What is Procure-to-Pay (P2P)?
Procure to Pay (P2P) suites are integrated solutions that optimize the workflow to request, procure, receive and pay for raw materials and services across the supply chain process, saving costs and mitigating the risks. They comprise of transactional data flow related to orders and payments of a product or service to and from the supplier.
Blockchain in P2P
Blockchain technology plays a vital role in global Business-to-Business (B2B) transactions. As P2P operations constitute several distinct systems and processes, blockchain technology assists in supporting the supply chain management. It simplifies the complicated document transactions eventually scaling downtime, cost, human errors and mitigating risk.
How does Blockchain in P2P work?
When buyers release orders for goods, a Purchase Order (PO) is created, and the transaction is reflected in the blockchain making it noticeable to the supplier.
When the buyer receives the goods, a Goods Receipt (GR) is generated and issued, eventually creating a transaction in the blockchain system. The supplier submits an e-invoice rather than submitting a hard-copy of the invoice.
The platform performs an automated three-way-matching process where it matches the PO, GR and the invoice (which is authorized by the parties in the blockchain).
The invoice, once accepted by the buyer, may also be forwarded to the bank for invoice financial services to enhance business liquidity.
The invoice is visible to the supplier and bank after it has been verified and approved. Further, the bank processes the payments. The supplier will receive the payment on the due date without submitting billing notes.
Major advantages of Blockchain for Procure to Pay process
- Improves Authentication and Validation
Blockchain technology is security compliant, prohibits fraud, and allows instant distribution of authentication rights across the P2P network.
- Improve visibility of Purchase order and goods receipt
All the suppliers are listed on the blockchain, thus eliminating the time invested in searching for the suppliers, purchase orders, and goods receipt data.
- Paperless transactions
Blockchain offers paperless transactions. Information about PO’s, GR’s and invoices are stored offline, but the transaction of the same reflects continuously in blockchain records. A blockchain distributed database makes it easier to retain records on the shared registry.
- Reduced money laundering
Suspicious transactions and anomalies can be easily traced based on past transactions. Blockchain provides transaction visibility to all the parties involved in procure to pay process, thereby prohibiting malpractices effectively.
- Retaining transparency and reliability between parties
Blockchain technology has the accountability of every transaction, building an equal amount of trust and fostering a relationship between buyer and supplier. Moreover, it also aids in building transparency and reliability for timely delivery and payment of invoices.
In the forthcoming years, industries will be facing more risk and uncertainty than ever before. Through blockchain, all transactions in the procurement and supply chain can be digitized. The solution consists of a distributed database that contains immutable ledger records, providing visibility to all parties involved in the procurement process. Blockchain can also be used as a referral in selecting an appropriate buyer and supplier in the marketplace.