Assessing Solutions: Source to Pay vs Procure to Pay
‘You need it? You buy it’ - if only procurement was so simple. The reality is, procuring goods - or services - sparks a chain reaction between different departments. The biggest challenge for businesses is to ensure that the process journey runs smoothly and compliantly. So where to start?
Effective co-operation between departments, accurate communication of details and efficient use of time are all must-haves for a truly optimised procurement process. Unfortunately, there are a number of ways to slip up - and it’s sometimes because organisations don’t focus on the process as a whole, but on individual, separate actions.
Even two years ago Gartner was predicting that by 2025, half of all midmarket and enterprise companies globally would seek cloud based procurement platforms - a trend only accelerated by 2020s necessity to work remotely.
Mapping out the journey from start to finish, in order to understand exactly what your procurement process requires for success is key. This is where P2P vs S2P becomes relevant.
What’s in a name?
The traditional Procure-to-pay (P2P) system has three discrete teams involved. The buyer, who has the need and provides the brief; the procurement team who make the acquisition and negotiate the rate and the finance team who process invoices and payment. Each team has its own expertise but must work flawlessly together to ensure the end result is fit for purpose.
With a Source-to-pay (S2P) process, this traditional method is enhanced, with additional sourcing tasks bolted on to the start of the process. By starting earlier in the procurement process, a S2P system offers buyers a catalogue of pre-vetted, on-boarded suppliers, maximising choice and value and ensuring rigorous corporate standards are met.
Both processes benefit from digitisation. A good P2P programme ensures the gaps in manual processes are eliminated by handling everything from start to finish. Buyers can raise POs, engage with finance teams and purchase using defined routes, ensuring that every transaction is logged and providing useful data for mining to increase efficiencies. P2P works well where suppliers are already sourced and rates have been negotiated.
Yet if your turnover and tailspend allow for it, a S2P system optimises purchasing even further. Not only - like P2P - does it prioritise efficiency, value and ease but it expands the process to include market research, new supplier sourcing, vetting and contract management. S2P is ideal for companies looking for new potential vendors, and for those needing to drill down to the bottom line to find value in every spend.
Where to start with process optimisation
There are a few points in the journey that merit close attention. The chances are, that even if you have software solutions already involved, there will be gaps where manual processes take over. Streamlining the buying process from end to end will help to optimise results.
One system from start to finish
Both methods benefit from a single, flexible solution which allows finance and accounting systems to collaborate directly with procurement software. This way, each purchase is logged and monitored, with clear visibility of progress, detail and destination. Data is then saved which provides a historic record of purchasing which can assist future spend optimisation.
Automate where possible
Watch out for opportunities to automate repetitive, time-consuming processes. Using RPA to assist will remove inefficiencies at each step - key for time-saving. Small tasks such as manually closing POs or low-value invoices which still need approval are ideal targets for automation.
Track success in each spend
Part of efficient procurement is ensuring the goods or services received are fit for purpose. In digitising and streamlining processes, you ensure you allow for reliable finance checks and confirmation along the way. Automation can help with verifying that requisitions, POs, invoices and receipts all match.
Consider whether you need more from your strategy
An intelligent, streamlined P2P system is excellent for ensuring a more efficient process from buyer to procurement to payment but it has its limitations. If you need to source vendors in a new market, need to go to tender or manage contracts, the chances are you’ll need to bolt on extra steps. An S2P platform will handle much of the sourcing, vetting and onboarding of new suppliers, saving the time and resources needed to take on such a job, but not many offer to handle tendering and contracting too. However, investing in a broader source-to-pay solution gives you a proactive, dedicated resource looking after your suppliers and benchmarking prices as well as ensuring sustainability and supply chain reliability.
So what’s the evidence for success?
Ultimately, organisations of any size can benefit from the variety of next-generation procurement optimisation tools now available in the market. This year’s Gartner Magic Quadrant report on the subject asserts that those using P2P suites will save 30% year by year on goods and services costs. Research quoted in our recent White Paper showed tailspend transactions at around £40 billion by just 8000 UK companies - yet there appears to still be a large amount left on the table when looking at the statistic that almost a third of companies report realising upwards of 10%+ savings when actively managing their spend.
So adopting a robust P2P programme is the essential first step for all businesses and is an investment never wasted - any source-to-pay needs can simply bolt on at a later date. Some ERP applications can already incorporate sourcing tools but ideally, any new P2P platform you choose would have the capacity to support S2P as a future option.
But for advanced level procurement optimisation right now, S2P applications are worth serious consideration. The best way to create lasting value is to begin at the beginning which is where S2P earns its merit. By finding, vetting, negotiating and contracting with new suppliers, you create a bespoke marketplace within your approved supply chain offering best value, enhanced reliability and ease of use right at the start of the procurement process. Extending your digitised process then drives better data collection, which in turn feeds into enhanced analytics - meaning every effort made at the start has the potential to optimise spend further as time goes on with more accurate forecasting and analysis.
System efficiencies are beneficial at all levels, but understanding that the right procurement platform could offer strategic insight across the board gives an indication of the power of these new analytical tools. Pairing the right software with the appropriate practical support provides an even more rounded solution.
To find out how the Maistro solution could be the missing piece in your P2P/S2P solution, get in touch.