Procure to Pay (P2P) processes includes everything from recognizing the need for a product or service to processing the final payment. However, procure to pay challenges such as inefficiencies, delays, and inaccuracies often hinder smooth operations. Given its direct impact on an organization’s procurement and financial health, the P2P cycle demands accuracy, efficiency, and proper management.
Yet, many companies continue to face inefficiencies, inaccuracies, and delays at every step. But why do companies still struggle with such drawbacks? What are the challenges in P2P process that result in such inefficiencies? How can such challenges be overcome?
In this blog, we detail all such common P2P challenges and present strategies that enable organizations to overcome them.
What is Procure to Pay or P2P Process?
As understood by the term itself, the procurement to pay process begins with “procurement” and ends with the “payment” of final purchases. This process involves 6 major steps which are as follows:
- Identifying the Need & Creating a Purchase Requisition: Recognize the requirement and initiate a formal request.
- Selecting a Vendor via Request for Quotations (RFQs): Evaluate and choose the best vendor based on received quotations.
- Issuing a Purchase Order (PO): Finalize the vendor selection and formalize the order.
- Generating a Goods Receipt Note (GRN): Verify that the delivery matches the order specifications.
- Invoice Approval, e-Invoice Generation & Matching: Get the invoice approved from relevant authorities and generate an e-invoice simultaneously. Once generated, perform a 3-way match (or 5-way match when including additional documents) to ensure accuracy before payment.
- Processing the Payment: Complete the cycle by releasing the funds post successful matching.
Procure to Pay Challenges and Solutions
Clearly, the procure to pay challenges impact procurement efficiency. If this process is not streamlined for improved efficiency, it can affect everything from budget allocations to supplier relationships. But what are the challenges in procure to pay that affect this process? How do they affect an organization’s overall growth? Let us understand below:
1. Manual Delays & Errors
Even today, many organizations depend heavily on manual processes for their P2P cycle. Some businesses hesitate to invest in automation due to cost concerns, while others fear the complexity of integrating new software with current systems. But the costs of manual errors, slow processes, and approval delays are often much higher.
How Manual Delays Impacts P2P Processes:
- Incorrect data entry in purchase requisitions, purchase orders, invoices, and other documents can lead to payment errors, miscommunication, and disputes.
- Missing critical details like PO numbers, item descriptions, or tax breakdowns delays approvals and leads to supplier disputes.
- Lack of standardized data formats creates mismatches, making invoice reconciliation and audits more challenging.
- Excessive paperwork increases the risk of duplicate invoices, missed payments, and even fraudulent transactions.
- Slow processing times caused by manual intervention leads to delayed procurement cycles, affecting cash flow and supplier relationships.
Strategies to Eliminate Manual Errors & Delays:
- Adopt an automated P2P system to eliminate manual involvement across the procurement lifecycle.
- Implement digital purchase requisitions and automated workflows to reduce data entry errors and manual follow-ups.
- Use smart invoice scanning and Intelligent Document Processing (IDP) to capture data accurately.
- Enable real-time dashboards to monitor pending approvals, payments, and process exceptions, improving overall visibility.
2. Invoice Processing Bottlenecks
One of the biggest procure to pay challenges is dealing with invoice approval delays. Teams in procurement cycle frequently get buried under piles of invoices, scattered email threads, and follow-ups. What should be a simple process becomes a prolonged cycle of inefficiencies.
Factors Contributing to Invoice Processing Bottlenecks
- Invoices arrive in multiple formats—scanned PDFs, handwritten documents, email attachments—resulting in inconsistent data and manual errors.
- Unclear approval workflows cause invoices to bounce between departments with no progress.
- Mismatched invoice details (incorrect pricing, tax miscalculations, missing PO references) result in frequent back-and-forth communication with vendors.
- High invoice volumes during peak periods overwhelm finance teams, causing missed due dates and late payment penalties.
How to Overcome Invoice Processing challenges:
- Implement a centralized invoice processing system to manage all invoices on a single platform.
