5 Ways S2P Automation Creates More Value
Source-to-Pay (S2P) is a vast and nuanced process, spanning purchasing, accounts payable, finance, and legal departments, and influencing how every dollar, euro, or pound is spent by a business. The all-encompassing nature of Source-to-Pay provides a uniquely broad opportunity for spend optimization and value generation. Conversely, failure to optimize this process can result in unnecessary spending and value leakage.
In order to better appreciate how source-to-pay automation provides value, it’s important to understand the different source-to-pay solution models available. Typically, businesses have two options when considering automating their source-to-pay processes:
Non-integrated modules – i.e. disparate components for each step of the S2P process, from sourcing, right through to payment (and everything in between).
Integrated, S2P suite – i.e. one platform which spans the whole S2P process, with a single database, where multiple departments can access the same data from different perspectives.
Let’s put a little more color into each of these configurations, so we can better articulate how S2P automation can create value, when done well.
Non-integrated S2P modules
Despite the strong cost-case for single-platform integrated source-to-pay processes, it is still extremely common to find businesses who have yet to consolidate on one platform. In many cases, this is because component modules in the process have been selected from niche providers, perhaps considered best-of-breed for their specific application to that one step in the overall process.
In many cases, different solutions will have been implemented and modified for each step at different times. Perhaps, initially, they were considered easy to set up and may have been adapted and grown beyond their original specifications as business volumes and demands evolved.
Whatever the reasons for each different solution, for each step in the S2P process, it’s likely that they don’t talk to each other in real-time, and quite probably have different logins, different interfaces and quirks that make it challenging to master every system and move fluidly to track transactions through the whole S2P process, from end to end.
When grouped together they may be described as a platform, but, frankly, they’re more of a Frankenstein-platform, where elements are forced to work together with custom-coded connectors, import/export batches, or manual copy-paste to ensure the data-flow from sourcing to payment.
Platform-based, integrated, S2P suite
It doesn’t take much to see that the alternative, having the full S2P suite on one platform, presents a better starting point for value creation. The reduction in risk from having one single data source that can be utilized across the process, and by different departments, alone makes a fair business case for this structure.
But it’s not all about real-time accessibility to a single source of reliable data, having a unified and harmonized UX and UI across all steps in the process empowers users to view the process as a whole and draw value from this increased visibility.
Running the whole S2P process on one platform enables businesses to simplify, streamline, and optimize from the procurement process through to pay process and everything in between.
How much value is there to gain?
Given that all purchases go through the source-to-pay process, the opportunity to optimize spend management through process control is huge. There are day-to-day savings for procurement teams who have greater visibility into more cost-efficient options when purchasing, but these are overshadowed by the opportunity for systemic savings achieved through greater compliance with S2P best practice.
It is commonly reckoned (see McKinsey’s thoughts on the topic here*) that somewhere in the region of 4% of external spend is wasted due lack of automation and optimization. So, for every £200m spent, there could be around £8m wasted; that’s a lot of money!
This waste tends to boil down to lack of compliance at various points throughout the process, such as maverick spend. It’s the lack of control of compliance which allows this to happen. Where people ‘go around’ the processes which are set in place, the checks and balances which are in place don’t happen, this increases risk and results in more time spent and therefore less efficiency.
Let’s look at 5 key areas where value is lost through poor S2P process structure. From here we can then more easily identify the 5 ways a source-to-pay platform can create value for your organization.
5 key areas where value leaks in the S2P process
1. Lack of compliance
It is estimated that around half of all value leakage in the S2P process stems from this. Lack of compliance happens more where there are multiple systems joined together, because at any join between systems, where there is any kind of manual connection, there’s an opportunity to go around this. It may even be attractive to do this – to save time, simplify things, etc.
With multiple, disparate systems in the S2P process, company policy for compliance ends up sitting with each department for compliance to their specific system or set of systems, rather than being managed at a higher level across one entire platform. It is harder to identify and address non-compliance when there are more sub-systems joined together, rather than having visibility across one holistic system.
2. Wasting time
Different systems may require back-and-forth between the ERP system and each system, or between each system in the process. Frequently, this results in data duplication and manual translation of content from one place to another, the opposite of streamlined automation. Training time across multiple systems is greater than training for one platform and each system is more at risk of disruption if there are fewer trained operators.
Checking data consistency between systems is a requirement when there are multiple systems, but not something which is needed when there’s just one. Patching and updating each system needs to be managed by IT independently, rather than one single update applied at a higher level.
3. Wasting money
How do we know that the savings are making their way through from the negotiated pricing in the contract to actual purchases? The continuity of having a single platform provide greater visibility and assurance that negotiated savings are being reflected in the real purchase value, purchase order, and payment.
