Procure to Pay (P2P) starts from vendor selection to finalizing payments in accounts payable. Every business has to have a P2P process to manage their vendor relationships. Advances in machine learning are opening up ways for businesses to improve the effectiveness and efficiency of their P2P process.
Given CFOs’ mandate of driving efficiency across the organization, it is mandatory that processes like P2P managed by the CFO organization are run as efficiently as possible. However, finance teams are not clear about what can be improved in their processes and are confused by similar vendor claims.
In this article, we explain capabilities of P2P Suites and how they can be improved with AI by referring to possible use case areas.
Procure to Pay Suites
| Vendor | Ratings | Total Number of Reviews |
|---|---|---|
| PRM360 | 4.8 | 290 |
| GEP Smart | 4.5 | 157 |
| JAGGAER ONE | 4.4 | 178 |
| Coupa | 4.3 | 996 |
| Medius | 4.3 | 147 |
| Basware | 4.2 | 268 |
| Oracle Procurement Cloud | 4.2 | 137 |
| Ivalua | 4.1 | 95 |
| Tradeshift Pay | 4.0 | 54 |
| SAP Ariba | 3.9 | 875 |
*This table includes P2P suites that can manage and automate all or most of the processes that are part of the procurement cycle. Ratings and reviews are based on Gartner Peer Insights, G2 and Capterra. Vendors who received the higher score are ranked first.
Procure to Pay Processes
P2P suites claim to automate core P2P processes. We identified the P2P processes and the benefits of P2P automation before. In the context of the use of P2P suites, the processes are summarized as follows:
Need Identification: Organizations identify the goods/services required and allocate a budget accordingly. Procure to pay suites can include the automation of the budgeting process from the beginning.
E-purchasing: P2P suites allow users to autonomously create requests for products and services, catalogs, digital forms, or free-text orders. Following a rule-based path, these requests are then approved and transformed into purchase orders (POs), which are forwarded to suppliers through multiple mediums like email, portals, or electronic data interchange (EDI). The culmination of this procedure is the receipt of the order.
Supplier Invoice: After the successful delivery of orders, suppliers send invoices with the detailed information on services/products and the amounts payable.
Accounts Payable Invoice Automation (AP-AI): This segment captures and automates the invoice process. It matches invoices against POs or, in the absence of a PO, supports coding and approval processes. The suites can handle exceptions that might arise from transport and labor costs or additional charges not mentioned in the POs, and also involve electronic invoicing.
Analytics: Analytics in P2P examines the entire procurement workflow, providing insights into supplier performance, spending patterns, and potential areas for cost-saving or improvements. This data-driven process ensures continuous optimization and informed decision-making for future procurement activities.
Some other features procure to pay suites may include are:
- Budget management
- workforce management
- Dynamic discounting and/or supply chain financing (SCF)
- Inventory management
- Supplier information management
- Employee expense management
- Payments
Integrating AI in procure-to-pay: 4 use areas
A “one-size-fits-all” strategy cannot always be the panacea for all P2P challenges.1 Enterprises, with their dynamic tech landscapes that evolve due to history, mergers, acquisitions, and a preference for best-of-breed approaches, cannot rely solely on a holistic solution.
Looking it the other way around, some AP-AI platforms may not have what P2P suites offer such as Coupa’s procurement approval capabilities. They may not offer the capability to make simple software solutions scalable. Yet, they can integrate with P2P suites’ , use their capabilities and focus merely on automation. Below, we discuss 4 use areas that exemplify this.
1. Sourcing:
P2P is a comprehensive process. It can be hard to handle each process manually from the beginning. AI can be used to automate several processes including need identification, creation of requisitions and supplier identification.
Example: Keelvar’s no-code sourcing bots can:
- trigger and configure events
- message category managers and invite suppliers
- open and close bidding rounds
- identify optimal award scenarios for user review
- record bids and negotiations for traceability and policy compliance
A case study shows that DAX 20 Consortium of large beneficial cargo owner (BCO) leveraged Keevlar’s ocean sourcing transportation bots to:
- create validation rules for mandatory field controls
- analyze carrier bids
- benchmark top 5% by cost performance
- optimize scenario analysis
2- Invoice processing
Sponsored
With the rise of deep learning and transformer architecture in the mid 2010s, a group of startups including Hypatos, launched solutions bringing deep learning to invoice processing significantly increasing the automation rate.
Hypatos’ products, with their continual learning abilities, offer flexibility, integration and industry specific solutions to enterprises in the end-to-end automation processes that P2P suites might lack. (Figure 1)
Hypatos leverages transformer architecture to bring end-to-end automation to invoice processing, automating:
- capturing
- classifying
- extracting and validating the information on invoices.
