Every business needs to make purchases and procurements. It could range from raw materials and office supplies to consulting services or even licenses. This end-to-end buying process has a name: Source-to-Pay (S2P). Organisations that are serious about operational efficiency, cost control and supplier relationships understand the concept of S2P very well and the need to keep it running in a smooth and seamless manner.
So, what is Source-to-Pay? S2P is the process that covers everything involved in acquiring goods and services. It could range from identifying and selecting the right suppliers all the way to making payments. Unlike certain processes that are aligned to one single department, S2P is a connected chain of activities that spans procurement, finance, legal and operations.
The S2P process consists of two broad phases:Sourcing: This phase is the strategic first front half. It includes identifying business needs, researching potential suppliers, issuing Requests for Proposals (RFPs), evaluating bids, negotiating contracts and onboarding approved vendors. This phase is also about finding the right suppliers at the right prices and terms.
Procurement to Pay (P2P): This is the operational back half of the S2P process and is concerned with the actual execution of the planned procurements. Once suppliers and contracts are in place, this phase covers the raising of purchase orders (PO), receiving goods and services, matching invoices against POs and delivery confirmations, approving payments and reconciling accounts.
The stages of the source-to-pay process
Most S2P frameworks follow a similar structure consisting of several core stages.
- Sourcing
- Supplier selection and onboarding
- Contract management
- Procurement and purchase orders
- Receipt of goods and verification
- Invoice processing
- Payment
The S2P journey begins with identifying the right suppliers. Strategic sourcing involves evaluating potential vendors based on quality, cost, reliability and compliance. Organisations issue Requests for Proposal (RFPs) to gather supplier bids and compare offerings.
Once the best and most appropriate suppliers for the organisation are identified and selected, organisations must formally onboard them into their procurement systems. This includes registration of the vendors, compliance checks, risk assessments and integration into supplier databases. Proper supplier onboarding is needed to maintain compliance and establish transparent relationships with vendors.
In the S2P framework, contract management ensures that negotiated terms such as pricing, delivery timelines and service levels are clearly documented and enforced. Companies must have effective contract management to avoid disputes, maintain compliance, and to ensure suppliers deliver according to agreed standards.
After contracts are finalised, procurement teams begin purchasing goods or services. This stage typically involves creating purchase requisitions, approving purchase requests, generating POs and sending orders to suppliers.
When suppliers deliver goods or services, organisations verify that they meet the agreed requirements by inspecting product quality, confirming delivery quantities and recording the receipts in procurement systems. This verification ensures that organisations only pay for items that meet contractual specifications.
Once delivery is confirmed, suppliers submit invoices for payment. The invoice must typically match three key documents—the purchase order, the goods receipt record and the supplier invoice. This process, which is known as three-way matching, helps prevent fraud, billing errors and duplicate payments.
The final step in the S2P process is paying the supplier. Finance teams process payments according to the agreed payment terms and the payments can be made through bank transfers, digital payment systems or other financial platforms. Timely payments help maintain strong supplier relationships and may also allow organisations to benefit from early payment discounts.
Why is source-to-pay important?
In many organisations, S2P is highly fragmented. Sourcing could be handled by one team, the accounts payable could be handled by the finance team and so on. There is little visibility or communication between departments and teams and that causes a real disconnect leading to measurable problems. Finance leaders are unable to see committed spend, outstanding liabilities and supplier exposure in real time. As management thinker W. Edwards Deming once said “Without data, you're just another person with an opinion.” When departments are siloed and processes are not integrated, that is the position many finance teams find themselves in—leading to blind decisions and cost leakages. Supplier relationships become stronger if S2P in an organisation is managed well. This ensures that suppliers are paid on time and contracts are managed professionally.
Today’s S2P platforms leverage AI and automation to transform every stage of the cycle through intelligent supplier matching, contract analysis and automated three-way matching. According to Bain and Company, when leading procurement organisations have strong processes in place, they can bring down a company’s purchasing cost base by about 8%–12% and deliver additional annual savings of about 2%–3%. If S2P in a business runs well, it not only strengthens supplier relationships, it also improves compliance and gives finance leaders the visibility to make the right decisions. On the other hand, a poorly run S2P could end up bleeding the value of the business at every stage. It is clearly a business imperative for any organisation to get its S2P right.
How IBPM can help
Recognised as a Gartner® Magic Quadrant™ Leader in 2024, Infosys BPM brings proven expertise to finance and accounting outsourcing. Our end-to-end Procure-to-Pay Solutions cover everything from invoice processing and vendor queries to master data management and on-time payments thereby eliminating value leakages at every step. We help organisations streamline procurement, reduce costs, strengthen supplier relationships, and stay compliant, so your finance function runs leaner, faster and smarter.
