How to Run a Simple ‘Procure to Pay’ Process

How to Run a Simple ‘Procure to Pay’ Process

The purchasing process for organizations is a little bit more complicated than just ordering and paying for products. Companies don’t want products just once but actually need a constant supply of goods when and where they need them. ERP tools like SAP Business One can help in the Procure and Pay (P2P) process. The P2P cycle in SAPcaptures information about every step and keeps you updated in real-time. Let’s have a look at the basic overview of the P2P cycle in SAP and how you can optimize the entire process.

Procure to Pay Cycle Overview

Step 1: Purchase Order

This is the first step in the Procure to Pay process. In this step, you create a purchase order (PO) that contains the details of the services or items you wish to purchase and send it to the vendor. The purchase order document includes agreed-to quantities and prices as well. A PO acts as your commitment towards the vendor saying that you’ll purchase their items.

Step 2: Goods Receipt PO

After the purchase order is created and sent to the vendor, they denote the delivery of the goods to you. A goods receipt PO document is drafted that is not only a verification of goods being delivered to the buyer but can also be used to update the inventory values and quantities.

Step 3: Accounts Payable Invoice

After the delivery of goods, an accounts payable invoice is generated by the vendor to request a payment by the buyer to be made to the vendor. It contains all the information about the goods or services being delivered and their costs and the buyer can use it as an invoice to pay the vendor.

Step 4: Outgoing Payment

This is the final step. The purchase order is received, goods are packed and delivered, and an invoice is generated by the vendor. All that’s left is for the buyer to pay the vendor for the goods or services they receive. In general, there are 4 ways of sending outgoing payments to vendors: cash, bank transfer, credit cards, or checks.

SAP Business One has a banking module that makes it easier for buyers as well as vendors to process payments.

Key Master Data in Purchasing

The purchase order requires key master data information from the vendor as well as the item. Let’s see what data is required from both.

  • Vendors

The vendor master data contains basic information like the contact details of the vendor or the person, mode of payment, addresses, and more. SAP Business One maintains three types of business partner master data and vendor data is one of them. It contains information about who is supplying what to the organization.

Vendor master data can be used in every purchasing transaction and can be used in manual as well as automatic financial procurement transactions. In SAP Business One, you can find information about any vendor and can even enter new vendor information while the purchase document is being created.

  • Items

Item master data is another key piece of information for the purchasing process. The header contains general information like the unique ID, product description, price of the item, and more. There are also checkboxes on the right to indicate if the item is offered as a sale, or if it is kept in inventory or both.

Information about the manufacturer, shipping methods, and additional identifiers are present in the General tab. Details about how to identify the item, its dimensions, units of measurement and such are recorded in the Purchasing data tab.

How to Optimize the Procurement Process

While the above process is normally followed across organizations, sometimes you may be in a hurry and need to process to execute faster. In such a case, there are a few things you can do to streamline the procurement process and receive the item quickly.

You can call and ask the vendor to deliver the item on the same day without creating a purchase order. The item is delivered with a vendor invoice and instead of creating a goods receipt PO, you process the payment and receipt of items directly by entering the A/P invoice.


The P2P cycle in SAP consists of four steps in general: purchase order, goods receipt PT, accounts payable invoice and the outgoing payment. SAP Business One is an excellent tool for managing the complete cycle from start to finish. For companies looking to streamline their procurement process, they can contact an SAP B1 partner to help with the details of the process.

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