How Source to Pay Process works?

The Source-to-Pay (S2P) process, also known as Procure-to-Pay (P2P) or Purchase-to-Pay (P2P), refers to the end-to-end workflow and activities involved in acquiring goods and services for an organization. It encompasses the entire cycle, starting from identifying the need for a product or service to making the payment to the supplier. The S2P process typically consists of several stages:

1. Sourcing and Vendor Selection: The process begins with identifying the organization's requirements for goods or services and determining potential suppliers. This may involve creating a request for proposal (RFP) or issuing a request for quotation (RFQ) to invite suppliers to submit their proposals or quotes. The organization evaluates the responses, negotiates contracts, and selects the most suitable vendor(s) based on factors such as cost, quality, delivery capabilities, and terms and conditions.
2. Purchase Requisition: Once the vendor is selected, internal stakeholders within the organization initiate a purchase requisition. This document outlines the details of the requested goods or services, including specifications, quantities, delivery dates, and any other relevant information. It serves as an official request to proceed with the procurement process.
3. Purchase Order: Upon approval of the purchase requisition, a purchase order (PO) is generated. The PO is a legally binding document that confirms the organization's intent to purchase the specified goods or services from the selected vendor. It includes information such as item descriptions, quantities, agreed-upon prices, delivery terms, and payment terms.
4. Goods Receipt: When the vendor delivers the goods or completes the services, the organization performs a goods receipt process. This involves physically inspecting and verifying the received items against the details mentioned in the PO. Any discrepancies or damages are noted, and the goods are accepted or rejected accordingly.
5. Invoice Processing: After the goods are received, the vendor sends an invoice to the organization for payment. The invoice should align with the purchase order and the goods receipt. The organization's accounts payable team reviews the invoice, validates its accuracy, and matches it with the corresponding PO and goods receipt. Any discrepancies are resolved, and the invoice is approved for payment.
6. Payment: Once the invoice is approved, the organization proceeds with the payment to the vendor. This may involve issuing a payment directly, typically via electronic funds transfer (EFT) or issuing a check, depending on the agreed-upon payment terms.
7. Supplier Relationship Management: Throughout the S2P process, organizations maintain ongoing relationships with their suppliers. This involves monitoring supplier performance, addressing any issues or concerns, renegotiating contracts, and seeking opportunities for collaboration and improvement.