If you run an office supply store and decide that you need to purchase a large number of laptops to stock your store, you will try to find the most affordable and best quality laptops that you can buy in bulk. You'll look at different laptop vendors, evaluate the costs of working with each, determine if the quality of their products matches what you're looking for, and then determine who to buy the laptops from.
By completing these actions, you are starting the source-to-pay (S2P) process, which is something all companies go through when working with suppliers. Keeping expenses low while maintaining steady income streams is vital to the success of your business, and mastering the S2P process is one of the most effective ways to reduce business costs.
Here are some questions this article attempts to answer:
- What is the source to pay?
- What is the difference between S2P and P2P?
- What is the origination to payment process?
- How does payment origination benefit your company?
What is the payment source?
Source to Payment, commonly referred to as S2P, is the entire end-to-end process of deciding if you need a certain product or service, finding the best supplier to work with, starting the procure-to-pay process, and making a purchase. and receive the merchandise in question. Like most business processes today, navigating from source to checkout with the right S2P software solution has numerous benefits. You'll notice easier supplier relationship management, faster delivery times, and reduced pricing models.
The source-to-pay process may seem very transactional, and parts of it are, but it is also incredibly reliant on supplier relationships, smart strategizing, and constant improvement. If you or your sourcing team can make the S2P process a priority, you will see how many benefits can be gained from it.
S2P vs acquire to pay
You may be thinking, “What is the source of payment? Is it the same as trying to pay?
S2P and P2P are not the same; The P2P process is integrated into the S2P process. In short, the S2P process is broader; It covers more steps than the P2P process. However, the P2P process is a subset of certain steps within the S2P process.
S2P begins the moment a business leader decides that a supplier needs a new good or service. Then you go on to find suppliers, evaluate prices, submit information requests, finalize supplier selection, create purchase orders, receive products, and make invoice payments. It can take weeks or even months to complete the source-to-pay process in its entirety.
The P2P process, on the other hand, begins after a supplier has been selected. The procurement team takes over from the sourcing team and continues working through the procurement activities of the S2P process. These include management purchase orders and purchase requirementstrack product delivery times, ensure receipt of goods, and work with the accounts payable team to complete payment to the supplier associated with the bill that matches the transaction.
Overview of the process from origin to payment
If your sourcing team essentially has a checklist of everything that needs to be completed during the source-to-pay process, they are less likely to miss something, expose their business to risk, or miss out on a beneficial sourcing opportunity. Even more, standardizing source-to-pay action items makes it more possible to trim the process, find synergies in your business, and implement a source-to-pay system that enables process automation and streamlining. supplier incorporation.
The steps of the S2P process are:
Identify business needs
Without the need for a new product or service, a company simply would not begin the source-to-pay process. Remember, in business there needs to be demand. In this case, your need for laptops is the demand. Once you're established, start shopping around.
Sourcing Supplier Options
There are many laptop vendors out there. Find several that look promising. Do you like the offer they have? Do your prices seem fair? You can use a source-to-pay system to help identify potential suppliers, track the S2P process with each one, and create a database of information if you ever go through this process again (which you will!).
Select a provider
Once you have submitted requests for information (RFIs), proposals (RFP) and quotes (RFQ), you will receive a series of responses from the suppliers to whom you sent them. You will look at the responses, determine which vendor best suits your needs, and choose one or several vendors to move forward with based on your purchasing needs.
Finalize contracts
With the selected suppliers, it's time to put pen to paper. You will create legally binding contracts that outline the partnership with the supplier, onboard suppliers into your source-to-pay system, and engage the procurement team to finalize the P2P section of the S2P process.
Obtaining
The above contract is not the same as a purchase order. Once the supplier contract is established, the procurement team will create a purchase order for what they need and send it to the supplier. Once the supplier accepts the PO, it is legally binding on both parties. Finally, the supplier will send the notebooks to your store according to the purchase order.
Supplier invoice processing
Once the products have been shipped, you will receive an invoice from the supplier detailing how much you must pay to complete the transaction. Make sure you stop by three way match process to ensure that the invoice matches the purchase order and the items received.
Complete payment
At this point, the accounts payable team will complete the payment. Depending on the agreement with the provider, the provider may use EFT, ACH or EDI payments. AP automation software It is a great tool for simplify invoice settlement.
Origin-to-Payment Benefits
The source-to-pay process has been around for a long time. Although the steps have remained relatively the same, the way they are completed has changed with the use of digital tools, P2P software, and automation capabilities.
Because it's more optimized than ever, businesses are seeing countless benefits from careful, optimized source-to-pay management, including:
- Improved supplier relationships are a wonderful outcome of today's S2P process. Streamlined process steps make it easier to work together, and technology can help create deal structures that make everyone happy.
- By finding the best suppliers at the best prices, your organization can save money. Whether purchasing in bulk, agreeing to a long-term supplier contract or switching from an old supplier to a new one, the pay principle is sure to help you realize savings over time.
- Data tracking is much more precise. This helps with audit trails, supplier analysis, and business forecasting in this space.
- As you continue your relationship with each supplier, you will need to ensure that the partnership remains favorable. The source-to-pay process can help you track specific metrics with ease, monitoring your suppliers' performance and getting ahead of any issues.
- Internal collaboration is supported at every step. Your sourcing team has to work well with procurement, and at the end of the process, accounts payable steps in to get you to the finish line. This collaboration can break down functional silos and illustrate the benefits of working together in different capacities.
Thinking in the future
The source-to-pay system brings supply, procurementand accounts payable functions together. Without each functional expert doing their job, the process would fall apart and jeopardize the health of your business. If you run an office supply store and can't seem to keep laptops stocked because your S2P equipment is failing, you may very well go out of business. Although we look at the S2P process holistically, opportunities for improvement can be found by delving deeper into the responsibilities and functionalities of each role.
AP may represent the end of the process, but ensuring invoices are paid on time is crucial to holding up your end of the deal. with the right AP Automation software like Nanonetworkscan avoid common mistakes in the S2P process. Effective AP Management can help mitigate S2P challenges that come with late payments, poor invoice management, and overall supplier relationships. When you optimize the supplier payment process, everyone wins.
technology is a part of business today, no matter what industry you are operating in. How can you integrate technology into processes like S2P to make your employees' lives easier, build better external partnerships, and get the most out of your investment? If you're not sure where to start, implementing a source-to-pay system is the perfect place.
