Optimizing procurement processes: How efficient is your purchase-to-pay process?

New opportunities arise for purchasing, linked to the term Purchasing 4.0 in many fields. Digitalization has profoudnly changed the convential image of purchasing, for instance in the purchase to pay process.

Dr. Christoph Feldmann, Managing Director of the Federal Association of Materials Management, Purchasing and Logistics (BME e.V.) has summarized the changing role and perception of the procurement process in companies.

While in the past the purchasing department’s only claim to fame was saving money, it can now actively contribute to growth and sustainability of the company.

Dr. Christoph Feldmann, managing director of BME e.V. about the procurement process

Amidst the euphoria surrounding new technology, it is important for purchasing not to lose sight of the essentials. Already some weeks ago, we explained the negative impact the maverick buying effect can have on the procurement process in the company and which stumbling blocks the procure-to-pay process hides. Problems of this kind only arise when the actual core competences of the purchasing department are disregarded. The optimization of procurement processes is just one of these core competences and creates the foundation for new technologies and innovations in purchasing. But why is that? 

This is why you should optimize your procurement process

Even a very simple procurement process involves a number of different parties within a company – from the employee as the one reporting a demand to the superior to the purchasing department. The impact is accordingly high when the process does not work as intended here or there. There are many good reasons why you should optimize the procurement process: 

  • Increased transparency and control in all ordering processes
  • Better terms and purchase prices
  • Securing cash discounts and avoiding penalties
  • Reduced process costs
  • Auditing compliance in the storage of process-related documents

Although the advantages appear to be obvious, the project of optimizing the procurement process fails in many companies. Getting started properly is often the main problem, although it should not be too difficult. 

Optimization of the purchase to pay process: starting with a requirement analysis

Strategy before tactics. Always! Give yourself time to get a clear overview of your procurement processes before wearing yourself out worrying about specific problems. 

Without asking the right questions, it is difficult to identify errors and potential for optimization. Ask colleagues. Scrutinize yourself. Question processes that “have always been like that.” Compare your aspirations to your actual needs. You should ask yourself these questions before setting out to optimize your procurement process: 

  • Does your company consist of different departments/employees who order goods or has your company established central purchasing?
  • Does your company follow a uniform set of procurement guidelines?
  • Does your company have an established order approval process?
  • Does your company use an electronic procurement process?
  • Do your employees rely on dependable suppliers/supplier portals and related conditions?
  • Do you have an overview of each and every invoice in circulation at all times?
  • Where are the potential areas for optimization in your procurement process?

Start now with optimizing your purchase to pay process. “I don’t have the time” is not a fact, but a decision!

To make your journey towards a completely optimized procurement process easier, we have dedicated an entire series of blog entries to the purchase-to-pay process. Learn how consistent your processes are and where the potential areas for optimization are in your procurement process. Our software can support the entire purchase-to-pay process – from an explanation of maverick buying to an analysis of the individual subprocesses of the P2P process (SAP purchase requisition, SAP incoming goods, SAP invoice verification, SAP archiving) to exclusive insights into the software.  

CTA purchase to pay