Source To Settle vs. Procure To Pay: Navigating Procurement Processes

Enterprises constantly look out for ways to improve efficiency, reduce costs and gain greater control over their spend. This is where two key procurement methodologies — source to settle (S2S) and procure to pay (P2P) — come into play.

Both of these terms — often interchangeably used — represent distinct stages within the procurement lifecycle. Understanding the differences between source to settle and procure to pay is crucial to streamlining spending and achieving greater financial transparency.

Procure to Pay: The Transactional Backbone

Procure to pay focuses on the transactional aspects of procurement, covering the activities that take place after the approval of a purchase requisition. P2P is essentially the process of acquiring goods and services, managing invoices, and making payments to suppliers.

Here's a breakdown of the key steps in P2P:

Purchase Requisition

An internal request is submitted by a department for the purchase of specific goods or services.

Purchase Order (PO) Creation

Once approved, the requisition is converted into a formal PO and sent to the vendor.

Goods/Services Received

Upon delivery of goods or services, a receiving report is generated in order to verify the order details.

Invoice Matching

The vendor's invoice is matched against the PO and the receiving report for accuracy and completeness.

Payment Processing

If everything matches, the invoice is authorized for payment, which can be done via agreed upon methods.

P2P systems automate the aforementioned tasks, helping enterprises eliminate manual data entry and cut the risk of errors. This streamlines the entire purchasing process and leads to faster invoice processing, improved cash flow management and better supplier relationships.

Source to Settle: A Holistic Approach

Source to settle takes a broader perspective on procurement, covering the complete procurement lifecycle from identifying a need to the final settlement with the supplier.

Here's a breakdown of the key S2S stages:

Strategic Sourcing

Potential suppliers are identified and evaluated based on factors such as cost, quality and reliability.

Requirements Management

This step involves precisely defining the specific needs and specifications for the goods or services required.

Spend Analysis

Spending patterns and potential cost savings opportunities are identified through analysis of historical purchasing data.

Contract Management

This involves creating, negotiating and managing contracts with suppliers to ensure mutually beneficial agreements.

Risk Management

This involves identifying and mitigating potential risks associated with the procurement process, such as supplier default or supply chain disruptions.

P2P Activities

This includes all the transactional activities mentioned in the P2P section such as purchase order creation, invoice processing, and payments.

Benefits of Source to Settle vs. Benefits of Procure to Pay

While S2S offers a more comprehensive approach, it's not always necessary for all types of purchases or for that matter the specific requirements of an enterprise. Here's a quick peek at the benefits of both S2S and P2P to help enterprises decide which approach is best for your specific needs:

Benefits of Source to Settle

• Increased spend visibility
• Enhanced purchasing experience
• Process automation
• Advanced sourcing capabilities
• Contract management
• Unlock capital in accounts payable

Benefits of Procure to Pay

• Easy requisition and purchasing
• User-friendly catalogs
• Trackable purchase orders
• Invoice management
• Dynamic discounting
• Comprehensive, tailored requisition-to-pay workflows

Integrating S2S and P2P for Optimal Performance

While source to settle and procure to pay represent distinct stages, they are not isolated processes. The key to achieving true procurement excellence lies in the seamless integration of these two areas. Modern cloud-based S2S platforms offer functionalities that extend beyond the strategic aspects and connect directly with P2P tasks. Here's how integration benefits your business:

Improved Data Accuracy

Streamlined data flow eliminates manual entry errors and ensures consistency between the strategic sourcing and transactional stages, minimizing delays and discrepancies during invoice processing.

Enhanced Visibility

Real-time data from both S2P and P2P activities provides a holistic view of the entire procurement lifecycle, enabling better decision-making, improved risk management, and identification of cost-saving opportunities throughout the process.

Streamlined Workflow

Integration automates tasks and eliminates manual handoffs between departments, accelerating the procurement process, reducing cycle times, and freeing up valuable human resources.

Enhanced Compliance

Automated workflows within an integrated system ensure compliance from initial sourcing to final payment.

Supplier Collaboration

Integration platforms often offer features and capabilities that facilitate supplier collaboration, often involving exchange of purchase orders, invoices, and other documents in digital formats.

How GEP Can Help

GEP’s unified procurement software platform provides a comprehensive range of procurement solutions in one system, enabling enterprises to streamline the end-to-end procurement process, accelerate digital transformation, enhance procurement and its strategic reach and impact on the business.