Procurement Mastery Roadmap: Digitizing Source-to-Pay

The source-to-pay process takes a purchase from vendor selection to payment. Find out how to automate the process for better savings and business outcomes.
Written by:  Nikki Blank
Last Updated:  January 20, 2023
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Procurement Mastery Roadmap: Digitizing Source-to-Pay

Automation and digital administration of the procurement process is advancing quickly. As technology advances, it is easier for businesses to see real-time pricing data and, as a result, gain more control over their spend management. 

In fact, with the right strategy, your business could automate nearly half of the procurement process tasks currently bogging your team down. To maintain a competitive advantage, your procurement team must be at the forefront of these emerging technologies

The potential upsides to automating your source-to-pay process are astonishing. Automation unlocks cost savings while freeing up time for your procurement team to hunt down new sources of value for your business. 

In this article, we will break down key concepts regarding digitizing your source-to-pay process:

  • What is the source-to-pay process?
  • What are the benefits of source-to-pay automation?
  • What are the steps in automating the sourcing-to-pay process?
  • How do different technologies improve source to pay? 

What is the source-to-pay process?

The source-to-pay procurement process is the workflow companies use to find suppliers, purchase goods, track procurement metrics, and manage procurement spending. 

The importance of source-to-pay automation cannot be understated. Businesses that neglect budgetary control and spend management risk losing their competitive advantage. The first step is having clear insight into the emerging technologies that assist with all facets of procurement, such as supply chain management, sourcing, and contract management.

How is source to pay (S2P) different from procure to pay (P2P)?

The source-to-pay process differs in scope from procure to pay (also called purchase-to-pay). While P2P deals only with the purchase and payment of goods or services, S2P encompasses the entire procurement process, from vendor selection to payment remittance. 

A P2P platform helps you input existing vendor information to manage the purchase and payment workflow. S2P further helps you discover and evaluate new potential vendors to work with.

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Benefits of the S2P process

Establishing a source-to-pay process improves the efficiency and cost-effectiveness of your procurement function. Using automation to enhance the process further extends its value. 

Reduced cycle times: A streamlined process makes everything from approvals to payments go faster. This reduces the time to close on new purchases and takes the workload for closing deals off the plate of busy accounts payable professionals. 

Better cash efficiency: Source-to-pay automation allows companies to find the best deals for the items they need and process purchases with less human intervention. This results in better direct and indirect savings and higher cash efficiency. 

Fewer errors: Manual source-to-pay processes require significant work from your AP teams. When teams shoulder the burden of manual processing, errors naturally follow. Automating your source-to-pay process drastically reduces the exception rate in your purchases and invoice processing. 

Steps in the source-to-pay process

A streamlined source-to-pay process follows a predictable pattern. It begins with an intake form from your stakeholder and proceeds through sourcing, selection, order, delivery, and payment. Ideally, the process works as follows:

  1. Intake: A stakeholder with a specific need fills out an intake form and routes the purchase requisition for approval. The intake form should include all the necessary information to make the purchase. Alternatively, a stakeholder whose organization uses a source-to-pay solution selects what they need from a curated catalog or list of vendors within the platform and goes from there.
  1. Approval: Procurement researches potential suppliers and creates a shortlist. Once a supplier is selected and price and terms are negotiated, procurement transmits a purchase order for fulfillment. This process is handled within a platform, so the approval process begins with an understanding that the purchase will occur with an approved vendor.
  1. Fulfillment: The supplier delivers the goods, and procurement (or accounting) reconciles the order against the purchase order and invoice. This is called three-way matching. A platform can handle most of this process automatically while your teams work on higher-value tasks.
  1. Payment and reconciliation: If everything matches, accounting pays the invoice. In a platform, payment may be automated directly through the system. After payment, Finance tracks the data and conducts spend management to ensure supplier performance and competitive agreements. 

Refining your source-to-pay process

With so many complex new processes to consider, it may seem daunting to determine where to start automating your procurement process. Remember, the only thing you can do is start from where you are. 

If you’re currently using multiple systems scattered across departmental silos, start there. Work toward tearing down the walls of the silos and coordinating each team’s efforts. Identify each step in your procurement process and estimate the value of closing the gaps you find. Your business will see a notable boost in productivity when placing and receiving orders and processing payments.

Projects of this magnitude require champions. Find a leader to serve as the torch-bearer for the project. Your champion project leader should identify your processes’ main pain points and bottlenecks. Then you can experiment with solutions for those areas. 

