Procure To Pay

Procure to Pay
October’2020
CONTENTS
1) Definition of Accounts Payable

2) Procure to Pay cycle- PTP life cycle
3) Sub process involved in accounts payable
4) Purchasing/Procurement department
5) Key steps in Procurement
6) Vendor Master
7) Invoice/Types of Invoice/Modes of receiving invoice
8) Invoice Indexing
9) Invoice processing/1way, 2way, 3way & 4way matching
10) Invoice Rescan
11) Goods receipt note (GRN)
12) Payments & Methods of Payment
13) Supplier Queries
Presentation Title | to
WK Procure Author | Date
Pay| Oct’ 2020 © Capgemini 2017. All rights reserved | 2
WHAT IS ACCOUNTS PAYABLE?
Accounts Payable is a liability due to a particular creditor when it order goods or services without paying in cash up front, which
means that goods are bought on credit.
What is Procure to Pay?
Procure to Pay is also known as PTP. Procure to Pay is the process of Requisitioning, Purchasing, Receiving, Paying for and
accounting for goods and services. It gets its name from the ordered sequence of procurement and financial processes starting with
the first steps of procuring a good or service to the final steps involved in paying for it.
PTP LIFE CYCLE
1) Requirement Identification & Purchase Requisition
This is the first step in the purchase-to-pay cycle, whenever there is a shortage/need of raw materials or services or any parts needed to
continue the operation, the person in charge will identify the need for the material or the service.
The need for the material or service is then informed to the purchasing department by creating a purchase request/requisition.
The purchase request/requisition will be submitted to the purchasing manager for approval.
What is Purchase requisition?

Purchase requisition is a document used when an employee needs to make a purchase or an order request on behalf of their company.
Purchase requisition consists of following details:
 Description of the Item/Service

 Part Number, if applicable
 Quantity Required of Material (Unit of Measurement (UOM) can be No., Kg, Ton, meters etc.)
 Approval from the Department Head
 Approvals from Finance Department (for budget)
PTP LIFE CYCLE
2) Source Determination/Vendor Identification

