What is Source to Pay (S2P)? How Does Source to Pay Differ from Procure to Pay?

Source-to-pay (S2P) is an end-to-end process that goes one step further than procure-to-pay (P2P) by adding strategic sourcing to the procurement process, where the acts of sourcing the best vendors and working out a deal with them is added to the process, ultimately resulting in payment for their goods or services. 

What Steps Are Involved in Source to Pay?   

S2P isn’t a completely separate process distinct from the procurement process. Instead, it’s a digital journey that leads to e-procurement. Here’s a typical route that journey often takes:

1. Demand. First, there must be a need for some service or product. Alternatively, a need for a lower price or better terms could create the demand. 
2. Sourcing: In this step, potential vendors in the supply chain are located and evaluated. This sourcing strategy can be achieved using software platforms that handle large amounts of data on historic spend, market trends, and company goals. Vendors that pass minimum standards can be cataloged in an onboarding process that is seamless. 
3. Preparing a bid: RFx documents are assembled. These materials could include requests for information, proposals, and quotes. 
4. Decision making: In the fourth step, candidates need to be reviewed. Some will be chosen and others not. 
5. Contract management: Next, it’s time to add successful vendors to a supplier management database and negotiate pricing and contract terms. 
6. Contract signing: Once the terms of a contract are finalized, it’s time to wrap up the document and sign it. 
7. Transition to procure to pay: With the signing of the contract, it’s time to pass the baton to the procurement team, who will be responsible for handling all purchase orders, invoicing, and payments. 

What Steps Are Involved in Procure to Pay? 

For spend management, a procurement organization will follow a flexible outline that completes the source-to-pay process by adding these steps:

1. Requisition: A purchase requisition begins the journey of obtaining goods or services and paying for them. E-procurement software operating on a single platform streamlines the process significantly. At this point, a pre-selected group of vendors has already been established. One that offers best pricing and terms for the particular good or service in question will be chosen. 
2. Creation of a purchase order: The requisition is used to create a PO. This has to be approved in-house before it is sent to the appropriate vendor. Once the vendor accepts the document, it becomes legally binding at that point. 
3. Materials or services are received: Orders for goods need to be reviewed. It’s also a good idea to cross-link the paperwork from the items received to the original PO. This is also the point when refunds and returns should be handled, if necessary. 
4. Invoice processing: The invoice will be received from the supplier; it should be verified against the purchase order and other paperwork. An invoice that is correctly reconciled should be prepared for payment. 
5. Payment. The accounts payable department transfers the appropriate amount of money to the vendor. 

What Are the Benefits of S2P and P2P?

When businesses need to find new vendors that offer better terms, lower prices, or new goods that current suppliers don’t offer, the S2P process is effective at realizing these goals. A complete supply chain can be consolidated using both S2P and P2P procedures, and this leads to a higher level of procurement efficiency.

Other specific advantages of source-to-pay and procurement-to-pay include the ability to:

• Combine important processes into a single sourcing and procuring platform
• Improve regulatory, procedural, and contractual compliance
• Achieve more accurate and consistent forecasting
• Enhance collaboration and spend among suppliers and other trading partners

P2P and S2P tools also help to evaluate suppliers against numerical standards. These include:

• Cycle times for e-invoicing and purchase orders
• Number of on-time deliveries
• Pricing

What Are the Advantages of Using S2P and P2P Software?

The bottom line is that businesses that have the right digital tools in place will have a competitive advantage over other enterprises that don’t have modern software. The benefits of such computer programs include:

• Real-time data analysis
• Long-term cost savings
• Process automation
• More accurate spend analysis
• Reduced processing costs
• Easier cash flow analysis
• Business processes are simpler
• Streamlined supply chain management
• Risk management is more efficient
• Supplier information is easier to track
• Overall user experience is better

What Software Platforms Are Available for S2P and P2P?

There are many digital tools on the market for P2P and S2P functions. They offer a variety of resources at varying costs. Examples include:

Oracle Procurement Cloud:

This digital platform from Oracle delivers many user-friendly tools AP offices need in order to make sourcing and procurement as quick and efficient as possible. Resources in the software of special importance include:

• A collaboration tool for suppliers, which allows them to share commentary and documents and transact digitally. This feature is designed to function seamlessly with minimal training. 
• Requisition automation with invoice matching. 

Pricing for Oracle’s Procurement Cloud starts at $405 per month per user. 

SpendBridge:

With this company’s software-as-a-Service (SaaS) format, it’s possible to accomplish a host of S2P and P2P functions. For example:

• SpendBridge helps to connect multiple ERP tools under one roof. 
• SpendBridge’s web-based platform provides tools to pay suppliers quickly and easily.
• All forms are digitized, creating a completely paperless S2P and P2P environment. 

Coupa Procurement:

This software program delivers real-time budget management tools that help track current spend against goals. Included at no extra charge are machine learning tools and an artificial intelligence; they detect fraud and errors automatically. Other services the digital platform offers include:

• Widgets to store contracts and monitor compliance.
• Procurement management tools that help reduce redundancy and wasteful spend.
• Purchasing software that seamlessly tracks PO’s and reduces cycle time.         

Source-to-Pay and Procure-to-Pay Tools Help Streamline AP Offices

Locating suppliers, filing contracts, and making payments don’t have to translate into a laborious and time-consuming process anymore. AP departments that engage in source to pay and procure to pay will find their tasks easier, more cost efficient, and quicker if they adopt today’s software designed for such tasks.