Often referred to as S2P, source-to-pay is the end-to-end process of sourcing, ordering, and paying for goods and services. It covers every step in the process, from spend management, strategic sourcing, and vendor management, through to purchasing, invoicing and supplier payments.
The model is designed for organizations with complex procurement needs who require a dedicated sourcing function.
Source-to-pay applications utilize technology, big data, and business networks to create process efficiencies, allowing companies to integrate practices, and automate their sourcing and procurement activities.
From increasing visibility throughout the process and strengthening contractual compliance, to improving collaboration and spend analysis, source-to-pay solutions allow companies to streamline processes and cut down their source-to-settle time.
What’s the difference between source-to-pay and procure-to-pay?
Although source-to-pay and procure-to-pay are similar, there are also a number of key differences between the two processes.
The main difference between P2P and S2P is the starting point in the process. P2P typically starts with the requisition of goods and services and ends when the accounts payable team pays the supplier, while the S2P process starts one step earlier, with the sourcing of goods. Also, for P2P most of your suppliers are already selected, so it's less about sourcing suppliers and more about ordering from the approved.
As a result, S2P makes strategic sourcing part of the process, ensuring the best suppliers are selected and negotiating deals with them. This helps to optimize internal controls, enhance supply chain efficiency, and simplify supplier relationship management.
Find out more about the differences between source-to-pay and procure-to-pay here.
Clearing up confusion: Source-to-settle or source-to-pay?
Source-to-settle (S2S) is another term for source-to-pay (S2P). The source-to-settle, or source-to-pay, process brings together sourcing and purchasing. The process includes the following stages:
- Sourcing (including RFx and Auctions)
- Requisition management
- Generation and transmission of purchase orders
- Receipt and processing of invoices
- Payment of invoices
What is the source-to-pay process?
The source-to-pay process starts with finding, negotiating, and contracting suppliers of goods or services and ends in the payment for those goods or services.
A full source-to-pay process map usually includes the following stages:
- A need for a product or service
- Identification of potential suppliers
- Running demos or PoCs with relevant suppliers
- Evaluating suppliers
- Contracting suppliers
- Placing orders
- Monitoring the supply of the products or services
- Authorisation of payment
- Release of payment
The process also includes all the activities that support these stages and the end-to-end operation, including supplier and master data management.