Defining the Accounts Payable Workflow Process (P2P)

The "procurement to pay" process, also known as P2P, is the flow of processes from requisitioning and obtaining a product or service, managing administration in relation to the purchase, and finally making payment for it. This process is a key component of Accounts Payable and involves several steps in the journey.

The steps in the Accounts Payable Workflow Process cycle are:

Generating Requisitions

The first step of the P2P process is to generate requisitions for the needed goods and services. Requisitions are typically submitted by departments or end users who need to acquire the product/service that they require. These requisitions can either be manual (email, in-person request etc), or digital (through procurement systems such as NetSuite.

Managing Requisition Approvals

Once the requisitions are submitted, they need to be approved by an authorised person. Depending on the size of the purchase and the organisation’s policy, multiple approvals may be required from purchasing managers, finance and upper management.

Choosing a Vendor

After the requisition is approved, procurement or accounts payable staff will then research different vendors who can provide the product/service that was requested. Many businesses have a pool of preferred vendors, depending on the product or service being requested. Systems like NetSuite also make it easy to ensure all requisitions are managed in alignment with company rules and policies.

Creating a Purchase Order

Once the vendor is selected, a purchase order needs to be created. This document will include all details related to the goods/services being purchased, such as quantities and prices, shipping address, delivery time-frames and required payment terms.

Receiving Delivery of Goods or Services

Once the purchase order is issued, the vendor will typically ship or deliver the goods/services according to the timeline outlined in the PO. A receiving document or delivery docket should be issued to confirm the delivery and provide additional details such as any damage or discrepancies that may have been found upon receipt of goods.

Receiving the Vendor's Invoice

The vendor will usually send an invoice to the company once they have shipped or delivered the goods/services. The Accounts Payable department will then match this invoice to both the purchase order and delivery document, to confirm that all items were received and match what was ordered. This is commonly referred to as a three-way match. A good ERP software, like NetSuite, will offer the ability to identify and match purchase orders, delivery dockets and invoices automatically, for easier management of accounts payable processes and documents.

Making Payment to Vendor

After confirming that all items on the PO and invoice have been delivered and received, the Accounts Payable team will then process payment to the vendor. This is typically done by sending a cheque, or making an electronic transfer of funds. Once a payment has been made, a remittance advice will be sent to the vendor.

Closing Purchase Order

The final step in the process is to close the purchase order (PO) once payment has been made and it can be marked as complete. This is important to ensure that all accounting documents are tracked, and that the company is not paying for goods or services twice.

The Importance of Efficient Accounts Payable Workflow Processes

The Accounts Payable Workflow Process is an essential part of any business’s operations, and it’s important to have a reliable system in place to ensure everything runs smoothly. NetSuite offers an all-in-one, integrated solution for managing the P2P process, from requisition and order management to accounts payable processing. With NetSuite in place, businesses can ensure that their accounts payable workflow process is efficient, accurate and compliant with company policies.