What is Source to Pay (S2P)?

Source to Pay (S2P) is the end-to-end process government contractors undertake to search for and vet suppliers and subcontractors, negotiate prices, sign a contract and ultimately manage schedules and payments until a project is complete and money has changed hands. The process ends with the final payment to the contract supplier and with actional reporting of performance, including supplier scorecarding and spend analytics.

Source to Pay can be used in a wide range of industries from healthcare to aerospace and defense, both in the public and private sectors, to effectively manage the procurement of goods and services.

Get on The Path to Procurement Efficiency

Discover how government contractors streamline operations across the entire project lifecycle using a source to pay system.

Get the Guide

There are various steps in the Source to Pay process that are required to join forces with direct and indirect material suppliers. These include:

• Sourcing: identifying and selecting new suppliers, vendors and subcontractors.
• Contracts: executing agreements with your suppliers and teaming partners.
• Procurement: the internal process of approving and ordering goods and services.
• Resource management: leveraging and tracking labor and collecting time and expenses.
• Accounts payable: receiving an invoice and matching it to an AP Voucher.
• Performance: utilizing business intelligence and analytics to track performance and ensure you’re delivering a successful project.
• Compliance: meeting government and contractual regulations, including which suppliers you can use.

Procuring and paying for goods as a government contractor can be a challenging and complex process because of these various steps and the need to manage multiple vendors or suppliers throughout the entire project lifecycle while maintaining compliance processes and systems. It also requires keeping a variety of internal stakeholders aligned, including individuals in business development, contract and subcontract management, purchasing, receiving, project management and finance and accounting.

In fact, due to these many moving parts, it’s not uncommon for companies to spend 40-50 percent of their overall costs on resources supporting procurement – and it’s because of this intricate juggling act that this process requires so much time and effort.

Source to Pay and Procure to Pay are related processes, but source to pay adds additional steps, beginning at the initial demand for goods or services and ultimately sourcing suppliers, vendors or contractors.

Procure to Pay is a selection of steps in the more extensive Source to Pay process, beginning with the act of procuring the goods or services and ending with final payment.

Paying attention to the broader Source to Pay process is beneficial for government contractors because the act of sourcing can make or break the successful delivery of your project. As the saying goes, procurement’s goal is to buy the right product or service from the best supplier at the best price. For government contractors, contractual requirements often specify supplier and subcontractor candidate criteria.

For example, it may be mandatory to use a subcontractor with a specific socioeconomic status, such as veteran-owned, small business, 8a, or woman-owned. By implementing a streamlined source to pay process, you can better ensure you remain compliant while getting the best price.

A streamlined Source to Pay process can help you eliminate excessive overhead costs and create greater efficiencies in your business.

First, a Source to Pay process requires that contractors think through their standard operating procedures and consolidate where they store contractual and non-contractual information. By housing all relevant information in a single place, you gain quicker access to the information you need to make smart decisions throughout the process, beginning with selecting the best-fit opportunities and the right vendors or suppliers.

Once you work with certain suppliers or subcontractors, a Source to Pay process requires determining the best communication channels for all relevant parties. By implementing standard communication channels and proactively communicating, you can improve customer service and relationships with vendors.

A Source to Pay process can also improve business practices by ensuring you’re tracking and measuring key metrics to gain insight into process cycle times and buyer and supplier performance.

When government contractors optimize the Source to Pay process, projects move forward faster and margins are protected and enhanced. For these reasons, more and more forward-thinking government contractors are moving away from managing projects using outdated, legacy solutions or relying on manual processes. Instead, they’re investing in robust, compliant Source to Pay systems.

Refine Your Procurement Process

Discover how streamlining your Source to Pay process leads to cost savings, improved relationships and increased transparency.

Watch Webinar

For government contractors that need to procure goods and services, leveraging multiple disparate systems, paper and people to manage the procurement process can increase procurement cycle times, Days Payable Outstanding (DPO) and the time needed to complete a CPSR audit.

Without a single system to house procurement data, departments are not working from a single source of truth. This means the business is missing out on key learnings that could help you make better, more strategic decisions that reduce cycle times and improve efficiency.

By connecting project data across the entire Source to Pay process, you can reduce manual and paper processes and eliminate the need to re-enter data, accelerating each step in the process while reducing the risk of human error.

Strategically choosing a Source to Pay solution that meets your end-to-end process needs can help you gain a competitive edge while:

1. Connecting project data across the entire Source to Pay process, which leads to shorter procurement cycle time by reducing redundant processes
2. Bringing automation, accuracy and acceleration to the invoicing process, improving Days Payable Outstanding
3. Streamlining contract and subcontract management while ensuring reporting accuracy, which means fewer disputes about purchase orders and invoices and improved Days Sales Outstanding for suppliers
4. Maintaining compliance standards that are required under your contract and ensuring you’re prepared for audits with all transaction and negotiation history in one place
5. Easing the handoff between teams by enabling proactive communication
6. Generating a clear audit trail by making it easier to track and verify procurement decisions and transactions.
7. Improving inventory management by optimizing the procurement processes.

Adopting a strategic Source to Pay process can help you and your teams deliver better projects by reducing cycle times, improving efficiency and allowing you and your teams to focus on more strategic initiatives. Learn more about how Deltek can support your Source to Pay process with our all-in-one solution.