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The source-to-pay process begins with strategic sourcing, offering a much better and tightly integrated solution that helps companies by improving internal controls and also improving vendor relations. The traditional procure-to-pay (P2P) process begins when a purchase requisition is sent for goods or services. The final step in the entire process is when the payment is cleared and issued to the vendor by the AP department.
With source-to-pay, the process also includes additional activities relating to sourcing, including finding, negotiations, and contracts with vendors for goods and services.
Source-to-pay solutions leverage the power of technology, including big data and integrated platforms to optimize procurement processes. Instead of thinking about procurement as a bunch of discrete tasks, organizations that focus on source-to-pay bring together key business processes to improve their spend analysis and maximize value. The key steps include:
This encompasses the entire end-to-end process from the moment demand arises for goods and services until payment is cleared.
The source-to-pay process offers considerable advantages, driving business value and helping procurement teams manage operations and relationships better. Companies that use a source-to-pay platform experience the following benefits.
With greater transparency and a more comprehensive understanding of the entire sourcing and procurement process, companies can evaluate offers from several vendors and select the most affordable option. Since everything is handled through a centralized platform, it becomes much easier to compare and select the best option.
Source-to-pay significantly improves regulatory and procedural compliance. Since POs can be matched quickly with the terms in the original vendor contract, companies can improve compliance, which reduces the risks of undue penalties or fines.
Predictability is very important for growing businesses. With a source-to-pay platform, companies can make accurate forecasts about business performance and their overall procurement process. It allows them to prepare more accurate cash flow forecasts and reduce the risks of overstocking or understocking.
Source-to-pay improves collaboration between trading partners, allowing companies to quickly send purchase orders, receive confirmations from vendors, including details regarding delivery. This also improves trust and significantly reduces friction in the procurement process.
Risk management is critically important throughout the procurement process. With a S2P solution, companies can establish an onboarding process for new vendors, mitigates risk and the potential for fraud. Only vendors who are pre-approved will be onboarded, so companies won’t have to worry about fraudulent invoices either.
With S2P software, companies can accurately identify different sources of spend data within the organization, review it for any errors, and create reports that follow a specific format. This makes it easy to review the data later on, which ultimately improves the process of vendor selection, spend management, and also improves cash flow.
While source-to-pay and procure-to-pay are relatively similar, there are a few key differences. In essence, the former begins a step before the P2P process kicks in. S2P also factors in the sourcing process, whereas the procure-to-pay focus starts when a purchase requisition is made.
By focusing on strategic sourcing, companies can select the best vendors to buy from, and negotiate deals to get the best prices. This not only tightens internal controls, but also improves efficiency throughout the supply chain and simplifies key business processes.
SoftCo Vendor Management is a fantastic solution that lets you work with preferred vendors. It optimizes purchasing, reduces costs, and eliminates repetitive tasks. SoftCo Vendor Management lets preferred vendors submit their invoices straight from the Portal and has an automated onboarding process that complies with AML regulations.
It helps organizations streamline vendor lifecycle management by a considerable margin, automating workflows and allowing business leaders to make smarter decisions pertaining to procurement.