3.Compliance:
AI can be utilized in monitoring, analyzing and mitigating enterprise spend risks in procurement.
Example: Software such as Oversight can monitor data across:
- travel and expense
- purchase and fleet cards
- payables, procurement and general ledger
The algorithm of the software can: detect fraud, misuse, errors, and risk patterns, to manage SOX, FCPA, improper pay and do-not-pay audits and sign-offs. It can also detect duplicates and improper POs along with the procurement process and stop the payment.
In a case study involving HD Supply (F500 construction supplier), Oversight was able to identify +$3M worth of potential duplicate procure-to-pay transactions. It was able to stop or recover more than $170,000 in duplicate payments within six months of implementation.
4.Analytics:
In procurement, AI powered spend analytics solutions can improve efficiency.
Example: Suplari is an AI-automated analytics platform providing insights for procurement. It can:
- Clean, normalize, and categorize spend data and supplier activity from ERPs, contract repositories, travel and expenses, and corporate P-card transactions.
- Automates analysis of current data and historical patterns within an organization to
In a case study involving Gemological Institute of America (GIA), Suplari:
- connected, cleaned, and unified GIA’s spend data across 13 countries’ legacy systems including Workday and Concur.
- created a dashboard for analyzing spend, contract, and purchase processes, and understanding P-card spend, and PO compliance violations.
- Enabled real-time access to spend reports to check inefficiencies and opportunities.
Cloud optimization: AI can also enable cost management and cloud optimization in procurement.
Example: Zesty.co is an optimization tool for AWS. The tool:
- provides real-time data about cloud performance, anomalies
- collects AWS CloudWatch & CloudTrail logs and analyzes the usage data of infrastructure
- includes EC2 scheduler which allows engineers to automate turn on/off cycles of idle EC2 instances
- includes Resource Cleaner that identifies and disposes of idle cloud resources such as EBS, EIP and ELB
Armis security by using zesty.co in 18 months, reduced $1M of EC2 costs (40% of costs). The software enabled hands-free automation of commitment management.
FAQ
What are P2P suites?
Gartner defines Procure to Pay suites as comprehensive solutions that automate workflows across an enterprise for requesting, procuring, receiving, and settling payments for products and services.2 They also claim that there is an increasing trend for customers to purchase P2P services as part of a larger S2P deal with a single vendor.
What are the potential use cases of P2P suites?
Procurement for Daily Needs (Indirect Procurement):
The goal is to increase spending compliance and automation for goods and services that a business needs to run, but not for producing things or selling them again.
It’s the main way P2P suites are used. Users want an easy buying process and to work well with many suppliers.
Focus on Direct Materials
Here, the focus is on collaboration within the supply chain, mainly for businesses that manufacture or sell products.
These types of procurement processes are based on what customers want and goes into the product’s total cost. Users in this area need to connect with other tools for planning, product life, quality, and more. This kind of procurement often needs more integration with suppliers because purchase orders change a lot.
Service procurement
This is for businesses that acquire various services.It encompasses intricate service procurement as well as temporary worker procurement.
Finance
This case is predominantly about financial tasks, like handling invoices and payments, encapsulating AP-AI and transaction management.
Enterprises aim to unify finance operations within the procurement processes usually orient towards e-invoicing, AP-AI, and payment features.
For Complicated Setups
A use case based on complicated procurement categories and geographical scopes that need advanced integrations and analytics to support a diverse back-end infrastructure.
This use case is for businesses with many different and specific needs, like oil and gas companies or those that have grown through many deals. Also of worry are security, legal compliance, and adaptability across a wide range of end-user access devices. The key to success is being able to connect to many operational and financial systems and see how procurement processes are going.
What are the challenges related to P2P suites?
Many organizations gravitate towards procure to pay solutions to minimize integration, as suggested by Gartner research publications. This is understandable, yet it shouldn’t overshadow the importance of selecting the right solutions. The all-encompassing solution looks tempting, but it’s highly unlikely for a vendor to provide a comprehensive procure to pay suite that works and can be customized in every module.
By opting for such a suite, companies can trap themselves into a package of varying quality that might take significantly long time to implement; resulting in slow user adoption rates and potential inefficiencies. Solutions such as Coupa offer a comprehensive approach, but customers who want help with specialized solutions may not find what they are looking for.
For further questions regarding the topic, reach out to us:
Find the Right Vendors
External Links:
- “The Rise Of The Ecosystem In Procurement And Sourcing“. Basware.
- “Procure-To-Pay Suites (Transitioning To Source-To-Pay)” Gartner.
This post originally appeared on TechToday.