IFS ERP Finance- P2P (Procurement to Pay)

Objective:

By the end of this article, you will get to know a high-level understanding of the IFS Finance P2P process.

• What is P2P Process?
• How does the P2P process work in IFS ERP?

What is P2P Process?

Procurement to pay process starts with initiating the internal purchase request based on the demand and ends with payment to the vendor.

Accounts payable is a department that is responsible for the processing of Vendor/Supplier Invoices and payments during the P2P process.

However, there are many steps in between which are used to perform by various other departments of any organization.

The P2P process includes the following activities which are normally performed by different departments. Let’s understand…

• When there is a need for any item or service by any department and at the same time, required items are not available within the organization. The concerned department sends the request to the purchasing department.
• The purchase department sends a request for quotation (RFQ) to multiple suppliers/vendors to get quotations for the cost, quality, and lead time of delivery. (This step, may not perform if the organization has already authorized and registered a vendor for particular goods or services or the value of the item is very low. For example need for stationery items then usually the purchasing department directly goes for the purchase order. or even employee buys from their pocket and later they got reimbursement)
• Once the purchasing department received the quotations then they start comparing all the quotations to find the best quotation which has a minimum cost, minimum delivery lead time, etc.
• Purchasing department raises the PO to the supplier/vendor with all the details such as required quantity, wanted date of delivery, terms & conditions, taxes, and agreed price.
• The vendor accepts the Purchase Order and agrees to deliver the goods/service on the agreed price and date.
• The vendor delivers the goods to the store along with the Supplier Invoices/Bills.
• Accounts Payable department book the vendor’s Invoice in the accounting/ ERP system and create the supplier’s liability.
• Once the vendor invoice is authorized for payment, then the cash or treasury department releases the payment to the supplier.

This is how in general, the p2p process works. Now, let's understand how the p2p process works in IFS, and as an IFS Finance Consultant what you must know.

How does the P2P process work in IFS Finance?

IFS uses industry-standard best practices to follow the P2P process with 2 and 3-way matching. IFS, tightly integrated with multiple domains save a lot of time and increases data integrity. In IFS p2p process also starts from requisition, purchase order, goods receipts, supplier invoice, and then payment.

Let me explain the steps in detail…

1. Any department of an organization can create the material requisition demand in IFS. The material requirement can be generated in multiple ways like Shop Order, Work Order, Project, Material Requisition, etc. (No Accounting Entry)
2. Then, the purchasing department creates a request for quotation to get the various quotation from different vendors/suppliers. (No Accounting Entry)
3. After the selection of a vendor, purchasing department creates the Purchase order in IFS which define all the requirement of goods and services along with the wanted date, price, taxes, etc. (No Accounting Entry)
4. When the vendor supplies the item to the store at that time IFS creates 1st accounting entry automatically which Debits the Inventory and credits the Interim purchase liability posting control. This is the Integration point of two modules of IFS (i.e. Supply Chain and Finance). [Note: All the automatic accounting is based on the posting control rules defined in IFS. please refer to my other article to know more about IFS Posting controls.]
5. When the accounts department receives the Supplier Bill/Supplier Invoice then they need to book the actual supplier liability in the IFS supplier Invoice screen which automatically creates the accounting when the user posts the Invoice, the status of the invoice change to “Posted”. Debit Interim purchase liability and credit the Supplier liability posting control. At this time system reverse and nullify the account “Interim Purchase Liability” and book supplier liability. (Please refer to another article to understand in detail Posting Control in P2P)
6. All the supplier Invoices should be in “PostedAuth” status to make the payment which means the Invoice should be authorized for payment. So, in this step normally the authorized person who passes the bill normally makes the Invoice posted authorized so that the cash/treasury department can process the Invoice for payment. (No Accounting Entry)
7. Once the Invoice is posted and authorized, it is ready for payment. The cash/Treasury department can process the invoice for payment in IFS. Mainly, there are two screens “Mixed Payment” and “Supplier Payment”, any screen can be used to make the supplier payment. When the officer selects the Invoice then and approves the payment it creates another payment voucher with automatically accounting entry. Debit Supplier liability and credit the Bank or Cash. Now, supplier liability also nullifies, and no amount is pending to the supplier for this particular invoice. However, we can make a partial payment for any invoice and remain we can pay later.

In my next article, I would discuss IFS Posting Control for the Accounts Payable Module, posting control configuration is a very important process that saves a lot of time for the finance department and creates maximum accounting entries automatically.

Please let me know if you want to hear about any other topic related to the IFS Finance modules. Also, if you have any doubt, I would be happy to assist you. you can reach me at vivekkhare22@gmail.com