The vendor selection is a subsidiary process that allows clearly stating, defining and approving those vendors which meet
requirements of the procurement process. Often vendor selection criteria vary between organizations.
Key Criteria for Vendor Identification:
 Years in business: You need to know that the company is established and ready to service your requirements
 Ability to constantly supply products or services: You need your products and services on a regular basis. A vendor
that has supply issues will affect your ability to supply your customers and this is an important factor when selecting a
vendor.
 Flexibility to allow changes in orders or product lines: All businesses need to change their orders sometimes – if
your vendor heavily penalizes you for doing this – perhaps they are not the one for you and you need to move on with
selecting a vendor
 Substantial catalogue of products or range of services: This not only indicates an established vendor of size, but
also means that you have flexibility in your ordering. As your business grows, you can keep with the same vendor. It
also means that you are able to minimize the number of vendors you are dealing with.
 Sustainability and financial stability: The last thing you want is to have to change your vendors very quickly
because one of them has gone out of business
 Prices: Discounts on the price list are always negotiable, but they are an important part of selecting a vendor.
 Delivery times: You need to know that deliveries can be made where and when you want them. The number of
deliveries per week or month may also be important to you.
 Terms of business: Payment terms are particularly important as they impact upon your cash flow
PTP LIFE CYCLE
3) Request for Quotation: Requesting potential vendors to submit a quotation for a material or services. Quotation contains the
vendor’s terms and conditions and constitutes the basis for vendor selection
4) Purchase Order/PO Creation:
Purchase Order (PO) is a formal request to a vendor to supply certain materials or services under the certain conditions. A
Purchase Order (PO) can be created with reference, or without reference to a purchase requisition, a request for quotation, or
another purchase order.
PO’s usually specify terms of payment, incoterms, delivery date, specifications, material Qty, price and reference or part numbers.
Types of purchase orders
 Standard Purchase Order: Standard PO’s are the most common types of purchase orders. Here, the buyer already knows exactly
what type of item does he need- its quantity, how much it costs, has agreed with the vendor about the payment terms and when it
should be delivered.
 Blanket Purchase Order: If they buyer knows what item is required, but does not know how much or when it needs to be
delivered, in this case blanket purchase order can be created.
 Service Purchase Order: Service purchase orders are entered for services that are procured. These purchase orders are different
from standard ones as they don't require a goods receipt since they have no stock.
PTP LIFE CYCLE
6) Goods Receipt: Once the supplier delivers the promised goods/services, the buyer inspects the delivered products or services to
ensure that it complies with the contract terms. The goods receipt is then approved or rejected based on the standards specified in the
purchasing contract or purchase order.
7) Invoice Verification: After Goods Receipt process, next process of PTP is invoice verification. It plays an important role in
procurement process and Materials Management Module which performs the following tasks.
A Vendor Invoice can be created with reference to a Purchase Order, a Goods Receipt, a Delivery Note..
Invoice is verified in-terms of prices, quantity, necessary approvals by project managers. After verifying all the data, the invoice is
posted and the data is saved in the system.
8) Payment to Vendors: The last step in procurement process cycle is payment to vendors, vendors get paid as per payment terms.
Payment to vendors can be made through various methods. For example – through EFT, Direct Debit & Cheque payment etc.
SUB PROCESSES INVOLVED IN PTP
Purchasing/Procurement
Vendor Master Invoice Processing
Department
Payments Query resolution
PURCHASING/PROCUREMENT DEPARTMENT
Procurement:
Procurement is a process or a function associated with the buying of goods and services to support business operations.
Key steps of the procurement include:
Planning\Need analysis – planning for requirements in terms of quantity, timing & quality Strategic sourcing – Decision making
process for selection of vendors. Purchasing – Actual Process of raising/creating Purchase Orders (PO). Purchase Order Administration
– Tracking through the order cycle. Ongoing cost and supplier performance management.
Direct procurement:
Mostly used in manufacturing industries. It encompasses all items that are part of finished products, such as raw material, components
and parts used in building the product.
Indirect Procurement:
Activities concerning “operating resources” that a company purchases to enable its operations. It comprises of a wide variety of goods
and services, from standardized low value items like office supplies and machine lubricants to complex and costly products and
services like heavy equipment and consulting services.
PURCHASING/PROCUREMENT DEPARTMENT
Purchase Order (PO) is a formal request to a vendor to supply certain materials or services under the certain conditions. A
Purchase Order (PO) can be created with reference, or without reference to a purchase requisition, a request for quotation, or another
purchase order.
Purchase Order consists of following details:
 Name & address of the company
 Bill to Address
 PO Number & Date
 Buyer Name & Email address
 Ship To address
 Name/Address of the supplier
 Description of goods or services
 Price
 Freight (If any)
 Insurance (If any)
 Payment Terms
VENDOR MASTER
Vendor Master Data Management (VMDM)

Vendor management is the process of managing suppliers and is an integral part of the procurement process. The vendor management process
optimizes the way an organization interacts and collaborates with its suppliers.
Vendor Master Data base
The vendor master database contains information about the vendors that supply an enterprise. This information is stored in individual vendor
master records.
Vendor Master Data base consists of following details:
1) Vendor ID 2) Vendor Name 3) Vendor Address 4) Tax ID 5) Phone Number 6) Email Address
7) Contact Name 8) Payment Terms 9) Contact Name 10) Currency 11) Banking Details 12) Vendor Type
* (Different Vendor Types: Utility Vendor, Regular Vendor, One Time Vendor, Statutory Vendors)
Types of Vendor Master requests:
 Vendor Creation request: This type of request is received when procurement department purchases Goods and Services from a new supplier
and vendor details are not available in vendor master data base. In this case, New vendor has to be set up in database.
To have new supplier set up in the system vendor should provide above details on VCF (Vendor creation form) along with Tax forms (E.g. W9, W8
etc.)
 Vendor Modification request: This type of request is received when there is a change vendor details. E.g. Address, Email ID, Tax ID, Vendor
name & Banking details.
INVOICE PROCESSING
What is an Invoice?
An invoice is a time-stamped commercial document that itemizes and records a transaction between a buyer and a seller. If goods or services were purchased
on credit, the invoice usually specifies the terms of the deal and provides information on the available methods of payment.
Invoice copy consists of following details: Header Of

Invoice
Header of Invoice:
 Name/Logo of the seller
 Contact Information of the seller
 Billed To: (The bill-to address is where you send customer invoices and other billing
related information)
 Shipped To: (The ship-to address is the physical address were customer shipments
are sent)
 Invoice Date: (Invoice generation date) Body of
 Invoice Number: (Unique reference number for invoice) Invoice
Body of Invoice:
 Details of goods & services rendered (Qty, Price, Service period)
 Discounts offered (If Any)
 Applicable Taxes
 Total Amount due with currency
Footer: Footer
Payment Terms
Preferred Method of payment
INVOICE PROCESSING
Different types on Invoice

