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The Procure-to-Pay Process: What It Is, Best Practices, and More

MHC Team      Written: August 18th, 2021      Updated: January 13th, 2023  

The Procure-to-Pay Process What It Is, Best Practices, and More Banner

The procure-to-pay (P2P) process is an integral part of every organization. Any company that hires outside vendors or suppliers needs to have a procure-to-pay process in place in order to track and complete external payments.

It’s a complex process that can be both time-consuming and prone to error when run manually. But when it’s done right, organizations can see major benefits that can spur growth. Learn more about the procure to pay process and how to maximize its efficiency below.

What is Procure-to-Pay?

Procure-to-pay (P2P) refers to a collaboration between an organization’s purchasing and accounts payable (AP) departments to secure goods and services that meet the organization’s needs. The aim of P2P is to integrate those functions and create a smoother procurement workflow with closer control and deeper visibility into every stage of a transaction. A P2P approach often allows an organization to centralize its procurement efforts while reducing avoidable errors and gaining useful insights into spend and cash flow.

Learn more about the differences between P2P and S2P

Understanding the P2P Cycle

The procure-to-pay (P2P) process is an integral part of every organization. Any company that hires outside vendors or suppliers needs to have a procure-to-pay process in place in order to track and complete external payments.

It’s a complex process that can be both time-consuming and prone to error when run manually. But when it’s done right, organizations can see major benefits that can spur growth. Learn more about the procure to pay process and how to maximize its efficiency below.

What Is the Procure to Pay (P2P) Process?

The procure to pay process (P2P) involves requisitioning, purchasing, receiving, invoicing, and paying for goods and services. Essentially, as the name suggests, P2P involves all of the steps involved in obtaining and paying for goods or services.

Since P2P is such a cornerstone of successful business, the benefits of implementing a well-oiled P2P process can be substantial. Those benefits range from reducing manual data entry, avoiding late fees (and sometimes even receiving early payment discounts) and minimizing data errors and compliance issues to reducing overall cost.

But before you can realize any of these benefits, it’s critical to understand exactly how the procure-to-pay process works.

The Process Flow of Procure to Pay

The procure to pay process may vary in small ways from business to business, depending on how each functions, but generally, the flow is as follows.

1. Identify Needs

First, a company must identify their needs and how to meet them. That means determining who to hire to provide the goods or services necessary to meet their needs. For example, the marketing team might determine that they need an email marketing management platform. Or, human resources might need help with hiring and decide that they should purchase an applicant tracking system.

This step includes the identification of the team’s needs as well as potential vendors and cost of the goods or services in question.

2. Create Purchase Requisition

Next, once the department that wants the purchase decides on the vendor, cost, scope and timeline, that department must submit a purchase requisition—i.e., a formal request to make a purchase—to accounting. The purchase requisition remains within the buyer’s company and does not pass to the vendor.

3. Generate Purchase Order

Once the department has created and submitted a purchase requisition—and accounting has approved it—a document called the purchase order (PO) goes to the vendor. A PO is a document sent to a vendor stating the scope of work being agreed upon. Both the buyer and vendor must approve this document.

1 2 3 The Procure-to-Pay Process
4 5 6 The Procure-to-Pay Process

4. Receive Purchase Order Approval

Next, the purchase order must be approved by various stakeholders. The first party that needs to give the green light to a PO is the buyer’s accounting team. Often, purchase orders are rejected and must go back and forth within the organization until all of the information is correct. Once the necessary teams on the buyer’s side have signed off, the vendor receives the purchase order and must then agree to it.

The process of approving purchase orders is a necessary step, particularly when companies have a manual P2P process, since approval can catch important errors. However, approval can be a cumbersome step of the overall P2P process, since the purchase order must pass through several hands and may encounter many bottlenecks.

5. Issue Goods Receipt

Once the buyer has actually received the goods that they’ve requested, they’ll then check the quality of the order: Did the vendor ship the right number of products? Is the product itself in good condition? If these sorts of things are in order, then the buyer will issue a goods receipt. The goods receipt triggers a couple of actions: 1. The supply chain department uses this document to adjust inventory accordingly. 2. Once a goods receipt has been generated, then the buyer can proceed with approving the vendor’s invoice (step 6).

6. Receive and Review Vendor Invoice

After the services or goods requested have been completed or received, the vendor will then send an invoice, which is different than a PO and a goods receipt. This invoice goes to the accounts payable team who will need to review it to ensure the information lines up with some of the previous documents generated throughout the procure-to-pay process, namely the PO and the goods receipt. This comparison of the three documents—the PO, the goods receipt and the invoice—is known as three-way matching.

