What Is Procure-to-Pay (P2P)?
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In this article
Talk to our experts- Procure-to-pay
- Procure-to-pay (P2P) is the buyer-side business process for getting goods and services and paying for them. It runs from the purchase request through the order or award, receipt and acceptance of what was delivered, and checking the supplier's invoice, to payment and closeout. The supplier runs the same transaction from the other side as order-to-cash.
Also called: P2P
How it works
The US Department of Defense describes procure-to-pay as encompassing all business functions necessary to obtain goods and services using procurement processes and procedures, including:
- Executing procurement requirements and strategy
- Procurement award and management
- Receipt and acceptance
- Entitlement, disbursement and closeout
Where the process starts depends on who draws the line. Treasury's Federal Financial Management use case library splits the front end into its own process: Request-to-Procure, where a request for the purchase of goods is submitted and an order or award is prepared and sent to a vendor. Procure-to-Pay then picks up when the goods are received and accepted, the vendor submits an invoice, and the agency pays it after performing a three-way match.
The procure-to-pay cycle
Someone in the buying organization submits a request for the purchase of goods.
An order or award is prepared and sent to the supplier.
The goods are delivered, received and accepted.
The supplier's invoice is checked against the receipt of goods and the order.
The approved invoice is paid and the order is closed out.
Procure-to-pay vs. order-to-cash
A B2B sale can be seen from both sides: the buyer runs procure-to-pay, and the seller runs order-to-cash, from the customer's order to the customer's payment. Each step on one side has a partner on the other:
- Purchase order, then sales order. The buyer's purchase order lists the products, prices and quantities it wants; the seller records the sale it agreed to fill.
- Receipt, then shipment. The buyer records what was received and accepted; the seller ships and records what left the warehouse.
- Invoice match, then invoice. The buyer checks the invoice against its order and receipt, which is why the seller's invoice should quote the order number and line items.
- Payment, then cash application. The buyer pays on the agreed terms; the seller applies the cash to the open invoice.
If you sell to buyers who run procure-to-pay, their process decides what your documents need to show. Treasury's use cases also show what happens when they don't match: an invoice that bills the agency too much is found not valid, and it is paid only after the vendor sends a credit memo.
Example
A school district's facilities team needs 40 air filters. A staff member submits a purchase request, it is approved, and purchasing sends purchase order 2231 to a distributor for 40 filters at $15 each: 40 x $15 = $600.
The distributor enters the order, ships all 40 filters and invoices $600, quoting PO 2231. The district's receiving team records 40 filters received. Accounts payable matches the invoice, the receipt and the PO, and pays $600 on Net 30 terms. On the distributor's side, the same $600 moves from order to shipment to invoice to cash.
On Shopify
On the seller's side, Shopify B2B runs on the Basic, Grow, Advanced and Plus plans. These features, available on all four, line up with the steps of a buyer's procure-to-pay process:
- PO numbers. B2B customers can add purchase order (PO) numbers to an order, and staff can add them to an order or a draft order from the Shopify admin.
- Checkout to draft. You can require a company location's orders to be submitted as drafts, so you can review and make changes before they're confirmed.
- Payment terms. Companies can be assigned Net 7, Net 15, Net 30, Net 45, Net 60, Net 90 or due on fulfillment.
- Draft order to invoice. You can send invoices to collect payment for draft orders.
How Uncap helps
Some buyers run procurement inside a dedicated system. Uncap's guide to punchout catalogs for Shopify B2B explains how a punchout catalog lets a buyer inside a procurement system shop your Shopify storefront and pull the cart back into their purchasing workflow as a requisition, while their procurement platform stays the system of record for approval and purchase order issuance.
Sources
Frequently asked questions
What is the difference between procure-to-pay P2P and accounts payable?
Accounts payable handles the supplier invoices: Treasury's federal use cases, for example, describe matching accounts payable invoices before they are paid. Procure-to-pay is wider. The Department of Defense describes it as covering procurement requirements and strategy, award and management, receipt and acceptance, entitlement, disbursement and closeout.
Which comes first, PR or PO?
The purchase request comes first. In Treasury's federal use cases, a request for the purchase of goods is submitted, and then an order or award is prepared and sent to a vendor.
What is O2C and P2P?
They are the two sides of one B2B transaction. Procure-to-pay (P2P) is the buyer's process from purchase request to supplier payment; order-to-cash (O2C) is the seller's process from the customer's order to the customer's payment.
