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Process Definition and Functions

31 August, 2015 - 15:42

The Purchase-to-Pay process is an interacting structure of people, equipment, methods, and controls that is designed to accomplish the following primary functions:

  1. Handle the repetitive work routines of the purchasing department, the receiving department, the accounts payable department, the payroll department, and the cashier1
  2. Support the decision needs of those who manage the departments listed in item 1
  3. Assist in the preparation of internal and external reports

Review Question

What primary functions does the PtoP process perform?

First, the PtoP process handles repetitive work routines by capturing and recording data related to the day-to-day operations of affected departments. The recorded data then may be used to generate source documents (such as purchase orders and receiving reports) and to produce internal and external reports.

The PtoP process prepares a number of reports that personnel at various levels of management use. For example, the manager of the purchasing department might use an open purchase order report to ascertain which orders have yet to be filled. The cash disbursements manager might use a cash requirements forecast to help her decide which invoice(s) to pay next.

Finally, the PtoP process assists in the preparation of external reports such as financial statements. The process supplies the general ledger with data concerning various events related to the procurement activities of an organization.

Before leaving this section, we need to clarify two terms that we will be using throughout the chapter: goods and services. Goods are raw materials, merchandise, supplies, fixed assets (e.g., buildings, machinery), or intangible assets (e.g., patents, copyrights, franchises). Services are tasks performed by outside vendors, including contractors, catering firms, towel services, consultants, auditors, and the like. Employee activities feeding the payroll process are a specialized form of services.

Review Question

How, in your own words, would you define the PtoP process?