What Is Source-to-Pay? +Benefits of S2P Process Automation
- June 28, 2022
Organizations often waste resources due to inefficient spending during the sourcing & procurement processes. McKinsey suggests that most organizations waste up to 4 percent of their total external spend on high transaction costs, inefficiency, and non-compliance. Implementing a digital source-to-pay (S2P) application helps efficiently manage an organization’s spend by up to 50%, driving an additional 31% in total savings.
In this blog, we explore how source-to-pay applications are a one-stop solution to streamlining strategic sourcing and procurement.
What Is the Source-to-Pay Process?
The procure-to-pay (P2P) process begins with purchase requisition and ends with the payment of goods via accounts payable. However, when you bring strategic sourcing into the scenario, there is a tightly integrated source-to-pay (S2P) process that allows procurement leaders to manage maverick spending, sourcing, and contracting for higher efficiency.
Stages of the S2P Process
The source-to-pay process includes the following stages:
- Strategic Sourcing
- Contract Lifecycle Management
- Procurement
- Invoice Management
- Payment Processing, and more.
S2P Process Steps
Due to varying business requirements, the source-to-pay process varies across industries. But the general S2P framework consists of the following nine steps:
1. Demand identification
The first step is demand identification. Procurement leaders identify a need for goods and services and better pricing opportunities.
2. Sourcing
You can automate the sourcing process using an e-sourcing application. This solution handles large data sets to derive actionable insights from historical spending and market trends. Based on the organizational goals, potential vendors are identified, evaluated, and onboarded.
3. Bidding
In this step, RFx documents, including the request for information (RFI), request for quote (RFQ), or request for proposal (RFP), are prepared, reviewed, and distributed to the potential suppliers.
4. Review & reward
The RFx responses are reviewed, and a winner is selected based on their suitability.
5. Contract negotiation & management
Post selection, the supplier is moved to the vendor management database, and contract terms and pricing negotiations begin. Once both the parties agree upon the contract terms, it moves to the signing stage.
After contracts are signed, vendors are retained for the duration of their contract lifecycle and then long enough to comply with tax-related and company-related document retention policies.
6. Purchase order
Post contract signing, there is a transition to the procurement process, and a purchase order is created for the selected supplier.
7. Invoice processing
The accounts payable team receives vendor invoices and is responsible for the entire e-invoicing process, from processing invoices, getting approvals, and generating accounting reports.
8. 3-way matching
A three-way match is suggested once an invoice is received. The accounts payable team compares the purchase order, the goods receipt, and the supplier’s invoice before approving the invoice for payment. A 3-way match helps determine whether the invoice should be paid partly or entirely.
9. Payment
The accounts payable team makes and reconciles payments to conclude the source-to-pay process, keeping suppliers informed about the status of their payments.
Challenges in Source-to-Pay Automation
S2P is a complex process, and the absence of a digital S2P integrated application suite can pose these three major challenges:
1. Non-compliance
Corcentric research suggests that S2P processes have around 50% value leakage due to a lack of compliance. Organizations use multiple, disparate systems leading to decentralized compliance, making it difficult to maintain transparency in the overall process.
2. Poor Data Visibility
It becomes difficult to maintain data visibility for the complete process unless there is an automated flow of data from one application to another to avoid any gaps.
3. Poor Collaboration
Collaboration becomes a challenge in the case of different applications as the solutions are configured by different people at different time frames, leaving scope for optimization but not collaboration.
5 Benefits of S2P Process Automation
Source-to-pay automation will reduce maverick spending, minimize supplier risk, and streamline the entire S2P process. Digital transformation of the S2P cycle can help organizations maximize ROI and build a robust supplier network.
Here are five key benefits of digitizing the S2P process:
1. Risk diversification & minimization
Most organizations were exposed to supplier risk during the pandemic. Post this; organizations focused on building resilient supply chains and diversifying the risk by creating a robust network of suppliers. S2P automation provides a single source of truth and empowers the sourcing team to drive higher value from digital procurement and strategic sourcing processes. It further helps in building a collaborative relationship between all the stakeholders.
