Source-to-pay or S2P refers to the end-to-end process involved in procurement. The process expands its capabilities to include the “sourcing” of products and services. The source to pay process focuses on behavior–compliance and policy enforcement. It helps companies to improve their process efficiency and better spend management. However, not many organizations get the desired ROI of implemented strategies from the source to pay process. The process is shared by Procurement and Accounts Payables process, creating an ambiguity in the ownership. Although finance claims ownership, the ownership for tactical procurement is often distributed with strong stakeholders. This affects the process efficiency and transparency significantly.
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Strategies to Improve the Source to Pay Process
Improve the shared process
Discrepancies in targets for procurement and accounts payables (shared process) is one of the major reasons for inefficiency in the source to pay process. Mostly procurement targets include identifying savings, managing categories and suppliers, and supply risks whereas accounts payables targets focus on improving process efficiency to accelerate invoice management. Understanding the difference in objectives in the shared process is imperative to connect the procurement and the accounts payable process. Aligning targets can improve cash flow management and help companies to assess the supply pool.
Manage strategic and tactical spend
Procurement often refers to spend as being either strategic or tactical. Strategic spend is managed in the ERP solutions or by category-specific tools whereas tactical spend refers to spend in indirect materials and services categories. Strategic spend constitutes three-fourth of the spend and is important from the procurement perspective. On the other hand, spend value may be low for tactical spend but the volume is usually high. Therefore, companies need to manage both strategic and tactical spend to improve the source to pay process.
Establishing a common invoice management process can help organizations to channel all invoices. The process will capture the invoice data for invoices that lack purchase order, contract or goods receipt data to match against. It will provide the end-users with pre-populated fields and accounting information lessening the need for interaction with Accounts Payables.
Inability to establish an invoice management process can impact the source to pay process for companies. Stay a step ahead by requesting a free demo of our procurement platform to gain exclusive insights to improve the source to pay process.
Reconcile the purchase order
Reconciliation of the invoices, purchase order ensures that companies receive what they have ordered, and amount matches up the purchase order. Once the reconciliation has been done, Account payables can issue the payment based on the payment terms of the supplier. While paying to suppliers, companies can adopt electronic payments or payments via credit cards.