CA Ajay goel
Quick Summary
In the world of business, there are two fundamental processes that keep the wheels turning Procure to Pay (P2P) and Order to Cash (O2C). Think of P2P as the way companies buy things they need, and O2C as how they sell their products or services and get paid. These processes might sound a bit compli
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FAQ :
The Procure to Pay (P2P) cycle is a business process that covers how a company acquires the goods and services it needs. It involves steps like identifying a need, creating a purchase requisition, seeking approval, selecting a supplier, placing an order, receiving goods, and finally, settling the invoice with payment.
The Order to Cash (O2C) cycle is a business process that manages the journey from receiving a customer order to collecting payment. It includes order processing, invoicing, delivery, payment collection, reconciliation, record keeping, reporting, and customer relationship management.
The P2P cycle is likened to a shopping trip where a business identifies a need (like needing chocolate sauce), creates a shopping list (purchase requisition), gets approval, chooses a store (supplier), makes the purchase (purchase order), receives the goods, and pays the bill.
The O2C cycle can be illustrated with a bakery receiving an order for cupcakes. This involves processing the order, invoicing the customer, delivering the cupcakes, receiving payment, reconciling the payment, keeping records, analysing sales, and maintaining a good customer relationship.
P2P and O2C are crucial as they ensure efficient management of a company's resources and revenue. P2P guarantees that a business can obtain necessary resources while maintaining financial discipline, and O2C drives revenue generation, allowing the business to thrive and grow.
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