By Ruskin Singh
The procure-to-pay (P2P) process consists of a sequence of business process steps that procure goods and services and pay suppliers for these goods and services. A P2P process commences when an organization identifies a need for a product or service, creates a purchase requisition, obtains approvals, issues a purchase order, receives the goods or services, verifies the invoice against the purchase order and receipt, and proceeds to make the payment to the supplier.
It involves many departments such as suppliers, finance, and other business units. Hence a well-coordinated system ensures smooth progress through the steps and scheduled delivery of goods and services to the manufacturer and timely payment to the supplier. The business capabilities of manufacturing industries rest upon the efficiency of its Procure-to-Pay process.
Historically, it was the work of multiple business departments working in silos causing steady progress through the steps. Over the years, the entire procure-to-pay (P2P) has been grappling with invisible costs, inventory management challenges, ever-changing regulatory norms and compliance, and inefficient management of business operations to name a few. To effectively resolve these problems, some organizations decided to adopt digital transformation. Digital transformation was not enough, the industry needed a solution that was capable of “intelligently” identifying the changing data and making “smart business decisions” accordingly. With the advent of Artificial intelligence, the entire process of P2P has seen a paradigm shift.
Artificial Intelligence
Artificial intelligence is a technology that enables machines to perform tasks that require human skills and intelligence. Artificial Intelligence can bring rapid transformation across all stages of the procure-to-pay (P2P) process such as need Identification, supplier management, contract negotiation, invoice processing, and fraud detection to achieve tangible business outcomes. Today, more than 50% of top-performing organizations use advanced analytics and algorithms to carry out their procure-to-pay processes. With data-driven insights available twenty-four hours a day business decisions can be taken with confidence.
Need Identification
Artificial Intelligence (AI) by virtue of its decision-making capabilities, has brought significant changes to identify and predict the actual need of the goods and services.
Analyzing the actual needs of a business at a particular time is highly critical for the success of an organization. The Purchase requisition or Purchase request (PR) is raised based on this analysis. The Purchase requisition document contains a description of the materials required, their quantity, approximated cost, preferred vendors, etc. AI algorithm can be effectively applied to make this critical decision. Business organizations can also mitigate the risk of non-compliance, early detection of fraud, the accuracy of the invoice, and unauthorized spending with AI-powered analytics.
AI can use historical data to analyze and report unwanted purchases and save a significant amount of cost. It not only saves time but also ensures that procurements are carried out as per the actual requirements and internal policies of the organization.
Streamline P2P workflow
By automating routine tasks, detecting patterns in data, and providing real-time insights, P2P businesses can work more efficiently and effectively. An efficient workflow leads to increased productivity and cost savings for the procurement team. Real-time collaboration also reduces common human errors to benefit the business in the long run.
A comprehensive business workflow can be achieved by implementing intelligent automation at various stages of P2P such as generating purchase orders, capturing invoices, updating statuses, and keeping information consistent across the departments and business units. This will permanently resolve the problems arising due to data discrepancies and delayed payments to the supplier. It will also eliminate data silos and ensure that accurate information flows throughout the P2P processes to strengthen business growth.
Machine learning algorithms can be used to automate repetitive tasks to improve efficiency, accuracy, and speed to save manual hours of redundant work.
Fueled by the data model, an AI-powered workflow, can help you maintain vendor profiles, manage contracts, and monitor various performance metrics paving the way for timely deliveries of goods and services. Moreover, a unified interface for buyers, suppliers, procurement, and finance departments thereby creating a virtually seamless experience for the user of these departments.
AI in Procurement
The procurement department can implement advanced analytics of AI in efficiently selecting correct suppliers, ordering materials and services, and managing inventory. Procurement decisions based on poor data and analytics result in a significant amount of fraudulent expenses. The procurement department can use predictive algorithms for demand forecasting and improve working capital while helping reduce costs and risks. They can use AI, particularly in these areas:
• Smart Invoicing
Machine learning and AI models such as the Optical Character Reader technique can be used to extract data from scanned invoices which helps procure-to-pay departments to save time and effort. Efficient invoice processing reduces supplier queries and complaints. This helps procurement professionals to devote their time and efforts to value-added tasks such as cash flow analysis and improving operational effectiveness.
• Demand forecasting
Business units can leverage AI and machine learning models in procure-to-pay processes in order to predict future demand for the required goods or services based on historical data and machine learning algorithms.
• Risk assessment and prevention
In procure-to-pay process steps, machine learning models can be used to identify any possible risks for a particular supplier or vendor. AI can also suggest the steps to avoid those risks using predictive analysis.
Coupa’s AI-powered spend management tool, Coupa Software is the cloud platform for business spend. Coupa provides a unified, cloud-based spend management platform that connects hundreds of organizations representing the Americas, EMEA, and APAC region with millions of suppliers globally.
Similarly, Wipro’s AI360 is helping enterprises capitalize on the true value of Artificial intelligence.
Conclusion:
Since the rise of AI, there is hardly any industry that has not benefitted from its predictive analysis and automation capabilities. AI can streamline the entire P2P process, ensuring a smooth process and keeping your suppliers happy and satisfied. Your business can gain a competitive advantage, generate revenue, and propel growth. As organizations have started to realize the transformative abilities of AI, the usage of AI is bound to see a rise in the days to come.