21 Nov 2010 Definition of Purchase to Pay
Very few definitions are definitive – if you know what I mean. Purchase to Pay, (if you prefer, Procure to Pay or P2P – they’re synonymous), is one of those.
The “official” definition of Purchase to Pay according to the Chartered Institute of Purchasing and Supply goes like this: “A seamless process enabled by technology designed to speed up the process from point of order to payment.” This isn’t a great definition. It is unhelpful to use the word seamless. Whether it’s a good process or not, the purchase to pay process is there and even when best practice is applied, there are plenty of “seams”. Enabled by technology? Not necessarily – although technology can play an important part. And finally designed to speed up the process from point of order to point of payment – this is just plain wrong.
Purchase to Pay is all about helping to optimize the processes associated with purchasing and recognising that the process does not end at the purchase order but extends to include accounts payable and payment processes. It goes further. The suppliers’ sales order processes, strategies and technologies are involved as are the buying organization’s treasury management and accounting functions.
Purchase to Pay is not about speeding processes up. (Ask any CFO if he’s like to start paying all suppliers quicker.) Purchase to Pay is about the optimization of processes introducing control and efficiency as well as reducing risk. It is about ensuring that sourcing savings are delivered by providing purchasing processes that ensure compliance to contract.
The CIPS definition of P2P is not only less than useful – it is misleading and undermines the value that Purchase to Pay can deliver.