Source to Pay is an effective business process management strategy used to gain required resources or elements to meet the client’s need. The process is broken down into several steps. These steps include:
- identifying the needs of the client;
- identifying the best possible source;
- researching for the best possible suppliers;
- creating a suitable contract;
- and finally negotiating for payment terms.
As you can see, the entire process takes several days to complete. When sourcing for a company’s required components or materials, various different strategies can be employed depending on the size of the company and the available resources. Large companies usually require contracts from very reliable suppliers. To get hold of these suppliers, the company contacts a supplier via a procurement process. After determining the kind of items, the company requires, it creates a searchable database. The searchable database will contain all the relevant suppliers of the items.
Benefits:
After creating the database for the suppliers, the organization can easily start searching for the required items. Using the S2P tool, organizations can easily locate suppliers with better terms like “cash on hand”, “in-house” or “guaranteed”.
- A S2P solution also helps to determine the cost of procuring the required supplies.
- Another advantage of S2P is that it also provides feedback on the procurement process.
- Organizations can analyze the requirements and compare them with the resources available.
- In addition to providing better terms for purchase and supply, S2P also improves financial management.
- The companies do not need to maintain separate accounts payable and accounts receivable. Instead, the whole process is consolidated into one account. This helps in reducing the processing time involved.
- Organizations can use S2P to create invoices for services rendered, goods purchased, inventory, and financial accounting. In this way, organizations can track their accounts payable and accounts receivable on an effective and efficient manner.
- When sourcing activities are integrated with S2P solution, it becomes easier for organizations to automate various aspects of the sourcing activities. Invoicing, purchasing, and financial management can be done in a streamlined manner.
- The S2P solution makes it easy for organizations to follow and monitor the suppliers. In fact, the suppliers can themselves track their accounts receivable and accounts payable on a daily basis.
- Another aspect of better visibility when it comes to outsourcing is cost savings. Implementing S2P solution is beneficial because it offers a number of cost savings measures. One of these includes easier supplier selection. For instance, it has been found that sourcing activities can be optimized by using the keywords. Organizations can focus their efforts on suppliers offering the best solutions.
An integrated source portfolio solution helps in identifying the areas in which cost can be optimized. This allows for proper allocation of resources and expenditures. Moreover, it reduces the risk of overspending. Once these factors are implemented, the organization can expect to enjoy a number of cost-saving measures including reduced vendor lock-in, reduced overage charges, cost reduction in maintenance and service, improved customer satisfaction, and better visibility on supplier quality reports.
Finally, big data analysis plays a crucial role in the success of the entire process. The data analysis enables organizations to make informed decisions on strategic business decisions. The data analysis helps in making business decisions on the basis of insights from the huge amounts of unstructured data. It enables the companies to come out with innovative solutions for business prospects.
Process of Source to Pay:
S2P is the process of settlement that is used for a standard commercial transaction. The process of S2P involves a contract between the service provider and the merchant. This contract provides that the merchant pays the service provider a sum of money in exchange for a set number of goods or services from the service provider.
As a part of the process of S2P the merchant’s payments are deposited into an account maintained by the provider. This account is commonly known as the merchant bank account. The payment received will be debited from the merchant’s account. The provider will transfer the payments to the merchant’s bank account once they become available. Once the payment is made, the bank will give the merchant’s debit card a direct deposit into their business account.
The process of S2P is normally done on the internet. There are two ways for a merchant to do this.
- They can either pay through credit cards, or
- Pay with a check.
Some merchant accounts offer both methods for their clients. However, it is advisable for customers to settle their transactions through a method that they are most comfortable with.
Pay with a Check:
The other way in which a merchant can establish a process of source to pay is to pay with a check. The merchant deposits funds into an account owned by the service provider. The service provider then transfers the funds to the merchant’s bank account. The advantage of this system is that the merchant can have control over the date the check is drawn, and there is a greater degree of financial security provided through the use of a specific bank. Using this method also enables the merchant to determine how much money will be available to be spent per month without having to depend upon how the check is deposited.
Credit Card Sales:
Many businesses have become successful by combining online credit card sales with marketing campaigns. Through these campaigns the merchant can increase their sales and attract new consumers to their websites. When the merchant processes credit card transactions the credit card company provides a certain level of payment processing credit. This credit card funding is usually made available to the merchant free of charge.
As the Internet becomes more popular the way in which businesses process credit card transactions continues to expand. This has been a positive for the merchant but has also created several disadvantages. Some of the disadvantages include increased costs associated with processing payments. In some cases, the increased costs are not offset by increased sales. As the Internet becomes more popular the type of merchant services provided will continue to change.