Keep in mind that invoices that are not based on purchase orders, known as non-PO invoices, are not suitable for three-way matching. This makes these types of invoices more difficult to process. 

7. Approve Vendor Invoice

If everything checks out after three-way matching, then the invoice can officially be approved. Usually, this requires that the invoice be routed to someone who has the authority to approve invoices. However, teams that still rely on manual processes to route invoices for approval can quickly run into bottlenecks and delays—particularly if the designated approver is out of town or has a backlog of other invoices they’ve yet to approve.

In workflows that leverage AP automation, though, these sorts of roadblocks are easily avoided with processes like automatic approval routing with built-in scripts that reroute invoices to a secondary approver if they haven’t been approved in a certain amount of time. This way, payment can be processed more quickly.

8. Pay Vendors Through Accounts Payable

The accounts payable team must ensure the vendor invoice lands in the company’s accounting system. Some companies do this process manually, but this approach is prone to human error and is time-consuming.

To eliminate mistakes and speed up the process (thus avoiding late fees) many companies use automation software. This software can use technology such as optical character recognition (OCR) to convert image text into readable files. Without automation, each vendor invoice passes from vendor to accounts payable team to accounting system, then eventually gets paid out. With P2P automation, it instead goes straight into the accounting system.

9. Track Supplier and Vendor Performance

You can argue that the P2P process is complete once the buyer actually pays the vendor or supplier. However, it’s important to remember that your processes, including procure-to-pay, should be based on robust data. As such, businesses need to track metrics of vendor performance such as on-time delivery, accuracy of invoicing, and so on. Tracking these metrics will help you gauge how suppliers contribute to the working relationship you have with them. Having access to this data is essential for supplier relationship management


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The Biggest Challenges in Procure to Pay

There are a lot of moving pieces involved in the procure-to-pay process, and a problem with any one of those pieces can create major challenges for procuring goods and services quickly and efficiently. Let’s take a look at several of the biggest difficulties procurement teams come up against.

Time-Consuming Manual Work

Virtually every step in the procurement process becomes more time- and labor-intensive when it is performed manually. Tasks such as manual data entry, drawing up requisitions and purchase orders, comparing each document for data matching, and physically tracking down approvals for all necessary documentation eat up a lot of valuable minutes in a workday.

Manual processes also create a much higher chance of human errors, each of which requires even more time and effort to correct. Not only is this approach time-consuming, it is also repetitive and tedious work that can cause employees to become demoralized or burned out. In an era where many employers struggle with employee retention, that can lead to even larger challenges.


Siloed Systems

The procurement process often moves through a number of departments and approvers, depending on which products and services are being procured. This can create challenges in larger organizations where different departments follow different processes, or where information is siloed between different teams.

The communication problems that arise in those situations can lead to incomplete documents, invoicing discrepancies and exceptions, duplicate payments, and many other issues that impact the successful fulfillment of the procurement process.


Limited Visibility

A manual procurement system provides very limited insight into where invoices and purchase orders are in the process, how much is being spent by each department involved in the procurement, or where any errors or discrepancies may have originated.

With no easy way to track the procurement process from start to finish, payments can be delayed or duplicated, avoidable errors can slip through the cracks, and communications between departments and with vendors can become strained and frustrating. Overspending becomes much more likely, and accountability for errors becomes much more difficult to determine.


Lack of Compliance to P2P Policies

As we spelled out earlier, a successful P2P process demands that a very specific set of steps be followed, with very little room for deviation.

Running a procure-to-pay process manually or using outdated methods offers limited oversight to ensure that teams are abiding by those steps, or following other internal policies or procedures that impact procurement.

That can quickly lead to miscommunication, missing approvals, and cutting of corners that ends up violating compliance standards and delaying the receipt of vital goods or services.


Difficult Collaboration with AP

Your procurement team needs to be able to work closely with your accounts payable team in order to make sure that all invoices are processed correctly and vendors are paid accurately and on time. 

If your AP team lacks visibility into what your procurement team is doing, or vice versa, those vital processes can be delayed or impacted by costly human errors. Not only does that hurt relationships with your suppliers, it can also create internal tension between departments.


Difficult Supplier Management

Onboarding new suppliers and maintaining strong working relationships with existing ones takes a great deal of work. Clear lines of communication and mutual understanding of relevant policies are essential for setting expectations on both sides of the procurement process. 

