Procure-to-Pay (P2P)
Definition
The end-to-end process from requesting and ordering goods to receiving them and paying the supplier. Integrating these steps improves control and spots errors before money leaves the business.
Related Terms in Purchasing & Inventory
Moving Average Cost
An inventory costing method that recalculates the average unit cost after each purchase, so goods are issued at the latest running average. It smooths cost fluctuations in a perpetual system.
Specific Identification
An inventory method that tracks the actual cost of each individual item, used for high-value or unique goods such as vehicles or jewellery. It gives precise cost matching but is impractical for large volumes.
Inventory Shrinkage
The loss of inventory between what the records show and what is physically present, caused by theft, damage, spoilage or error. It is recognised as a cost when identified at a stock count.
GMROI (Gross Margin Return on Investment)
A retail metric measuring the gross margin earned for each unit of money invested in inventory, showing how profitably stock is being used. A GMROI above one means inventory earns more than it costs to hold.
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