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The Procure

The Procure-to-Pay (P2P) cycle encompasses the entire process from identifying a need for goods or services to the final payment of invoices. It includes steps such as purchase requisition, purchase order creation, goods receipt, invoice matching, and payment processing, ensuring efficiency and accountability. This cycle promotes transparency and accurate financial records within organizations.

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17 views2 pages

The Procure

The Procure-to-Pay (P2P) cycle encompasses the entire process from identifying a need for goods or services to the final payment of invoices. It includes steps such as purchase requisition, purchase order creation, goods receipt, invoice matching, and payment processing, ensuring efficiency and accountability. This cycle promotes transparency and accurate financial records within organizations.

Uploaded by

chitreysaumya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

The Procure-to-Pay (P2P) cycle is a critical process in the realm of accounts payable and

procurement. It involves all the steps from identifying a need for goods or services to the final
payment of the invoice. Here's a comprehensive overview of the P2P cycle with examples:

Identifying the Need:

Example: A department identifies the need for new laptops to enhance productivity.

Initiating a Purchase Requisition:

Example: The department submits a purchase requisition, detailing the laptop specifications,
quantity needed, and any other relevant information.

✔ Purchase Requisition Approval:

Example: The requisition goes through an approval process. Once approved, it becomes the basis for
the purchase order.

Creating a Purchase Order (PO):

Example: The approved requisition is converted into a purchase order. The PO includes details like
product specifications, quantities, prices, and delivery terms.

Sending PO to Vendor:

Example: The PO is sent to the chosen vendor for the laptops.

Goods/Services Receipt:

Example: Upon receiving the laptops, the receiving department checks the goods to ensure they
match the PO specifications.

Invoice Matching:

Example: The accounts payable team matches the received goods with the PO and the vendor's
invoice to ensure accuracy.

✅ Invoice Approval:

Example: After matching, the invoice goes through an approval process to verify that the goods or
services were received as expected.
Payment Authorization:

Example: Once the invoice is approved, the accounts payable team authorizes the payment. This
may involve setting up the payment in the financial system.

Payment Processing:

Example: The payment is processed using the chosen payment method (e.g., wire transfer, check,
electronic funds transfer).

Recording the Transaction:

Example: The payment is recorded in the accounting system, updating relevant accounts and
maintaining accurate financial records.

Vendor Reconciliation:

Example: Regularly reconciling vendor statements with accounts payable records to ensure all
transactions are accurately reflected.

Archiving Documentation:

Example: All related documentation, including the purchase order, invoice, and payment records, is
archived for audit and reference purposes.

Reporting and Analysis:

Example: Periodic reporting on P2P metrics, such as cycle times, cost savings, and vendor
performance, helps in analyzing the efficiency of the process.

The P2P cycle ensures a streamlined and controlled process from identifying a need to making the
final payment, promoting efficiency, transparency, and financial accountability within an
organization.

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