Benchmarks and metrics are a requirement to keep S2P processes on track for optimal efficiency, but these are more effective when applied to measure end-to-end performance, than when applied to each step in the process. The extra overhead of knitting together performance measurement and control for each step in the process is a cost in itself as well as a hindrance to more effective cost control across the process.
Money is wasted on extra training, management, and licensing when multiple systems are used throughout the S2P process.
4. Poor collaboration
Each system may have been set up at different times, by different people with different business objectives in mind. Functionality may well be optimized for each step in the process, but collaboration between users or process owners for each step can prove challenging if data is structured or labelled in different ways in each system.
When something (e.g. RFx) needs to be reviewed that touches multiple points in the S2P process, this can become a challenge to get engagement and access from the necessary stakeholders at each point.
5. Poor data visibility
How can you report on all activities across the whole S2P process if you don’t have access to the data at each stage, or if this data resides in different places and they don’t 100% agree?
Data labelling and synchronization between each step in the S2P process, as well as with the underlying ERP system, should allow for real-time analysis and control. However, it can be a full-time job to extract, cleanse, and then import this data into a business intelligence tool for insight and reporting.
The Definitive Guide to Accounts Payable Automation
The 5 ways a source-to-pay platform creates value
1. Enforced compliance
When the S2P process runs on one platform, the impact of any deviation can be determined across the whole system at a glance, with a single source of truth, and no opportunities or temptations to workaround aspects of the S2P process.
Streamlined workflow encourages users to comply with best practice for the S2P process. With each user accessing via their own login, insight into any non-compliance is more readily available, allowing for targeted training and management to maximize compliance.
2. Time savings
Create contracts automatically from a sourcing event and ensure these are adhered to throughout purchasing and payments. Linking different aspects of the S2P process together allows for workflow automation and saves time.
With a single S2P platform, there is a considerable reduction in time spent onboarding, checking, and synchronizing data between systems. One platform means less time spent training users on different platforms, and less manual effort at each step in the process. Your S2P process becomes less about data entry time, and more about decision time.
3. Greater spend control
A single-platform source-to-pay solution allows for the automated enforcement of savings. Discounts negotiated in contracts are automatically flowed through to procurement, and rebate thresholds can be managed and met with greater certainty.
Furthermore, having one set of data means that this can be more easily plugged into a supplier performance management system, enhancing spend control as you have true visibility and control across the process.
4. Collaboration
Purchasing, AP, finance, legal, and other business users are all able to see the same picture. Improved stakeholder engagement and greater capacity for interaction between departments, because they are all speaking the same language.
Whilst each business function may access a different aspect of the same system, the connectivity between each function allows for clearer communication and greater collaboration.
5. Data and process visibility
How can you make the right decisions if you don’t have all the facts? Decision making in S2P often requires knowledge of contractual details, purchase history, and performance metrics.
A single S2P platform enables cross-functional KPIs and reporting capabilities without the need for a BI expert to create this. With a 360-degree view of what is going on with each supplier, Finance teams can quickly determine business process performance and make decisions to optimize spend as a direct result.
And finally, when business requirements change, the reports for related insight are more easily adjusted if they rely on data from one source, rather than going deep into each step to extract and combine data for new reporting requirements.
Sourcing, procure-to-pay, and supply chain efficiency
By addressing the key causes for value loss across the S2P process, cost savings can be made that have a real impact on the bottom line. Streamlining workflows not only improves business process efficiency, but can improve supplier relationships, through more timely and accurate management of all touch-points through their lifecycle.
Efficiency gains can be achieved through capitalizing on the benefits of strategic sourcing in the supply chain, as well as operational enhancements to the procurement process, such as a e-procurement initiatives.
With everything from sourcing to contract management, supplier management, procurement, invoice management, and financial management on one platform, the analytics across this have greater business value. End-to-end reporting, combined with the ability to pinpoint performance concerns, wherever they are in the S2P process, holds more actionable value than fragmented reporting and department-by-department performance management.
How to build your business case for a unified S2P platform
Every business has different S2P priorities, but at Corcentric we have spent the last 20 years addressing these different needs for over 2,300 customers and optimized the flow of over $150bn per annum across these processes.
We can help reduce manual processes from requisitioning through to payment and everything in between. Procurement professionals and finance teams alike have benefited from the breadth of value source-to-pay solutions from Corcentric can bring to businesses.
This case study highlights one such example, in how Corcentric helped Alliant take control of spend. There are plenty of similar stories in our case studies section here.
Feel free to get in touch, so we can help you build a business case that targets your specific priorities in the S2P process. Frequently, savings from optimization work can fund further improvements to the S2P process – realizing ROI at every stage of the project.
*A road map for digitizing Source-to-pay, April 2017.