For an organization trying to manage procurement largely through manual processes, upholding that level of communication with multiple suppliers at once can quickly become a frustrating challenge.


Delays in Invoice Processing

Getting an invoice fully approved is not always a simple task. In many organizations, getting payment issued requires routing the invoice through multiple departments and stakeholders for approval. If a necessary approver is unavailable or simply slow in signing off on the invoice, the entire process can grind to a halt.

All invoices must also be compared against respective purchase orders and receipts of goods or services to ensure that all of the relevant data matches. If errors or discrepancies are found, your AP team must begin the time-consuming process of identifying the source of the exception and getting the data corrected before re-routing the invoice.


What is P2P Automation?

The procure-to-pay process has been revolutionized in recent years by advancements in automation technology. Automated tools can assist or fully handle nearly every step in the procurement process, from identifying areas of need to generating necessary documents to routing invoices for approval. Automation helps to create a streamlined, error-free process that significantly reduces the time and expense that goes into each new procurement.

While the specifics of automated solutions will vary extensively depending on the organization’s needs and goals, a few of the most universally useful features of automated systems include:

Three Way Matching Illustration


Before an invoice can be approved, your team needs to confirm that all of the data contained in the invoice matches the data in the corresponding purchase order and receipt of goods or services. Automated 3-way matching compares those documents against each other without requiring human touch points, speeding up the process drastically while eliminating much of the risk of human errors.


Optical character recognition is a technology that can scan nearly any kind of document and extract relevant data. That can be a huge time-saver for businesses dealing with invoices in a variety of forms, from PDFs to email attachments to Microsoft Word documents, and even scans of physical documents. OCR eliminates much of the time and risk of error associated with manual data entry.

OCR image
MHC Workflow img


As outlined earlier, an efficient procure-to-payment process relies heavily on strict adherence to a specific set of steps. In a manual system, it can be all too easy for that workflow to be disrupted or thrown out of order. An automated system ensures that all documents are routed where they need to go at the time they need to be there, with reminders and notifications to make sure that key steps are not delayed or ignored.


Processing invoices by hand takes a long time – up to 25 days for a single invoice, according to industry research. An automated invoice processing solution not only cuts that time down to three to four days, it also eliminates human touch points, greatly reducing the chance for errors and delays.


What Are the Benefits of an Automated Procure-to-Pay System?

The good news for busy procurement teams is that most of the biggest challenges of the P2P system can be mitigated using automation. Investing in an automated software solution to assist with procurement removes many of the risks and points of confusion that are unavoidable in a manual system. Let’s look at how automation can help to meet each of the challenges outlined above.

Time-Consuming Manual Work?

Eliminate human error and streamline productivity

An automated solution drastically cuts down the time required to perform many of the basics of the procurement process, and further streamlines your efforts by eliminating many avoidable errors. Manual data entry, for instance, takes up a great deal of time and leaves much more room for human error than an automated system that can use OCR technology to pull in relevant, error-free data in a fraction of the time.

Siloed Systems?

Use a single platform for the entire process

Automation helps to tear down the silos that interfere with internal communication, helping your organization avoid the miscommunications and delays that come with navigating across multiple teams and departments. A quality automated solution can move your entire procurement process onto a single platform that also integrates easily with your accounts payable system. That eliminates potentially costly barriers between departments while streamlining communication between your procurement and AP teams.

Limited Visibility?

Get a detailed view of the full P2P processes

Improved visibility into the procurement and invoicing processes is one of the biggest advantages afforded by upgrading to an automated solution. For example, using a manual process, tracking down the source of a data error often requires a great deal of effort and re-tracing of steps. An automated system running on a single platform provides a detailed view of the full procurement and payment processes and allows fast visibility into any point of the process. That makes errors and inefficiencies far easier to identify and correct.

Lack of Compliance to P2P Policies?

Perfect cohesiveness with AP and P2P

Compliance is much easier with an automated solution that allows your organization to set its own business rules. That guarantees that every step of your procurement process is completed according to the rules established by your procurement and AP teams before it can proceed to the next step. Automation also guards against potentially costly violations of governmental regulations and industry standards.

Difficult Collaboration with AP?

Work Seamlessly with AP Department

Collaborating with your accounts payable team becomes far easier with a software solution that integrates easily with your AP functions. Using software solutions including an invoice automation system creates simple, seamless cohesion between your P2P and AP systems. It also greatly reduces both processing time and the risk of human error, making your collaborations all that much more fruitful.

Difficult Supplier Management?

