In this blog series, I will review some of the critical documents and milestones in the Procure-to-Pay process, explaining what each steps means and how they impact the business.
Once a purchase need is identified, one of the first steps in the Procure-to-Pay (P2P) process is to secure an approved Requisition.
What is a Requisition?
A Requisition (or Purchase Request) is an internal document used to approve a purchase. The purpose of a Requisition is to make sure that buyers/end users have all of the necessary approvals from their managers, finance, etc. to complete a purchase before a commitment is made to a supplier.
Each organization will have their own defined approval process for Requisitions based on the purchase type and total cost. For large spend purchases (i.e. multi-million dollar piece of equipment), this may mean collecting approval from the executive team before proceeding. Alternatively, small purchases (i.e. new office chair) may only need sign off from your manager.
Why is a Requisition important?
The Requisitioning process is an essential step to make sure that you have the proper sign-offs from your internal team to engage the supplier(s) in purchasing goods or services.
Recently, I was asked by a client to help review and improve their Requisition workflow to ensure that the company was not engaging suppliers when there wasn’t an approved budget. While this company was using Requisitions, it was more of an afterthought by many stakeholders in their quest to identify a supplier for their purchase needs. As the client looked to strengthen financial and budget controls across the organization, they identified the Requisition workflow as an opportunity to quickly address this issue.
In their current process, a contract could be fully executed with a supplier without an approved Requisition and, at times, work may have already begun with that supplier. In the new process, they simply changed the order of steps in their current workflow so that an approved Requisition must be submitted to Legal before they will execute a contract and subsequently issue a PO.
What can you do to improve the Requisition process?
One of the main issues we hear from clients about their P2P process is that it takes too long – there are too many approvals and requests just sit in a queue for extended periods of time. There are many ways to help diagnose what is causing these delays in the turnaround times, but one way to help speed up the process is to introduce technology.
There are many solutions that automate the P2P process by establishing electronic requests and automated approvals. The tool will have built in workflows that will circulate your request to the necessary approvers based on the value, your department, the purchase category, and any other parameters defined by your organization. As individual in the workflow receives the request, they are able to easily approve through the tool and that request will then automatically send to the next person in line. Many of these tools also offer functionality to alert/remind approvers if requests are pending to help minimize delays.
Before you introduce technology, it is important that you first review the process in place to understand if the issues may be tied to the policies/procedures. By reviewing the approval workflow, signature authority levels, and purchase thresholds to ensure that these still align with the current state of the business, you may be able to address many of the challenges faced today.
In future posts, we will review the additional steps in the P2P process to provide insight into documents, approvals, and best practices to ensure that your organization has the right controls in place to effectively monitor purchasing activity.
Corcentric’s Advisory experts can help to review your current P2P process to identify opportunities to drive efficiency and help you achieve your Procurement goals. Similarly, Corcentric offers solutions to help automate your P2P process. Contact our Procurement experts to learn more about how we can support your business objectives.