Welcome to the Efficient eLearning S A P training series. This video is
Procure-to-Pay Process Overview.
And this is the list of topics we'll be covering.
We'll begin by outlining the steps in the procure-to-pay process.
We'll then explain how the steps are split between procurement roles and
accounts payable roles.
So let's now take a look at the steps involved in the procure-to-pay process. Please note
the process can be quite complicated in some large organizations. However, for the
purpose of this video we'll be keeping it simple and focusing on the core
processes that are most commonly used.
The process begins with the creation of a purchase requisition. A purchase
requisition is a document created to request the purchase of goods or
services. It's an internal document - that is, it's not sent to anyone external to
the organization.
In most organizations it's necessary to obtain approval for spend. This leads us
to the next step in the process - approve purchase requisition. This approval can
be provided offline (for example by signing a piece of paper), online (by
approving within the relevant financial software) or a combination of the two.
Once the purchase requisition is approved it can then be converted to a
purchase order. In general terms a purchase order is an agreement by a
buyer to purchase from the seller (referred to as a vendor in this case) a
particular good or service for an agreed quantity and price. Unlike the purchase
requisition the purchase order is sent externally - it's sent to the vendor.
Once the vendor supplies the relevant good or service this event is recorded
by posting a goods receipt against the purchase order. This provides evidence in
the relevant financial system that the goods or services have been provided.
Once the goods or services been supplied that vendor sends an
invoice to the buyer. This invoice is then posted in the relevant financial
system. The invoice is usually posted with reference to the purchase order.
Most financial systems will have internal controls that compare the
invoice details with the purchase order and the goods receipt providing what's
referred to as a three-way match.
And the final step in the process is payment. When the relevant invoice
becomes due for payment the buyer pays the vendor the amount owed for the
relevant goods or services.
The steps in the procure-to-pay process are categorized into two broad functional
areas.
The procure or procurement steps are completed by a combination of normal
end-users across all departments within an organization and staff within the
procurement department.
Purchase requisitions can usually be created by any staff member. However, in
some organizations procurement is centralized and completed by the
procurement department. Approval of purchase requisitions is usually
completed by management staff who have been provided with approval delegation.
Converting purchase requisitions to purchase orders is usually automated but
where this is not the case the procurement department is usually
responsible for this task. And responsibility for receipting goods or
services is usually the remit of the requisitioner (that is, the person who
requested the goods or services) as they usually receive the goods themselves and
are best placed to confirm the goods or services have been provided.
The pay or accounts payable steps (posting vendor invoices and making
vendor payments) are completed by the accounts payable department. Once payment
is made the procure-to-pay cycle is complete.
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