 Standard Invoice: A standard invoice is issued by a business and submitted to a client. This is the most common form of invoice that
businesses create and the format is flexible enough to fit most industries and billing cycles.
 Credit Invoice: A credit invoice, also called a credit memo, is issued by a business that needs to provide a client with a discount or a
refund, or to correct a previous invoicing error. A credit invoice will always include a negative total number. For example, if a credit
invoice is issued to a client to detail a $50 refund, the total on the credit invoice would be -$50.
 Pro Forma Invoice: A pro forma invoice is an estimated invoice that a business sends to a client before providing their services. A pro
forma invoice provides the client with an estimated cost of the work to be completed. Pro forma invoices may have to be altered once a
project is complete to accurately reflect the hours worked. NOTE: This is not valid invoice for payment
 Recurring Invoice: Recurring invoice are useful for businesses that charge clients the same amount periodically for their services. E.g.
Rents
 E-Invoice: An electronic invoice (e-invoice) contains data from the supplier in a structured format that the buyer's financial system can
automatically recognize, without requiring manual data input from the administrator.
 Utility Invoice: A utility bill is a detailed invoice, issued and paid once a month from utilities, including electric, natural gas, water, and
waste.
Modes of receiving invoices from vendor

 Scanned copies- Paper Invoices Converted to digital format and sent for processing
 Emails- Invoices sent by vendor through emails
 Fax- Invoices sent through fax
INVOICE PROCESSING
What is Invoice Indexing?
Invoice indexing is the process of tagging information on the invoice to a workflow or document management system with Vendor
number, Invoice Number, Invoice Date, Invoice amount & accounts reference for the invoice which helps users to easily access the data
they require in future.
Key fields indexed in workflow:
 Invoice Number
 Invoice Date
 Amount
 Document Type (Credit note/Invoice)
 Vendor Name
 Vendor Number
 PO Number
 Company Code
INVOICE PROCESSING
What is Invoice Processing?
Invoice processing refers to the entire process for handling a supplier invoice, from its receipt to when it has been posted in the
ERP (Enterprise resource planning) system and is ready for payment.
What is Invoice matching?

Invoice matching is the process of comparing information on the invoice with supporting documents such as a purchase order,
goods receipt, and contract. The invoice matching process aims to ensure accurate vendor payments and correct accounting of
costs; it also enables compliance to purchasing contracts and easy detection of potentially fraudulent invoices.
Types of Invoice Matching:
 One Way Matching is done for Non-Po Invoices, here validity of Invoice and necessary approvals from Finance team is
verified.
 Two Way Matching is used to compare the invoice received from vendor with the Purchase Order
 Three Way Matching is used to match the details of PO, Goods Receipt/GRN and the Invoice document received from
vendor.
What is GRN (Goods Receipt Note)?

GRN acts as internal proof of goods received to process and match against your supplier invoices/purchase orders. Goods
Receipt Notes. The goods receipt note is an internal document produced after inspecting delivery for proof of order receipt.
Generally produced by your stores team.
INVOICE RESCAN
Invoice rescan Request?

Invoice Rescan request is made to the requestor when the processor is unable to read the details of invoice copy due to poor image
quality or when multiple invoices are scanned as one document.
Request for rescan are sent in below scenarios:
 Request made to the requestor/concerned team, asking to rescan the invoice image with good clarity in readable content if the
invoice image is poor quality & unable to read the Invoice details in order to review & process the invoice for payments.
 Multiple invoices in single attachment, request to rescan the multiple invoices into individual invoice request.
Rescan request scenarios:
 Scenario 1: Invoice from vendor “ABC Healthcare” was received for
processing, however details on the invoice copy which is required for Poor Image Quality
processing is not legible. In this scenario invoice will terminated and sent
back to the sender or directly to vendor requesting to rescan the invoice with
readable quality.
 Scenario 2: If Invoice number 9847 & 9848 is scanned together and sent for
processing as one document, in this case processor rejects/terminates the
document and sends back to requestor/vendor asking them to split and rescan
the invoice# 9847 & 9848 separately.
PAYMENTS
Vendor Payment: Once the invoices are processed it will be sent for the payment. Payment can be made in one or more of the following ways
based on the Payment terms. The mode of payment is agreed upon at the time of the contract.
What is Payment method?

