types of RFQ documents back to preparer, they are Bid, Catalog, and Standard RFQ.
Purchasing Order is one of the main document, prepared and approved by the buyer according to the quotation and sends it to the supplier which contains terms and conditions, quantity, price, items details, shipment details and other data.
There are four types of the purchase order are Standard, Planned, Blanket, and Contract.
Once the buyer receives the goods or services from the supplier, the purchasing department prepares a Goods Receipt.
Once the verification of the services or goods is done, the payment invoice is generated and the essential approvals from the project managers are obtained.
Once the invoice is generated, accounted and approved, then buyer can make final payment to the supplier. Here, P2P cycle comes to end.