Manage Suppliers Easily and Efficiently

Many of the more delicate aspects of managing a stable of suppliers can be handled more effectively using automation. The onboarding process for new suppliers can be drastically streamlined using auto-generated forms, while communications with existing suppliers can be simplified by automatic notifications and reminders. Those simple measures can make a big difference when it comes to resolving concerns and questions with minimal conflict.

Delays in Invoice Processing?

Zero Delays with Automated Invoice Processing

Virtually every step of the invoicing process can be handled using an automated solution, which can reduce the time it takes to process an invoice by days or even weeks. A decreased risk of human error means your team spends less time handling exceptions and tracking down discrepancies. Especially for organizations that process high volumes of invoices, those time savings can add up to a serious financial difference.

Best Practices for the Procure-to-Pay Process

Clearly, the procure-to-pay process can get messy. The following best practices will reduce errors and streamline the process.

1. Keep it Transparent

Lack of visibility into the P2P process can leave vendors or suppliers in the dark, creating confusion and the need for excessive buyer/vendor communication. Ideally, your procure-to-pay solution will provide a self-service portal so that vendors can track the status of their invoices whenever they want.

2. Improve Supplier Relationships

When a company finds a vendor that meets their unique needs, it’s vital to maintain a positive relationship. Things like making early or on-time payments and providing easy access to vendor portals helps keep vendors happy so they’ll want to keep working with the buyer on a regular basis.

But this relationship, as with all relationships, is a two-way street. Companies shouldn’t just track their own performance in meeting vendor needs and expectations—they should also examine how those vendors treat the relationship. Do vendors or suppliers deliver goods and services on time? Do they send accurate invoices? Do they invoice promptly? Being able to measure these sorts of things can help your organization keep better track of the P2P process. But it’s important to keep in mind that monitoring these metrics manually is a difficult task and doesn’t scale well. Ideally, companies should use an automated P2P system to carry the burden of this work.

3. Integrate with Your ERP

To keep the process flowing smoothly, all of the data that’s relevant to the procure-to-pay process should live in one, easy-to-access place. By integrating your P2P process with your enterprise resource planning (ERP) system, you can knock down data silos, making sure all relevant data and documents are easily accessible to everyone who needs it, when they need it.

Find out more about ERP Integrations

4. Get Better Buy-in by Streamlining Workflows

Help employees do their jobs better by eliminating the tedium. Incorporating automation in areas like invoice routing, approval and processing, and 3-way matching makes everyone’s jobs easier. The more complication you remove from workflows, the more likely your team is to get on board with the workflows and stick to them.

5. Use the Right Procure-to-Pay Software

The best procure-to-pay software eliminates errors and delays, improves communication, cuts back on costs and creates better visibility for both buyer and suppliers.

To help you improve your process, a good P2P software should offer tools like workflow automation with invoice processing, routing and approval, vendor portals, ERP integration, and more. These solutions improve efficiency by reducing the need for employees to focus on manual entry and management.

P2P vs R2R vs Q2C vs O2C: Discover the Differences

How Can MHC Help Your Organization Learn More About P2P?

As an industry leader in automating workflows, invoice processing, and accounts payable functions, MHC has a unique insight into managing your procure-to-pay workflow. Take a look at some of our recent P2P webinars, featuring expert advice on topics such as automating key P2P functions, using metrics and KPIs to improve your P2P process, and streamlining an underperforming P2P workflow. Register for free to tap into these valuable insights!


How to Use Metrics and KPIs
to Improve Your P2P Processes

Discover how to determine the right numbers to measure and how to translate that information into action within your department. Explore examples of commonly used metrics in P2P departments. Register to watch the webinar recording!


Here Comes the Sun! How Your P2P Can Recover from a Stormy Year

Between a second year of COVID-19 and unprecedented supply chain issues, procure-to-pay teams faced a lot of unique challenges in 2021. But what if you had been prepared? How much different would 2021 have felt?


Turning Procure-to-Pay from Pain to Power through Automation

If you had the power to make the daily workloads and processes of your P2P employees easier, wouldn’t you jump at that win-win possibility? Now you can, and MHC would like to guide you through the potential of P2P automation in this webinar.

What’s Next? Find the Right Procure-to-Pay Solution

As an industry leader in automating workflow, invoicing, and accounts payable processes, MHC has deep insights into improving the procurement process for organizations of all sizes. Contact us today to schedule a demonstration of our MHC NorthStar automation solutions and learn how much easier your day-to-day workflow can be.


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