Payment method is the way one pays for the transaction.
What is Payment term?

Payment term is the condition under which a seller will complete a sale. These terms specify the period allowed to a buyer to pay off the amount
due.
Different modes of Payment:

 Electronic Fund Transfer (EFT): EFT is a system of transferring money from one bank account directly to another without any paper money
changing hands. In other words EFT includes any transfer of a fund that is initiated by electronic means, such as an electronic terminal,
telephone, computer, ATM or magnetic tape.
Two categories of EFT are Wire Transfer & ACH
 Wire Transfer: A wire transfer is an electronic transfer of funds. Under wire transfer, transfer of funds takes place from the customer’s
bank account to the supplier’s bank account electronically. Customer will give a wire message to his bank to transfer the funds to the
supplier's account. It is used for both domestic and international transfer of funds.
To enable wire transfer, a supplier should choose wire transfer as the mode of payment and also provide their banking details at the time of
setup.
PAYMENTS
 ACH (Automated Clearing House): It is a secure, private network that connects banks by way of the Federal Reserve Board
or other ACH operators. It is a batch oriented EFT system governed by the NACHA which provide for the interbank clearing of
E-payments for participating financial institutions. A Receiver authorizes an Originator to issue ACH debit or credit to an
account. The Originator then creates an ACH entry to be given to an Originating Depository Financial Institution (ODFI), which
can be any financial institution that does ACH origination. This entry is then sent to an ACH Operator (usually the Fed) and is
passed on to the Receiving Depository Financial Institution (RDFI), where the Receiver's account is issued either a credit or
debit, depending on the ACH transaction.
 Purchase Card (P-card): P-card refers to a purchasing card. It is an enhanced credit card issued by a banking organization and
given by a business entity to its employees. Authorized personnel can make small purchases of goods & services using P-card. P-
cards can only be used by the individuals named on the card. Once the company receives the bill from the issuing authority, it will
verify the purchases made and the payment will be sent directly to the bank.
 Cheque Payment: Cheque is a negotiable instrument drawn on a bank for making payment to a specified supplier.
 Direct Debit: Direct debit is a type of pre-authorized payment which allows a bank to pay the certain amount directly to a bank or
company at regular intervals. Money is automatically taken from the bank account, so organization can pay regular bills and easily
organize your payments (E.g. Rent)
QUERY RESOLUTION
Supplier query is handling and resolving all types of issues and questions raised by vendors. Below are the common queries which are
raised by vendor to accounts payable team.
Query Types:
Invoice Payment Status: Supplier requests AP team to provide the status of Invoice and details of payment date.
Remittance advise: Remittance advice is a proof of payment document sent by a accounts payable team to vendor.
COMMONLY USED ERP’S IN ORGANIZATIONS FOR ACCOUNTS PAYABLE
Great Plains (GP)
About Capgemini
A global leader in consulting, technology services and digital transformation,
Capgemini is at the forefront of innovation to address the entire breadth of clients’
opportunities in the evolving world of cloud, digital and platforms. Building on its
strong 50-year heritage and deep industry-specific expertise, Capgemini enables
organizations to realize their business ambitions through an array of services from
strategy to operations. Capgemini is driven by the conviction that the business value
of technology comes from and through people. It is a multicultural company of
200,000 team members in over 40 countries. The Group reported 2016 global
revenues of EUR 12.5 billion.
Learn more about us at

People matter, results count. www.capgemini.com
This message contains information that may be privileged or confidential and is

the property of the Capgemini Group.
Copyright © 2017 Capgemini. All rights reserved.

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Procure to Pay

1) Definition of Accounts Payable

1) Requirement Identification & Purchase Requisition

What is Purchase requisition?

Purchase requisition consists of following details:

 Description of the Item/Service

2) Source Determination/Vendor Identification

Types of purchase orders

Payments Query resolution

Vendor Master Data Management (VMDM)

Invoice copy consists of following details: Header Of

Different types on Invoice

Modes of receiving invoices from vendor

What is Invoice matching?

Types of Invoice Matching:

What is GRN (Goods Receipt Note)?

Invoice rescan Request?

Request for rescan are sent in below scenarios:

What is Payment method?

What is Payment term?

Different modes of Payment:

COMMONLY USED ERP’S IN ORGANIZATIONS FOR ACCOUNTS PAYABLE

Great Plains (GP)

Learn more about us at

This message contains information that may be privileged or confidential and is

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