🛒 F&A Process Guide

Procure-to-Pay (PTP) — Complete Guide

Procure-to-Pay (PTP) is the end-to-end process that begins when a business identifies a need to purchase goods or services and ends when the supplier is paid. A well-run PTP process saves costs, reduces fraud risk, and strengthens supplier relationships.

▶ Start: PTP Cycle Overview

• 1️⃣ Purchase Requisition (PR) → Approval
• 2️⃣ Purchase Order (PO) → Sent to Vendor
• 3️⃣ Goods/Service Receipt → 3-Way Match
• 4️⃣ Invoice Processing → Verification
• 5️⃣ Payment Approval → Bank Transfer
• 6️⃣ AP Reconciliation → Period Close

🔷 Purchase Requisition to PO

Every purchase begins with a Purchase Requisition (PR) — an internal request for goods or services. Once approved, it becomes a Purchase Order (PO) — a legally binding document sent to the vendor.

• PR contains: Item description, quantity, estimated cost, cost centre, requester, delivery date
• Approval Matrix: PRs routed based on value thresholds — e.g., <₹50K → Manager; ₹50K–5L → HOD; >5L → CFO
• PO types: Standard PO (one-time), Blanket PO (recurring supplier), Contract PO (agreed terms)
• In SAP: Transaction ME51N (Create PR) → ME21N (Create PO)
• Best Practice: No PO, No Pay — enforce this policy to eliminate maverick spending

🔷 Vendor Management & Evaluation

• Vendor Onboarding: KYC (PAN, GST, bank details), legal verification, credit check, NDA signing
• Vendor Master Data: Centralised in ERP — company code, payment terms, tax codes, bank account
• Vendor Scorecard: Rate vendors on Quality, Delivery, Price, Service (QDPS) quarterly
• Preferred Vendor List: Approved vendors for category-wise procurement — reduces sourcing time and risk
• Dual Control: New vendor creation requires maker-checker approval to prevent fraud

🔷 Invoice Processing & 3-Way Match

The 3-Way Match is the most important control in PTP. It compares three documents before approving payment:

• 📋 Document 1 — PO: What we agreed to buy and at what price
• 📋 Document 2 — Goods Receipt Note (GRN): What was actually received
• 📋 Document 3 — Vendor Invoice: What the vendor is charging
• ✅ Match: All three agree → auto-approve for payment
• ⚠️ Mismatch: Price variance, quantity shortfall → hold invoice → raise query with vendor
• Tolerance: Set acceptable variance (e.g., ±2%) below which auto-match is still allowed

🔷 Payment Processing & Treasury

• Payment Run: Batch payments processed on fixed days (e.g., every Tuesday & Friday) — reduces bank charges
• Payment Terms: Net 30, Net 45, 2/10 Net 30 (2% discount if paid within 10 days) — always negotiate
• Payment Methods: NEFT, RTGS, IMPS, Cheque, LC (Letter of Credit for imports)
• Cash Discount Capture: Always take early payment discounts — 2/10 Net 30 = ~36% annualised return
• Payment Fraud Controls: Dual signatory for payments >₹5L; bank account change requires physical verification
• In SAP: F110 — Automatic Payment Program runs batch payments

✅ End: AP Reconciliation & Aging

• AP Ledger vs Vendor Statement: Reconcile monthly — identify disputed invoices, double payments, unapplied credits
• Aging Buckets: 0–30 days | 31–60 days | 61–90 days | 90+ days overdue
• KPIs to Track: Days Payable Outstanding (DPO) = AP ÷ (COGS/365); Invoice Processing Time; % invoices matched first time
• GSTR-2B Reconciliation: Match vendor invoices in GSTR-2B with your purchase register for ITC claims
• Stale Cheques / Unclaimed Payments: Write back to income after limitation period