Although the terms source-to-pay and procure-to-pay may seem similar, they are a bit different from each other. Both of these processes have a significant impact on business finances, but one is a bit more in-depth than the other. At the end of each process, all of the vendors are paid, and the invoices are satisfied, but the amount paid and the amount saved will be very different if the processes are not carefully planned and implemented from start to finish. What is the difference between the two? Keep reading and find out.
What is Procure-to Pay?
Procurement in the business world is to obtain goods and services for the company in order to conduct business or make a profit – or both. The procure-to-pay process is the events that take place in order to obtain the goods and services, navigate through the buying process then pay the vendors for items that were bought. In the procure-to-pay process, the goods and services are already in place and available from the vendors, in most cases. What this means is that the procurement department already has sources for the goods and services, so they obtain what they need and go through the steps necessary to get the goods and services, then pay for them.
What is Source-to-Pay?
Source-to-pay is the process that starts with planning for the whole s2p before even starting. After planning, the team will discover the needs and demands of the business, then they will initiate finding and securing suitable sources for the goods and services that are required.
Finding and securing high-quality sources is part of the planning stage so that the team has time to compare and evaluate the sources to determine which ones will bring the highest benefit to the company.
After the sourcing is established, the next phases of the procurement phase will come into effect. Buying the goods and services, then paying for them and satisfying the invoices for the vendors.
The Planning Phase
The planning phase of the source-to-pay and the procure-to-pay process is probably the most important phase in the whole system. In both processes, every step of the way can be scrutinized and optimized for maximum benefit. The differences between s2p and p2p are that with p2p the sources are already available and ready to order from. When it comes to s2p, the sources have not yet been acquired, so the need for evaluation and speculation is still present. The planning phase allows the company to get a close look at each possible vendor and source by using software and common sense to find the sources that have a better track record, provide more robust services and goods, have the best prices, and so on. From sourcing to buying the goods and services the planning phase will be able to adjust the outcome of the entire process before it even starts.
Sourcing vs Procuring
As we mentioned above, sourcing is finding sources for goods and services that are necessary for the business, and procuring is obtaining goods and services for sources that have already been established. As prices, deals, and the quality of goods and services can fluctuate with changing seasons, it is a good idea to fluctuate with the changes and be willing to seek out fresh sources on a regular basis. Procuring goods and services from sources that can change from time to time could actually result in losses. Sourcing is seeking out and finding fresh sources while procuring is using the ones that are already in place. Pretty simple.
In the end, if you put source-to-pay in the ring with procure-to-pay in a head-to-head match to see which one is better, the answer is that it all depends on the needs of the business at any given time. Source-to-pay carries quite a bit more weight because it starts out with a plan and can pinpoint problems before they even occur. Whichever way is best for you, as long as you take the time to plan it all out and make intelligent choices along the way, you will get the best results.