Purchase-to-Pay in SAP®: How to Make Your P2P Future-Proof

In a day and age when customers are more demanding and online competition is growing steadily across many industries, it has become vital for companies to ensure their processes are competitive. This truism is particularly applicable to procurement processes. After all, procurement teams are faced with the challenge of setting up fast, powerful processes that enable the organization to operate transparently and effectively in the market.

It’s no secret that many businesses leave too much potential untapped in this area. For example, a survey of 200 companies conducted by the analyst firm Techconsult revealed that complete automation of the Purchase-to-Pay process could generate average cost savings of 42 percent. Yet there have long been solutions on the market that enable businesses to streamline their procurement process while also giving them confidence in their actions.

In this blog post, you’ll discover how Purchase-to-Pay in SAP supports you in this and which tools you need to thoroughly digitalize your procurement process.

What Exactly Is Purchase-to-Pay All About?

Purchase-to-Pay (P2P) describes the entire procurement process from purchasing and order confirmation to incoming goods inspection, payment and invoice archiving. Numerous individuals, departments and locations are involved in this process, exchanging, verifying and checking data among themselves to ensure that every aspect is in order. Among other things, this includes the agreed international commercial terms (Incoterms), the legally required information on invoices and various compliance regulations.

What Is the Status Quo of Purchase-to-Pay in Companies?

Despite ongoing digitalization through ERP systems such as SAP ERP or S/4HANA, the Purchase-to-Pay process in many organizations is still a mishmash of digital and analog processes. Digital and paper documents are exchanged via various channels during the process cycle, which employees then have to handle, check and archive in various ways. This repeatedly creates gaps in the P2P process, resulting in added stress and resources needed to resolve them. The ineffectiveness of these processes comes to the fore especially when problems arise, such as when a responsible supervisor is not available, a document is missing or goods have been delivered to the wrong location.

How Does Purchase-to-Pay Work in Practice?

To better understand the procurement process, we have divided it into five sub-processes that run sequentially during each order process:

• Order
• Order confirmation
• Delivery note
• Invoice processing
• Recording and archiving

After placing an order, the supplier sends an order confirmation accepting the order or suggesting changes; both may lead to a second order with a new order confirmation. The supplier then ships the goods, which are checked when they arrive at the company’s incoming goods warehouse. The acknowledged delivery note is forwarded to the procurement team, where it is recorded in the system. Once the incoming invoice has been validated, e.g. through a 3-way match, and approved following all specifications, a booking record is generated and payment is initiated. Finally, all documents must be filed and archived, taking into account the statutory retention requirements. From a technical perspective, the legal regulations that only take effect when a document is later deleted are defined at this point in the archiving process.

Purchase-to-Pay: SAP as the Basis for a Digital Procurement Process

With Purchase-to-Pay in SAP®, companies can create the prerequisite for mapping the entire procurement process in a completely digital manner. It’s crucial to understand that the software solution offered by the ERP system can only serve as a building block for the complete digitalization of the P2P process. After all, the software alone cannot eliminate media disruptions that slow down the digital P2P process in many places.

We’ll now use two examples from the procurement process to demonstrate why this is so and how you can reap the greatest benefits from Purchase-to-Pay in SAP®.

When the Order Confirmation Slows Down the Workflow

In practice, the scope of Purchase-to-Pay in SAP® is thwarted as soon as important documents in the P2P process are not available digitally and in the appropriate format. If the order confirmation arrives at the procurement department as a fax, letter or email, employees have to enter the data into the system by copy-and-paste or by manually typing it all out. This not only wastes time; it is also annoying for the individuals involved, and incurs costs that are actually out of keeping with the times. What’s more, the manual changeover from analog to digital often proves to be a treacherous source of error. All the more since you still have to ensure that the original documents, such as the paper-based order confirmation, are properly retained once the data has been recorded. For example, each order confirmation must be archived as a commercial letter for 6 years.

Reading Instead of Typing: EASY Order Confirmation for SAP

There is a simple solution that will make this workflow more efficient: easy Order Confirmation for SAP Solutions. It enables all incoming order confirmations to be automatically captured, read and inserted into Purchase-to-Pay in SAP®. An intelligent document reader is capable of automatically capturing all relevant information of an outgoing document and forwarding it to the SAP system.

It makes no difference whether the initial data originates from a fax, letter, PDF or XML document. At the same time, the Incoterms of the digital order confirmation are compared with the data of the original order via the SAP system. This way, validation takes place as soon as the order confirmation is received, enabling you to detect deviations in the order confirmation from the order or the customer’s wishes as early as possible.

The Delivery Note Is a Stumbling Block in Incoming Goods Inspection

Goods receipt is one of the most paper-intensive parts of the procurement process. This is mainly due to delivery notes, which must be acknowledged and compared with the delivered goods before being forwarded to the procurement team. Here the delivery note is picked up for a second time so that the goods receipt can be recorded in the system. This entire process is both error-prone and time-consuming. For companies spread out over multiple locations and warehouses, paper-based incoming goods inspection also means that it often remains difficult to clarify afterwards where exactly the goods were received and in what condition.

Goods Receipt in Real Time: EASY Delivery Notes for SAP

The alternative to a delivery note, which has to be passed on like a baton from the incoming goods team to the procurement department, is the immediate digitalization of the delivery note upon goods receipt: this is where easy Delivery Notes for SAP Solutions comes in. During this process, the delivery note is scanned with an intelligent document reader, which transmits all relevant data to the SAP system in real time. If there are deviations from the original order in the delivery note, these are clearly highlighted so that you know upon receiving the goods whether the order was received in the correct quantity and quality, and at the correct delivery location. In addition to detecting insufficient quantities, partial deliveries are also seamlessly documented in order to facilitate subsequent process steps.