Insights / Guide / Business process reengineering (BPR)
GuideProcure to pay: controls without delay
Purchasing needs control, but too many approvals slow the business and encourage workarounds. How to tier approvals, match before paying and use preferred suppliers well.
Procure to pay covers everything from the moment someone in the business needs to buy something to the moment the supplier is paid. It includes the request, approval, purchase order, receipt of goods or services, invoice processing and payment. Done well, it protects the organisation’s money, secures good prices and keeps suppliers content. Done badly, it is slow, frustrating and surprisingly leaky.
Purchasing needs control, but too many approvals slow the business and encourage workarounds. A team that waits three weeks for approval to buy a small item will find another way: a personal card, an expense claim, an order placed directly with a supplier and an invoice that arrives with no purchase order. Each workaround weakens the very control the approvals were meant to provide.
The goal of redesign is not less control but better-placed control: strong where the risk is high, light where it is low, and built into the flow rather than added on top.
Understand where the effort and risk sit
Before changing anything, look at the shape of your spending. In most organisations, a large number of purchases are small, and a small number are large. The many small purchases consume most of the processing effort; the few large ones carry most of the financial risk.
- Extract a year of purchase orders and invoices, and group them by value band.
- For each band, count the number of transactions and the total value.
- Measure the typical time from request to order, and from invoice receipt to payment.
- Count invoices that arrived without a purchase order, and payments made outside the standard process.
The picture this produces usually makes the redesign priorities clear. If a large share of transactions are low in value but pass through the same approval chain as major purchases, approval tiering will save a great deal of effort. If many invoices arrive without purchase orders, the request process is probably too slow or too awkward.
Tier the approvals
Light approval for small purchases, stricter for large ones.
A single approval chain for every purchase, regardless of value, wastes senior time on trivial items and delays the business. Tiering matches the level of scrutiny to the level of risk.
- Small purchases: approval by the budget holder alone, or no prior approval for catalogue items within budget, with spending reviewed after the event.
- Medium purchases: budget holder plus procurement review, to check supplier choice and terms.
- Large purchases: additional finance or senior management approval, with competitive quotes or a tender where appropriate.
- Non-standard risks, such as new suppliers, long contracts or data access, trigger additional checks regardless of value.
Set the thresholds based on your own spending pattern and risk appetite, and write them down clearly. Then make sure the purchasing system routes requests automatically according to the rules, so nobody has to work out who should approve.
Set time limits on approvals
An approval that sits unread for a week costs as much as no approval process at all, in delay if not in money. Set a time limit for each tier and escalate automatically when it passes. Report approval times by approver; the results often prompt quick improvement.
Match before paying
Compare order, receipt and invoice before payment to avoid errors and duplicates.
The three-way match is the core control in procure to pay. Before an invoice is paid, it is checked against the purchase order, to confirm the price and quantity agreed, and against the record of goods or services received, to confirm that what was ordered actually arrived. If all three agree within an agreed tolerance, the invoice can be paid without further review.
Matching catches overcharges, invoices for goods never received, and duplicate invoices submitted twice. It also allows most invoices to be processed with little manual effort, because only the exceptions need attention.
- Require a purchase order for all but a defined list of exempt categories, such as utilities or certain statutory payments.
- Make receipting quick and simple, so the people who receive goods or services confirm it promptly.
- Set price and quantity tolerances that reflect the value and risk of the item.
- Route mismatches to a named owner with a target time for resolution.
- Check for duplicate invoices by supplier, amount and date before payment.
The weak point is usually receipting. If the person who received the goods does not confirm receipt in the system, matched invoices cannot be paid, suppliers are paid late, and finance staff spend time chasing. Making receipting as simple as possible, ideally a single step on a phone or at the point of delivery, often removes the largest source of delay.
Choose preferred suppliers
Catalogues and agreed terms reduce effort and improve pricing.
Much routine purchasing, such as office supplies, maintenance parts, standard IT equipment and common services, can be bought from a small number of preferred suppliers on agreed terms. Putting their products into a catalogue within the purchasing system makes buying easy for staff and keeps spending with suppliers who offer good prices and reliable service.
- Identify categories where spending is frequent and needs are similar across the organisation.
- Agree prices, delivery terms and service levels with a small number of suppliers in each category.
- Load their items into a catalogue so requesters can order with a few clicks.
- Allow catalogue orders within budget to proceed with minimal approval.
- Review supplier performance and pricing at least annually.
Consider a typical multi-site services business where each site buys cleaning and maintenance supplies from local suppliers at varying prices. Consolidating to two preferred suppliers with a catalogue might cut the number of supplier invoices sharply, simplify matching, and improve prices through volume. Site managers spend less time buying and more time running their sites.
We removed approvals for catalogue items under a set value and tightened them for new suppliers. Purchase orders went up, invoices without orders fell, and the finance team stopped chasing approvers.
Procurement manager, facilities services client
Pay on time, on purpose
The final step, payment, is often treated as an administrative afterthought. Yet paying suppliers reliably on agreed terms has real value. Suppliers who are paid on time are more willing to prioritise your orders, hold prices and help when supply is tight. Suppliers who are paid late, or unpredictably, tend to build the cost of chasing into their prices.
- Run payments on a fixed, published schedule so suppliers know when to expect funds.
- Pay matched invoices to terms, neither early by accident nor late through neglect.
- Separate the people who set up or change supplier bank details from those who approve payments.
- Verify any request to change a supplier’s bank details through a known contact, not through the details on the request itself.
The last two points address one of the most common forms of payment fraud, where a criminal impersonates a supplier and asks for future payments to go to a new account. Simple segregation and verification close most of that risk at almost no cost.
Measure and adjust
Track a few measures that show whether the process is both controlled and fast: time from request to order, share of invoices with a purchase order, share of invoices matched automatically, time from invoice receipt to payment, and the number of duplicate or erroneous payments caught. Review them monthly and adjust thresholds, tolerances and catalogues as patterns emerge.
To start, extract last year’s purchase data and group it by value. Identify the band with the most transactions and the least risk, and design a lighter approval route for it. Pair that change with a push to improve receipting. Together, these two changes often deliver the largest improvement in speed without weakening control.
Source: Intelliversal analysis.
