Source-to-pay vs procure-to-pay: Key Differences and Benefits | Summit

Efficient procurement is essential for keeping business operations running smoothly. Managing how a company buys goods and services directly impacts costs, supplier relationships, and overall financial performance. Businesses need a structured approach to control spending and improve supplier management.

Most companies rely on either a source-to-pay (S2P) or procure-to-pay (P2P) process to handle their procurement. While both methods aim to streamline purchasing and payments, they have key differences that affect how businesses manage costs and suppliers.

Understanding these differences helps businesses choose the right strategy. A well-managed procurement process reduces errors, improves cash flow, and strengthens supplier relationships. In this guide, we’ll explain how S2P and P2P work, their differences, and which process might be best for your business.

What is procure-to-pay (P2P)?

Procure-to-pay (P2P) is the process businesses use to manage the purchasing of goods and services from suppliers. It covers everything from the initial order request to the final payment. The goal of P2P is to make the buying process more efficient, reduce costs, and improve accuracy.

Here’s how the P2P process works:

1. Purchase requisition – The process starts when a department identifies a need and submits an internal request for approval.
2. Purchase order creation – Once approved, a purchase order (PO) is created and sent to the supplier. This document confirms the order details, including quantities, pricing, and delivery terms.
3. Order approval – Managers or finance teams review the purchase order to ensure it aligns with the company’s budget and policies.
4. Goods receipt – When the goods or services are delivered, the company checks that they match the details in the purchase order.
5. Invoice matching and approval – The supplier sends an invoice, which is matched against the purchase order and goods received note to confirm accuracy.
6. Payment processing – Once the invoice is approved, the payment is scheduled and processed according to the agreed terms.

Automating the P2P process with procure-to-pay automation speeds up approvals, reduces manual errors, and improves financial visibility. With real-time tracking and automated matching, businesses can prevent overpayments, avoid late fees, and maintain better control over cash flow.

For a deeper dive into the P2P process, check out our complete guide to procure-to-pay.

What is source-to-pay (S2P)?

Source-to-pay (S2P) is a broader procurement process that starts with finding and selecting suppliers and ends with paying for goods or services. Unlike procure-to-pay (P2P), S2P includes strategic sourcing - helping businesses choose the right suppliers, negotiate better terms, and build stronger relationships.

Here’s how the S2P process works:

1. Supplier identification and evaluation – The business identifies potential suppliers and evaluates them based on factors like cost, quality, reliability, and terms.
2. Supplier negotiation and contract signing – Once a supplier is selected, the business negotiates terms and signs a contract, ensuring pricing and delivery terms are clear.
3. Purchase requisition – After securing a supplier, the business submits a request for goods or services.
4. Purchase order creation – A purchase order (PO) is created and sent to the supplier, confirming order details like price, quantity, and delivery dates.
5. Order approval – The purchase order is reviewed and approved to ensure it aligns with company budgets and policies.
6. Goods receipt – Once the goods or services are delivered, the business checks them against the purchase order to confirm accuracy.
7. Invoice matching and approval – The supplier’s invoice is matched against the purchase order and goods received note to verify that everything aligns.
8. Payment processing – After approval, the payment is processed according to the contract terms.

By combining strategic sourcing with automated payment processing, S2P gives businesses more control over procurement, helping them make smarter financial decisions and improve operational efficiency.

Key differences between source-to-pay vs procure-to-pay

While both source-to-pay vs procure-to-pay focus on managing business spending, they differ in scope and complexity. S2P covers the entire procurement cycle, starting from supplier selection, while P2P begins once a supplier has already been chosen. Here’s a quick breakdown of the key differences: 

S2P is ideal for businesses looking to improve supplier terms and long-term cost efficiency. P2P works best for companies focused on improving operational efficiency and payment accuracy. Choosing the right process depends on business goals and the complexity of procurement needs.

Choosing the right procurement strategy

The key difference between source-to-pay vs procure-to-pay lies in their scope and complexity. S2P covers the full procurement cycle, starting with supplier selection and contract negotiation. It’s more strategic and helps businesses secure better terms and improve supplier relationships. In contrast, P2P focuses on the execution side - managing purchase orders, matching invoices, and processing payments. P2P is ideal for improving efficiency and reducing processing errors, while S2P helps businesses achieve long-term cost savings and supply chain stability.

How Summit can support both processes

Summit’s spend management software streamlines both source-to-pay vs procure-to-pay processes, helping businesses improve efficiency at every stage. For S2P, Summit automates supplier evaluation, contract management, and payment scheduling, ensuring better supplier relationships and cost control. For P2P, Summit simplifies purchase order creation, invoice matching, and payment processing, reducing errors and improving financial visibility. With real-time tracking and automated approval workflows, Summit helps businesses optimise spending, ensure compliance, and make smarter procurement decisions.

Ready to streamline your procurement process? Talk to us today and discover how Summit can help your business increase efficiency and improve supplier relationships.