Identifying the best, cheapest, and simplest solutions from the beginning goes a long way. It helps you avoid stumbling into pitfalls or burdening your IT team with a massively complex solution, only to find that it might not achieve the expected results. 

procurement tech guide
Ebook

Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

Download the ebook

How machine learning enables the source to pay process

Applications for machine learning in the procurement process handle complex rules. Machine learning requires some recognizable pattern to achieve peak performance at uncovering sourcing opportunities. For example, machine learning tools can handle spend analysis areas that traditionally require human judgment, such as assigning transactions to spend categories.

Automating this process leads to greater accuracy and wiser decision-making, thanks to real-time spend analysis information. Machine learning helps your business with supplier management by enabling you to examine in-depth information about supplier relationships. In turn, you significantly boost your strategic sourcing strategy.

Cognitive agents

Cognitive agents are synonymous with artificial intelligence in many ways. Drawing from complex master data, cognitive agents pull the information necessary to plan your sourcing strategy or determine the best course of action.

The best example of using cognitive agents is the process chatbots use. The chatbot system searches a database of the most common questions to provide predetermined answers.

In the procurement process, cognitive agents may soon be beneficial for more complex tasks, such as comparing cost, quality, and more with a database of similar products. Cognitive agents and machine learning tools handle highly complex areas, such as developing spend category strategies and identifying the most beneficial supplier relationships. 

Robotic process automation (RPA)

This is a relatively new term in the procurement playing field. In contrast to machine learning, Robotic process automation (RPA) automates simple, repetitive tasks. Using bots, RPA accesses software the same way a human would. This eliminates the need to delve into software’s underlying code and saves a lot of time and resources. Robotic Process Automation easily handles many source-to-pay processes, such as invoice processing, ERP, and RFx.

Smart workflow

Traditionally, siloed departmental tasks contribute to wasted time and increased effort to be consolidated. Smart workflows link tasks performed by different people using different machines to streamline processes, such as risk management, and organize them around journeys. For example, tasks can be routed between the procurement and finance teams to simplify contract management. 

Instead of making incremental gains by applying optimization efforts in each department silo, smart workflow processes produce tangible benefits for the entire organization. They begin closing the black holes caused by lag time and lack of coordination between tasks. As a result, businesses experience better forecasting, spend management, and cost savings. 

Natural language processing (NLP)

Natural language processing is technology that allows computers to understand and respond to human speech in text or voice format. (If you’ve ever asked Siri or Google “Where is the nearest gas station?”, you’ve used NLP.) 

Natural language processing, especially when combined with RPA, streamlines the procurement process by organizing unstructured data found in free-form text. It searches through suppliers’ information for specific terms and matches the order requirements, such as pricing, to groups of suppliers.

After automatically sending out requests for bids, a member of your team receives the bids and makes the final determination. NLP is most useful as a connection between human input and structured data that machines use. 

Automation is an untapped source of value

The value generated by automating your source-to-pay process is shown in:

  • Reducing the amount of work
  • Reducing cycle times
  • Improving compliance
  • Creating significant cost savings
  • Having better supplier management

By finding the right procurement software that mimics its human equivalent, your company streamlines business processes and contract management with ease. 

Work smarter, not harder, to maintain your competitive advantage. Letting the machines do the repetitive tasks is definitely smarter. It frees up your team to focus on strategy. Plus, there’s an added benefit to procurement automation that is sometimes overlooked: employee happiness.

How Order.co supported ZeroCater’s source-to-pay automation

An employee calling a task “the bane of their existence” is your first clue that there’s an issue. If your accounts payable team is frequently asking what website employees are purchasing from, it’s time to investigate solutions to compliance issues seriously. 

This question and sentiment alerted ZeroCater that they had serious issues within their procurement process. Lack of clarity in their approvals process led to rogue spend and inaccurate spend analysis—ultimately negatively impacting their cash flow. 

After implementing Order.co, ZeroCater was able to:

  • Significantly reduce their cycle times
  • Streamline their payment process
  • Get the entire team on board with a more efficient process 

As a result, ZeroCater cut their invoices from around 200 per month down to three or four—a whopping 50x reduction. This freed their procurement and finance teams to identify new sources for creating additional value. 

Order.co focuses on providing the best user experience with a single platform that streamlines every level of your procurement process. We provide an end-to-end purchasing and payment platform with intuitive functionality and solid integrations to help your procurement team’s onboarding go smoothly. 
Request a demo of Order.co to see how procurement software centralizes and streamlines your source-to-pay process.

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