2. Increased compliance
The automated source-to-pay process follows a guided buying approach to ward off any contract or policy violations before they even happen. Source-to-pay solution guides the user through the purchase requisition process providing value by ensuring off-contract spending is curbed, and the buyer is guided to the correct suppliers, products, and services.
3. Cost savings
Automating repetitive manual tasks saves time and unlocks savings on your spending budget. According to Ardent Partners, organizations that leverage spend analysis directly into their sourcing projects can save an average of 24%- 41% more per project, while eliminating sourcing gaps can reduce savings leakage up to 38%.
4. Seamless technology integration
A tightly integrated source-to-pay suite enables a seamless workflow across the S2P lifecycle by inter-connecting all the modules and ensuring consistent data flow. Procurement teams can easily plug-in data, maintaining the ease of information flow.
5. Higher user adoption
Organizations can only reap the benefit of digitizing the S2P lifecycle provided a large number of users feel comfortable being a part of this technological change and modify their behavior.
Implementing a digital adoption platform such as Whatfix alongside your S2P solution can come in handy to increase user adoption. Whatfix offers contextual in-app guidance, multi-format self-help content, and intuitive change management capabilities to drive adoption and help you scale your technological changes.
5 Best Source-to-Pay Software Applications in 2022
Streamlining and automating the entire source-to-pay process would be impossible without technology. These six software tools will help you build a more effective S2P flow:
1. SAP Ariba
- Pricing: Custom-pricing
- G2 Review Rating: 3.9
SAP Ariba offers procurement and supply chain solutions enabling more effective collaboration on contract management, control of suppliers, and invoicing. It’s a sophisticated solution for large companies and enterprises willing to automate the entire procurement lifecycle. The platform covers all the critical features, including:
- Sourcing
- Purchasing
- Catalog creation
- Risk management
- Intelligent spend management
- Invoice management
- Discount management
Read our blog post to learn more about SAP Ariba implementation.
2. Zycus Strategic Sourcing Suite
- Pricing: Custom-pricing
- G2 Review Rating: 3.5
Zycus is a cognitive source-to-pay platform that guides buyers toward the right purchasing paths using its intelligent self-learning engine powered by Merlin AI. It seamlessly integrates critical features like requisition, catalog management, approval, purchase orders, invoice management, analytics, and others.
3. Jaggaer
- Pricing: Custom-pricing
- G2 Review Rating: 4.5
JAGGAER offers complete digital transformation across the source-to-pay cycle with modular solutions on a unified digital platform that integrates easily with your existing ERP solution and accounting systems. The solution’s functionalities include:
- Advanced Spend Analytics
- Category Management
- Supplier Management
- Sourcing
- Contract Management
- eProcurement
- Invoicing
- Supply Chain Management
- Inventory Management
4. GEP SMART
- Pricing: Custom-pricing
- G2 Review Rating: 4.2
GEP SMART is a unified source-to-pay solution offering end-to-end procurement functionality for direct and indirect spend management from a single, cloud-native platform.
5. Ivalua
- Pricing: Custom-pricing
- G2 Review Rating: 4.0
The Ivalua Platform is built on a single code base with a highly configurable cloud. The solution is highly flexible to tailor all your business requirements, allows you to scale up or down, and be assured of the highest security and performance standards, irrespective of the device.
A robust S2P solution delivers unparalleled value to enterprises by working on the pain points of both strategic sourcing and procurement teams. However, the product adoption challenges and software complexities make it challenging to use.
It’s difficult to make employees proficient as they find it challenging to memorize certain clicks and flows to complete required tasks. Digital adoption platforms such as Whatfix are your constant in-app companions that drive S2P application adoption through engaging and intuitive content such as interactive walkthroughs, task lists, and self-help widgets.
Explore Whatfix for S2P application adoption, onboarding, training, and on-demand support now!
Request a demo to see how Whatfix empowers organizations to improve end-user adoption and provide on-demand customer support
Thank you for subscribing!