Procure to Pay Process Flow in Oracle Fusion
Learn the steps that business run for P2P Cycle in Oracle Fusion
Procure-to-Pay process is the process of how business processes the transactions from the step it purchases raw material that is needed for maintaining business till the payment for this purchase. This process enables the company to fulfil a requirement for goods or services in a timely manner.
Imagine big companies not having a procurement plan and what chaos can it be to manage all steps from purchasing an item until its payment if planning is not executed in a strict order. If the company is willing to pursue a return on investment (ROI), company leaders need to develop the most relevant stages of the Procure-to-Pay process which need to be followed within the business. These steps are essential to the financial health and overall competitive strength of a business.
Procure-to-Pay Process Flow
Below are the steps for Procure-to-Pay Process Flow:
- Purchase Requisition
- Request for Quotation (RFQ)/Quotation
- Purchase Order
- Goods Receipt Note(GRN)
A requisition is a request for the goods or services. A purchase requisition is a formal document that is used when an employee needs to purchase or order something on behalf of their organization. The purchasing process is not processed when Purchase Requisition is created. This document informs the department managers or purchasing staff of the decision first. The purchasing department can start the process of purchasing the requested products or services after they receive an approved Purchase Requisition document.
Request for Quotation and Quotation
A request for quotation (RFQ) is sent to a supplier to request pricing and other information for an item or items. A quotation is the supplier’s response to that RFQ. Some examples of how you send an RFQ to a supplier include creating an RFQ in the RFQs window and sending it by facsimile, making a phone call, or using Oracle iSupplierPortal.
One way a supplier can send a quotation, whether or not in response to an RFQ, is through the Purchasing Documents Open Interface. If you don’t receive quotations electronically from your supplier, you can create the quotation manually using the Quotations window or copy the quotation from an RFQ.
You generally create a purchase order for a one-time purchase of various items. You create a purchase order when you know the details of the goods or services that you require, estimated costs, quantities, delivery schedules, and accounting distributions.
When you create a purchase order (manually or from requisitions), you can use the Supplier Item Catalog window to retrieve quotation information. The Supplier Item Catalog window can include quotations sent to you by your supplier through the Purchasing Documents Open Interface. Once the Purchase Order is approved, a detailed order form with amounts and delivery requirements is sent to the appropriate vendor for fulfilment.
Goods Receive Note (GRN)
Creating receipts is the process of recording goods that have arrived at the distribution centre into the warehouse system. The vendor delivers the goods or services and the relevant receiving document is entered, with line items verified to ensure that everything ordered is delivered.
To pay for the goods and services that the vendor provides, the company needs to receive an Invoice first to proceed with payment. But before payment company needs to validate the details shown in the invoice against Purchase Order or Receipt. If Invoice is billed without validating the information, it is much more likely that the Account Payable Unit can pay a different amount to supplier.
Say, purchase order has been created for the amount of 1000 and Receipt has been created against Purchase Order which is 1000 as well. Now Invoice is created for the amount of 1200. In this case, you will not be able to proceed with payment as Invoice will go on hold. In order to control this validation, there is a process called ‘Matching’ in Oracle. By this process, the company secures that the amount which needs to be paid to the vendor is exactly the same amount of goods and services that the vendor provided the company.
After Invoice is validated against controls, now it is time to release the payment to the vendor. You have to process payment in the system.
The payment that you need to send to the vendor is going through the bank. After the bank makes payment within a few business days (according to business needs) you receive a bank statement from the bank stating all the transactions that have been processed through the bank.
Now business will need to reconcile a bank statement with payment to ensure the right payment has been processed. After reconciliation, all accounting entries are transferred to General Ledger and this ends the Procure-to-Pay process flow.
That is it, guys:) Hope you are clear with the topic. If not, please do not hesitate to reach me.
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I am an Oracle Functional Specialist with more than 6 years of experience. I help clients to understand software capabilities and to analyze business needs. My main goal is to recommend solutions and ultimately guide through all phases of Oracle Cloud Applications. I am also inspired to write about life, improvement and personal growth.