Achieving optimized procurement - High savings thanks to Process Mining for P2P
Author: Katharina Laumann, Content Manager and Editor at PAF
Procure to Pay processes are an essential part of almost any business. The procure-to-pay process is the controlled and coordinated activity performed to fulfill a request for goods or services quickly and at a reasonable price. It involves a series of sequential steps performed in different departments. These steps start with the purchase order creation, usually with a purchase requisition, and they follow the process until an invoice is received and cleared. The steps in a procure-to-pay cycle must follow a strict order:
A typical procure-to-pay process looks like this:
- Goods/Services Request: Someone in the company has a need for a good or services and begins the process of purchasing them
- Application: A purchase application is created and moved for review and approval. Preferably, this purchase application is chosen from a set of pre-approved set of vendors and the pricing and terms is the best for that need.
- Purchase Order (PO): The purchase requisition is used to create a purchase order, which is sent for review and approval. Upon approval, the purchase order is sent to the corresponding vendor, becoming a legal contract once accepted.
- Goods and Services Received: For goods, orders are reviewed and, ideally, receiving paperwork is automatically cross matched to the corresponding PO. Any exceptions generate returns, refunds, or additional documentation as required by circumstances.
- Invoicing: The vendor’s invoice is received and checked against the purchase order and receiving paperwork. Exceptions are noted and processed as events warrant. Properly reconciled invoices are routed for payment.
- Payment: The accounts payable (AP) team issues payment and updates the accounting records to reflect the transfer of payment in exchange for goods/services.
Along this P2P process, the business is faced with an extensive list of occurring weak points. Including:
- Low supplier integration
- High number of suppliers
- Missing ordering concepts
- Low level of supplier management
- Vendor master file management
- Fast invoice payments
- Manual approval workflow for invoice release
- Lost invoices
- Short credit terms
This means that desirable KPIs are missed or not hit, resulting in waste, rework and loss of money. What PAFnow Process Mining can do is look at your P2P process with Process Mining dashboards and find out what keeps you from meeting those KPIs.
Process Mining collects data from ERP systems ( such as SAP, Oracle, and Salesforce) as well as any other type of system. This data contains all the information that Process Mining needs to provide a complete picture of the end-to-end process. Every detail is brought to light: how the process really works, including who performs a process step, how long it takes, and how it deviates from the average. Problems within the process are uncovered, and AI algorithms can identify the root causes of deviations. KPIs are monitored along the way and can be redefined and prioritized, allowing organizations to focus on the most important and urgent improvement steps.
PAFnow maximizes insights into:
High Risk Vendors
Identify which vendors are critical for your company’s survival (energy, landlord, other vendors)? Were those vendors always paid on time? For which accounts was the bank information changed before the payment?
Low value purchasing/ invoice
Find workarounds and slim down your process. Are certain steps obsolete and can be neglected when it comes to low purchasing invoices? Or are large invoices split to several smaller ones to surpass the approvals? Check based on vendor and time.
Find the lowest prices to save millions. Is the vendor paid in time, late or early and could there be more discount potential? Look at vendors, materials/material groups, and how expensive the transaction was. Consider payment runs and cashflow.
Are you losing money and time due to duplicate payments? Find out if there are duplicate payments in your process, how they happen and avoid them in the future.
Stop Maverick buying once and for all. Are there invoices that do not have a PO but should have? Are there cases where the PO was created after the invoice was posted?
For an open case analysis
Analyze open cases: Are there outstanding payments or outstanding deliveries of vendors? Prioritize, adapt your process, and get everything in time.
Perform a full population testing. Is there a sequence compliance issue, has there been split POs, or duplicate invoicing?