Purchase-to-pay process: faster, cleaner supplier payments

Key takeaways

The purchase-to-pay (P2P) process runs from deciding to buy something to paying the supplier. In small businesses it usually stalls at two points: invoices that do not match an order, and approvals that wait for one person. A purchase order for anything over a set value, automatic matching and a daily approval slot fix most of the delay and much of the fraud risk.

• 6 steps: request, order, receive, invoice, match and pay.
• Most delay sits in mismatches and approvals.
• Purchase orders above a set value make matching possible.
• Verify any bank detail change by phone before paying.

What is the purchase-to-pay process?

Purchase-to-pay is the end-to-end process for buying goods or services and paying for them. It covers the request, the purchase order, receipt of goods, the supplier's invoice, checking the invoice against the order and delivery, and the payment. Accounts payable is the back end of it, but most problems start earlier.

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• In-house vs outsourced accounts payable

What are the six steps?

Every P2P process has the same six steps, whether it runs on paper or in software. Writing them down with an owner each is the first improvement.

• 1. Request: someone asks to buy, with a budget code.
• 2. Order: a purchase order is raised above a set value.
• 3. Receive: goods or services are confirmed as delivered.
• 4. Invoice: the supplier's invoice arrives in one inbox.
• 5. Match: invoice is checked against the order and delivery.
• 6. Pay: approved invoices are paid on the agreed terms.

• Three-way matching: stop paying invoices you should not
• Supplier onboarding: set up new suppliers right first time

Where do invoices get stuck?

Invoices get stuck when there is no order to match them to, when the receipt has not been confirmed, when they arrive in personal inboxes, and when approval waits for one person. Each of these turns a ten-minute task into a week-long wait, and slow payment strains supplier relationships.

• Approval bottlenecks: when sign-off holds up the work
• Work queue management: stop jobs waiting in the back office

What does a faster process look like?

In an illustrative firm, invoices take about nine working days from arrival to approval, mainly waiting for the director. Introducing purchase orders above £250, a single invoice inbox, daily matching by a managed team and approval limits so matched invoices under £500 go straight to the payment run brings that to about two days. Example figures only.

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• Process cycle efficiency: how much of the wait is work?

How do you keep it safe?

Keep it safe by separating duties: the person who sets up suppliers or changes bank details should not be the one who approves payments. Verify every bank detail change by phone using a number you already hold, never one in the email. The National Cyber Security Centre's small business guidance covers the phishing risks behind invoice fraud.

• The four eyes principle for small businesses
• Data security with an outsourced team

When is a full P2P process too much?

For a business with a handful of regular suppliers and fixed monthly bills, purchase orders and three-way matching add more work than they save. A single invoice inbox, a monthly check against statements and a rule for bank detail changes are enough. Add structure as supplier numbers grow.

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What does this look like in practice?

A pattern we see: suppliers chase payments that the business thought were approved, because invoices sat in a manager's inbox. Moving all invoices to one address worked daily by a single team fixes the chasing within a month.

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• BPO Solutions for UK businesses

Purchase-to-pay checklist

Check your process against these.

• One inbox for all supplier invoices.
• Purchase orders above a set value.
• Receipts confirmed before payment.
• Approval limits written down.
• Bank changes verified by phone.
• Invoice age reported weekly.

• Outsourcing efficiency checklist: 20 checks

Next step

Tell us how supplier invoices reach you and who approves them. We will help you map the six steps and say where a managed team could speed it up.