The procure-to-pay (P2P) process isn’t glamorous. It’s the behind-the-scenes work that keeps businesses running—ordering supplies, approving invoices, paying vendors. But when it’s broken, everyone feels it. Teams drown in paperwork. Suppliers get paid late. Finance wastes hours fixing avoidable errors. And money? It quietly slips away.

Our team analyzed data from 500+ companies to understand why this happens. The answer isn’t shocking: most businesses still rely on outdated, manual processes. For example, 42% of mid-sized companies lose over 1.5% of their annual revenue simply because their P2P process in accounts payable remains stuck approving invoices by email, chasing down signatures, or reconciling mismatched purchase orders.

But here’s what surprised us: fixing procure-to-pay isn’t about chasing the latest tech trends. It’s about fixing the basics.

What Is P2P (Procure-to-Pay)

P2P, or Procure-to-Pay, is the process businesses use to purchase goods and services and complete payments. It covers everything from identifying needs, selecting suppliers, ordering, receiving goods, verifying invoices, and making payments

What is the P2P Process in accounts payable?

The P2P process is a complete, end-to-end cycle that manages how a company purchases goods or services and pays for them. It starts when a need is identified within the organization and ends when the supplier is paid. In accounts, this process ensures that all financial transactions related to procurement are accurate, compliant, and efficient. It acts as a bridge between the company’s procurement and finance teams, ensuring smooth operations and financial control.

Why Is the P2P Accounting Process Important

1. Better Financial Control

Keeping track of money is important for every business. A good system helps businesses monitor their expenses and stay within budget. It ensures that payments are made only for approved purchases, helping to avoid overspending. Clear financial records also help business owners make smart decisions about saving and investing money.

2. Fewer Errors and Fraud Prevention

Mistakes like duplicate invoices or incorrect payments can cause financial losses. The P2P accounting process reduces these errors by automating tasks like matching invoices with purchase orders. This system also helps prevent fraud by making sure that only approved payments go through, reducing the risk of unauthorized transactions.

3. Stronger Supplier Relationships

Suppliers are important for any business, and paying them on time helps maintain trust. A well-managed P2P accounting process ensures that suppliers get paid on time, reducing conflicts and improving relationships. When businesses pay on time, suppliers may offer better deals, discounts, or faster deliveries.

4. Following Financial Rules

Every company must follow financial rules and tax laws. If businesses fail to do so, they may face fines or legal problems. The P2P accounting process helps businesses keep clear records of all transactions, making it easier to prepare financial reports and handle audits. A well-organized system ensures that all payments and purchases follow the company’s rules and legal requirements.

5. Saves Time and Increases Efficiency

Traditional accounting involves a lot of paperwork and manual work, which takes up time. Automating the process speeds up invoice approvals and reduces delays. Employees can focus on important tasks instead of spending hours checking documents. A faster process also helps businesses make quick financial decisions when needed.

Understanding P2P Cycle in Accounts Payable

1. Purchase Request

This is where the P2P cycle in accounts payable begins. When an employee identifies a need (like office supplies or raw materials), they submit a detailed purchase request. This document includes item descriptions, quantities, budgets, and reasons for the purchase. Clear requests help avoid misunderstandings later. Automated tools can streamline this step in the P2P cycle in accounts payable, reducing manual work and errors.

2. Approval Workflow

The request goes through a review process. Managers or finance teams verify if the purchase aligns with budgets and company policies. Approvals ensure accountability and prevent overspending. Delays here can stall the entire P2P cycle in accounts payable, so many companies use digital approval systems for faster sign-offs.

3. Create Purchase Order (PO)

Once approved, a PO is generated and sent to the supplier. The PO acts as a legal agreement, listing prices, delivery dates, and terms. Suppliers rely on this document to fulfill orders accurately. A well-defined PO system minimizes mismatches in the P2P cycle in accounts payable and builds trust with vendors.

4. Receiving Goods/Services

When the order arrives, the team checks if the delivery matches the PO (quantity, quality, etc.). Any discrepancies (like damaged goods) are flagged immediately. This step ensures businesses only pay for what they receive. Automated tracking tools can simplify this phase of the P2P cycle in accounts payable, ensuring real-time updates.

5. Invoice Matching

Here, the supplier’s invoice is compared to the PO and delivery receipt (a “3-way match”). This step in the P2P cycle in accounts payable catches errors like overbilling or incorrect pricing. Automation speeds up matching, reduces manual checks, and ensures payments are accurate and timely.

6. Payment Processing

After approvals, payments are scheduled based on agreed terms. Timely payments are crucial for maintaining good supplier relationships. Companies often use tools like electronic funds transfer (EFT) or virtual cards to finalize the P2P cycle in accounts payable efficiently.

Common Challenges in P2P Process

1. Manual & Paper-Based Processes

Many organizations still rely on paper invoices, physical purchase orders, and manual approvals. This slows down the procurement cycle, increases processing costs, and creates the risk of lost documents. Additionally, manual data entry is prone to errors, leading to discrepancies and delays in payment processing.

