procure to pay p2p sap xsuite [shutterstock: 1488833627, 13_Phunkod]
[shutterstock: 1488833627, 13_Phunkod]
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Procure-To-Pay: Where To Start With Digitization?

In the SAP Business Suite or with S/4 Hana, it is generally possible to execute end-to-end procure-to-pay workflows directly in the system. However, this doesn't automatically remove paper from workflows.

The number of workloads in purchasing and accounting departments has been on the rise for years. Vacant positions can often not be filled, and increasing numbers of transactions have to be processed by a team that never changes in size. Added on to this are new and more numerous compliance requirements as well as the issue of different company locations, or even the need to work from home. This is where digitalization and automation can help.

Purchasing is an area in which many organizations have already invested a fair amount: According to a recent study by the German Association of Materials Management, Purchasing and Logistics e.V. (BME), two-thirds of the companies interviewed will have almost completely automated their operational purchasing processes in the near future. Automation is seen as crucial in this process, and its importance becomes even greater when we consider the fact that the process is generally extended to include invoice verification and payment, turning it into procure-to-pay (referred to here as P2P), which starts with creation of requisitions and ends with audit-proof storing of invoices.

Paper shows up in the most unlikely places

In the SAP Business Suite or with S/4 Hana, it is generally possible to execute the end-to-end P2P workflows described above directly in the system. However, this doesn’t automatically take the paper out of the workflows. A close look at practices reveals that processes are often far less digital than one would expect. And for good reason: Purchasing and accounting departments are generally well organized, and paper processes have already been optimized to the extreme. Thanks to employees who are adept and thorough in their work, well-functioning process flows have already been established.

However, the meaning of efficiency in procurement will have to include digital components in the long haul. Operational business processes must ultimately become fully digitalized and automated. Indeed, there are tools on the market – SAP-integrated workflow and process solutions such as those from the xSuite Group, for example – that provide a high degree of digitalization. These products ensure that document-based processes are mapped in SAP in a consistently automated manner. With processes speeded up and simplified, work results improve and targets become more achievable. In short, workloads in purchasing and accounting go down.

Potential starting points for digitalization and automation in the P2P process abound and can be found in the innumerable small, operational work steps involved, whether they are centered around individuals, departments, or workflows.

Integrate automation at the top of the process chain

Every procurement process begins with a requisition note. In practice, this means that, when an employee sees a need for a product or a service, either a form is filled out or a higher authority is informally requested to initiate the procurement process. And this is where the first challenge arises: You need to find out who is responsible. That person could be a supervisor, the manager of a department, a cost center manager, or an individual responsible for budgetary matters.

Informal requests such as those by e-mail commonly lack important pieces of information that purchasing requires. It is therefore not unusual to have to call back with queries. Usually, a paper application form directly captures all relevant information. However, this still involves all the disadvantages of paper: The authorized signatory must receive the document physically, and there is little flexibility as to when the document can be released or submitted, let alone flexibility as to the location from which the task is performed.

A departure from copy and paste

In the next step, hopefully after not having waited all too long or receiving all too many queries, the request goes to purchasing. The data must now be transferred to the SAP system so that a purchase order can be generated. Depending on the form of the request, copy-and-paste or manual data entry are prevalent. Barring any missing approvals or points for clarification, the order can be triggered in SAP. It is either printed out and sent to the supplier by mail or may even be sent digitally as a PDF by e-mail.

This lengthy process can be shortened with a workflow solution. The request is then created digitally, either via a web client or in an SAP Fiori app, or an experienced SAP user enters the data directly into SAP GUI. The requisition notice has been received digitally and all information is standardized and centrally available, which is a considerable benefit for purchasing. Manual compilation of information has been eliminated, and the time-consuming queries of the past simply don’t come up any more. The steps to follow – forwarding the request for review or approval – can also be automated using a workflow.

After release, the requisition automatically goes to purchasing, which is responsible for reviewing it. The system then automatically generates the purchase order from the requisition in the background. No more manual steps are necessary, and the order can be sent to the supplier.

Order confirmations automatically transferred to SAP

The next step in the P2P process is for the supplier to respond to the order with an order confirmation. Here too, digitization and automation come in handy – first of all, in the transfer of incoming confirmation data to SAP. This is possible across all document types. Whether the source document is paper-based or digital, PDF or XML, document extraction technology captures confirmation data and transfers it to the appropriate field in the SAP system. Agents no longer need to type information in manually or copy-and-paste it.

Automation can be beneficial in the content check, and warnings can be generated as well, highlighting values from the confirmation if they deviate from those in the order. This simplifies verification considerably.

Discover and eliminate time-consuming routines

The next step that can be digitally automated is processing incoming invoices. Similar to order confirmations, invoices arrive either digitally or in paper form, at a central location or to the attention of a specific person. As expected, there are various options for automation here as well. This includes extracting the data from the invoice and transferring it to the designated SAP fields, eliminating a costly, time-consuming routine. The agent only needs to verify and validate the document reading results.

Content matching can also be automated for invoices with PO reference. The software checks whether the invoice and purchase order details match and whether the goods receipt or service entry has already been posted. If each check has a positive outcome, then there is a three-way match. A three-way match ensures a particularly high level of security. Any manual reconciliation of these three points is no longer necessary. The process is fully automated, and virtually every error and attempt of fraud is detected early on. For the accounting department, this reduces the required effort dramatically, if not to zero. Performing a three-way check as a manual process is extremely time-consuming, making it hardly feasible in practice. The digitization of P2P processes, however, allows this check to be performed automatically. Consequently, a workflow solution significantly increases security.

Even if there is no purchase-order reference, many steps in the processing of an incoming invoice can be automated. By implementing document reading and data extraction technology, data entry into the SAP system can also be automated. Manual data entry becomes unnecessary, and only one validation step is required to ensure that the software has read and transferred everything correctly.

Automated approval and release levels

The potential for optimization through digitalization and automation also extends into the processes for approval and release. These processes always involve various people, usually from different departments. A digital workflow eliminates the need to transport documents from one desk to another, which shortens throughput times and ensures compliance with release rules and processes – provided that they are stored in the system, of course. With this given, there is no way rules can be bypassed when using automated workflows, neither during the requirements entry process through to the purchase order nor during review and approval of an invoice. Together with the reminder function and automatic logging and archiving, the software also relieves employees of a certain amount of responsibility.

The number of work steps that can be automated across the entire P2P process chain adds up. It is usually higher than most people would expect. The necessary prerequisite is the digitization of incoming documents, the extraction of data that they contain, and the automatic transfer of the data into the ERP system. This covers both incoming order confirmations and invoices, and the result is the elimination of manual data entry.

As explained above, implementing workflow-supported automation of P2P processes results in time savings, both in the short and the long term, increased transparency, improved evaluability of potential optimization, and considerably higher levels of security.

Procure-to-pay: where to start with digitization?

E-3 Magazine March 2021 (German)

About the author

Dina Haack, xSuite Group

Dina Haack is Product Marketing Manager of xSuite Group.


Click here to post a comment

  • Diana, great info. Do you know if xSuite’s invoice processing includes human in the loop automation? I’ve been looking a lot of places and have found other software that include this feature. If xSuite doesn’t have it, do you know other options that do something similar? Thank you for your help

    • Thank you for your question, Ken. Our solutions cover both approaches. On the one hand it is possible to include human staff, e.g. to validate the work steps done by the software or confirm its suggestions. On the other hand it is possible to automate certain processes to the degree that they can take place fully in the background. If you want to learn more about it, I recommend our blog article on background posting of invoices

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