Figure C10b.4 Procurement – Payment

Figure C10b.4 respects present Project management (PM) rules and describes Payments in the procurement processes in the same way via components (steps) of today's frequently used. The Payment function reflects the conditions surrounding the payment part of a sale, typically specified by the seller to the buyer.

Procure-to-pay is integrating purchasing and accounts payable systems to create greater efficiencies. It exists within the more extensive procurement management process and involves four key stages:

• Selecting goods and services

• Enforcing compliance and order

• Receiving and reconciliation

• Invoicing and Payment

Payment, like Purchasing, and Sourcing, is divided into six steps. The below-described steps reflect the  present stages of Procurement (e.g., by Wikipedia).

Their adaptation to the new project paradigm is a task of future teams. Similarly, like Sourcing and Purchasing steps, all Payment actions should be transformed into the Smart Contract technology in the environment of the Blockchain operations (see chapter B, Challenge).

The triad of a goal of the Payment in Procurement covers:

• Vendor payment: vendor payments (also called accounts payable or invoice to pay) are paying vendors with whom the organization or project has contract ties (for the goods and services or works). 

  So, vendor invoices are requests for products, services, and the works payment. Invoices represent a bill for ongoing services or can be based on purchase orders for specific items and services.

• Purchase order (PO) and Payment: is an official document issued by a buyer committing to pay the seller for the sale of specific products or services to be delivered in the future. 

  Each PO has a unique number that helps buyers and sellers track delivery and payment. The advantage to the buyer is the ability to place an order without immediate payment.

• Invoice approval is reviewing and approving supplier invoices before the payment is processed. Typically, the invoice approval process begins once the buyer receives (through email, post, etc.) a supplier invoice. 

  The goal is to reduce errors (e.g., reduce under, over, and double payments, reduce or eliminate, e.d., fees (type of payment) for unauthorized products or services, and help to manage cash spending by allowing invoices to be paid based on the monthly budget, etc.).

The triad of a path of Payment in Procurement covers:

• Requisition: a requisition in Procurement is a request for goods or services made by an employee to the person or department in a company responsible for purchasing. If the request is approved, that entity will submit a purchase order (PO) to a supplier for the goods or services.

• Conduct three-way matching: to ensure payment is made, the "three-way match" concept refers to matching three documents - the invoice, the purchase order, and the receiving report. The procedure ensures that only authorized purchases are reimbursed, preventing losses due to fraud and carelessness.

• Records keeping: procurement records include all documents relevant to the pre-tendering, tendering, and contract administration phases. It should be possible to reconstruct the entire Procurement and contract administration processes from these records and the procurement closing results. 

Organizations and projects need goods, services, and works records to prepare accurate financial statements and better loans for their business future. These include income (profit and loss) statements and balance sheets.

These statements help in negotiations with banks or creditors and are helpful for business and strengthen the position of the organization or any project owner on the fair market.

Figure C10b.4 - diagram's reading follows the same methodology described in the Sourcing section, and the reader of this text is asked to read both diagrams themselves. The purpose of the diagrams is to assist with scaling activities.