2. Invoice Matching Errors

The three-way matching process (comparing purchase orders, invoices, and receipts) is essential for ensuring accuracy in payments. However, mismatches occur due to incorrect data, missing documents, or pricing discrepancies. These errors require manual intervention, delaying invoice approvals and supplier payments.

3. Lack of Process Visibility

Without a centralized system for tracking procurement activities, businesses struggle to gain real-time visibility into spending, approval status, and supplier performance. This lack of transparency can lead to uncontrolled expenses, budgeting issues, and difficulty in identifying bottlenecks in the procure to pay cycle.

4. Fraud & Duplicate Payments

Weak internal controls can lead to fraud, such as unauthorized purchases, fake invoices, or payments to unverified vendors. Additionally, duplicate invoices—whether due to human error or system inefficiencies—can result in overpayments, leading to financial losses.

5. Supplier Management Issues

Inefficient supplier onboarding and communication can lead to delays in procurement. If vendors do not receive timely payments or clear order details, they may reduce their service quality or increase prices. Poor supplier relationships can also limit negotiation opportunities, leading to higher procurement costs.

6. Regulatory & Compliance Risks

Organizations must comply with tax regulations, industry standards, and internal policies. Non-compliance can lead to financial penalties, reputational damage, and legal consequences. Inconsistent record-keeping and lack of audit trails make compliance audits more challenging.

7. Integration Challenges

Many companies use different systems for procurement, accounts payable, and enterprise resource planning (ERP). If these systems are not integrated, data silos emerge, making it difficult to reconcile invoices, track payments, and generate accurate financial reports. This lack of connectivity can slow down the entire procure to pay process.

8. Approval Delays

Invoice approvals often require multiple levels of authorization. Without automated workflows, delays occur when key approvers are unavailable or when there is no standardized approval process. These delays can result in late payments, penalties, and strained relationships with suppliers, affecting future business transactions.

Best Practices for Implementing P2P Accounting Process

♦  Automate the Workflow

Utilize procurement software to automate purchase orders, invoicing, and payment approvals within the P2P accounting process. Automation reduces manual errors, speeds up processing time, and enhances operational efficiency. Implementing an end-to-end digital workflow ensures transparency, reduces delays, and allows better tracking of transactions. Organizations should invest in cloud-based solutions that integrate with ERP systems to streamline operations.

♦  Standardize Procurement Policies

Establish clear procurement policies that define roles, responsibilities, and approval hierarchies in the P2P accounting process. A well-documented procurement policy ensures that employees follow standardized procedures, reducing the chances of errors, fraud, and non-compliance. Regularly updating policies to reflect regulatory changes and business needs will help in maintaining an effective procurement strategy.

♦  Supplier Management

Maintain a well-structured vendor database and conduct regular assessments to ensure reliable supplier performance in the P2P accounting process. Establish strong relationships with key suppliers by evaluating them based on quality, pricing, reliability, and compliance. Conduct periodic performance reviews, negotiate favorable terms, and ensure alignment with business objectives to optimize procurement efficiency.

♦  Three-Way Matching

Implement a three-way matching system (purchase order, invoice, and goods receipt) to prevent discrepancies and fraud in the P2P accounting process. This method ensures that invoices are paid only when they match the corresponding purchase order and receipt of goods, eliminating unauthorized transactions and discrepancies. Automated matching tools can further improve accuracy and reduce manual intervention.

♦  Monitor Payment Terms and Cash Flow

Optimize payment cycles to improve cash flow management while maintaining good relationships with suppliers in the P2P accounting process. Efficient payment scheduling helps organizations take advantage of early payment discounts while avoiding late fees. Managing working capital effectively ensures financial stability and allows better allocation of resources for growth and investments.

♦  Data Analytics and Reporting

Use analytics tools to track spending patterns and detect inefficiencies in the P2P accounting process. Advanced data analytics can provide insights into procurement trends, cost-saving opportunities, and supplier performance. Implementing predictive analytics helps in forecasting demand and making strategic purchasing decisions that contribute to cost optimization.

♦  Regular Audits and Compliance Checks

Conduct periodic audits to ensure compliance with internal policies and external regulations in the P2P accounting process. Regular reviews help in identifying inefficiencies, fraud, and policy deviations. Implementing internal controls and compliance frameworks ensures adherence to financial regulations, industry standards, and corporate governance practices.

Conclusion:

The Procure-to-Pay process is the backbone of how businesses manage purchases and payments. From identifying needs to paying suppliers, every step in the P2P cycle plays a critical role in ensuring accuracy, compliance, and efficiency. However, many businesses still struggle with outdated, manual processes that lead to delays, errors, and strained supplier relationships.

By addressing common challenges like invoice mismatches, lack of visibility, and approval delays, companies can transform their procure to pay process. Automation is a game-changer—it speeds up approvals, reduces errors, and ensures payments are made on time. Standardizing procurement policies, implementing three-way matching, and maintaining strong supplier relationships are also key to success.