- Use AI-powered invoice capture to extract data automatically and reduce human errors.
- Automate approval workflows to route invoices to the correct approvers without manual intervention.
- Set up intelligent alerts and reminders to prevent invoices from getting stuck.
- Maintain a digital repository for all invoices, ensuring they can be retrieved instantly during audits or disputes.
3. Compliance and Audit Challenges
Every procurement transaction must comply with tax laws, internal policies, and regulatory requirements. However, fragmented processes and manual record-keeping make procure to pay challenges worse when it comes to audits and compliance.
Common Compliance and Audit challenges
- Missing or incorrect tax details result in disallowed input tax credits and potential legal penalties.
- Off-the-record purchases from unapproved vendors increase fraud risks and policy violations.
- Poor documentation practices create chaos during audits, as teams scramble to find invoices, approvals, and supporting documents.
- Constant regulatory changes (like new e-invoicing mandates) are hard to implement when processes are outdated.
How to ensure compliance and audit readiness:
- Adopt a P2P system with built-in compliance controls to ensure adherence to tax laws and policies.
- Enable automated tax calculations for accurate GST, VAT, and regulatory compliance.
- Conduct vendor verification to ensure GST health and also that only approved suppliers are part of your procurement process.
- Maintain comprehensive audit trails recording every transaction, approval, and modification.
- Monitor real-time compliance to ensure the latest regulatory changes are seamlessly incorporated.
4. Inefficient Supplier Management
A key procure to pay challenge is the inability to manage suppliers effectively. Lack of structured processes can result in procure to pay inefficiencies, causing late deliveries, miscommunication, and increased procurement costs.
Common Supplier Management disruptions:
- Frequent payment delays cause suppliers to deprioritize orders, leading to supply chain disruptions.
- No performance tracking mechanisms mean businesses continue working with underperforming suppliers.
- Pricing and contract disputes occur more frequently due to miscommunication and lack of documented agreements.
- Missed opportunities for better terms because businesses fail to leverage bulk discounts or negotiate effectively.
- Lack of Transparency and poor visibility into supplier activities and costs increases the risk of fraud and hidden charges
Strategies to streamline supplier relationships:
- Automate supplier onboarding to provide proper documentation and verification processes.
- Track supplier performance using analytics to assess reliability, pricing trends, and delivery accuracy.
- Implement payment tracking tools to ensure on-time payments, improving supplier relationships.
- Use smart contract management systems to ensure adherence to agreed terms and avoid disputes.
5) Approval Delays and Lack of Accountability
The P2P process involves multiple stakeholders—department heads, procurement teams, and finance approvers. Manual approval processes often lead to delays and confusion, especially when responsibilities are unclear.
Factors Contributing to Approval Delays
- Unclear approval hierarchies create confusion about who needs to approve what.
- Unavailable approvers cause purchase requests and invoices to sit idle for days.
- No automated reminders lead to missed approvals, further delaying transactions.
- Lack of centralized tracking forces teams to manually chase approvals, wasting time and reducing efficiency.
Strategy to Overcome This Challenge
- Implement clear approval hierarchies mapped within an automated P2P system.
- Enable automated routing and reminders to keep approval workflows moving.
- Provide real-time visibility into pending approvals so bottlenecks can be proactively addressed.
- Centralize the entire approval process on a single platform to eliminate manual follow-ups.
Conclusion
The procure-to-pay process is complex, but it doesn’t have to be inefficient. The procure to pay challenges businesses face today can lead to inefficiencies, increased costs, and compliance risks. Businesses that still rely on outdated, manual workflows are prone to errors, delays, and compliance risks—ultimately impacting their financial health and supplier relationships.
By adopting an end-to-end automated P2P solution, they can eliminate bottlenecks, gain full visibility into procurement cycles, and improve overall efficiency. From invoice processing and supplier management to compliance tracking and automated processes, a modern P2P system like GSTrobo®̥ ensures smooth operations with minimal manual intervention.
