S2P (Source-to-pay)

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What is S2P (Source-to-pay)?- Definition

Source-to-pay or S2P is the entire end-to-end process involved in procurement. It spans every process, right from spend management, strategic sourcing and vendor management to purchasing, performance management, and accounts payable.

Businesses that are using Source-to-Pay for competitive advantage have all spent and all their suppliers in one platform.  This platform connects the complete source-to-pay process internally and across the entire process to improve performance, visibility and value.

source to pay

Understanding Source to Pay

Source-to-pay (S2P) is a process that starts with finding, negotiating with, and contracting the supplier of goods, and culminates in final payment for those goods.

Source to Pay software relies on technology, big data, and digital networks to create procurement efficiency. Rather than treat procurement as a series of disparate tasks, best-in-class organizations aggregate purchases across business units to improve performance, provide better spend analysis, and drive business value. Those who adopt a source-to-pay platform:

  • See higher sourcing savings through increased visibility into procurement
  • Integrate key processes into a single platform to get to signed-contracts faster
  • Strengthen procedural, regulatory, and contractual compliance
  • Improve collaboration, trust, and spend among trading partners
  • Negotiate better pricing and have more accurate forecasting

Steps For Source to Pay

Source to Pay 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. 

Transition to source 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.

Explore Additional Resources to Know More

Vendor Evaluation Worksheet
The-Future-of-Procurements-How-Companies-Buy-Source-to-Pay-Aavenir
E-Book_Transforming-Source-to-pay-on-servicenow
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