Source-to-Pay (S2P) Automation in 2023: In-Depth Guide

Source-to-pay (S2P) automation is transforming procurement and finance operations by optimizing end-to-end processes from sourcing goods and services to making supplier payments. This comprehensive guide provides decision-makers with an in-depth understanding of S2P automation trends, technologies, use cases, implementation best practices, and solution providers.

The Strategic Importance of Automating S2P

S2P encompasses all steps involved in obtaining goods and services, including:

  • Sourcing and supplier selection
  • Contract management
  • Procure-to-order
  • Invoice processing
  • Payment execution

Many organizations still rely on manual S2P processes spread across siloed systems. This creates disconnects and bottlenecks that lead to high operating costs, errors, maverick spend, and lack of visibility.

Industry surveys reveal surging adoption of S2P automation:

S2P Automation Adoption

Year% Adopting or Planning to AdoptFirm
202263%Ardent Partners
202370%Paystream Advisors
202479%IDC

Automating S2P provides hard benefits like cost reduction and efficiency gains, along with soft benefits like insights for savings and supplier relationship management.

Benefits of S2P Automation

MetricImprovement
Cost Reduction40-80%
Process Cycle Times50-90% faster
ROI6-18 months

Leading organizations take an enterprise approach to S2P automation spanning systems, business units, and geographies to maximize its strategic value.

Current Capabilities and Maturity Levels

S2P automation solutions focus on four core capabilities:

  • Digitization – Scanning and OCR to convert paper documents like invoices and contracts into digital formats
  • Workflow – Configurable approval chains and business logic to standardize procure-to-pay steps
  • Central Platform – A unified data repository bringing together disparate S2P information flows
  • Advanced Technologies – AI, ML, and NLP to enable more automated, intelligent processes

However, most organizations are still at low-to-moderate maturity levels in leveraging these capabilities:

S2P Automation Maturity

Stage% of OrganizationsCapabilities
Nascent21%Basic e-procurement
Emerging47%PO and invoice automation
Maturing26%Integrated platform, advanced technologies
Optimized6%End-to-end, intelligent, supplier collaboration

Challenges to progress include integrating with legacy systems, lack of executive sponsorship, disjointed processes, and siloed solutions.

Leading practices involve securing leadership buy-in, embracing cloud, strategically applying emerging technologies, and focusing on user-centric design.

S2P Process Deep Dive and Automation Opportunities

Let‘s examine core S2P processes and automation approaches:

Sourcing and Supplier Management

Sourcing involves activities like defining procurement strategies, identifying suppliers, and negotiating agreements. Automating sourcing provides:

  • Supplier discovery and risk analysis
  • Sourcing event creation and management
  • Contract repository with metadata extraction using AI/ML

For example, Coupa uses community profiles, ratings, and machine learning-based recommendations to profile and recommend suppliers.

Procure-to-Order

Converting purchase requisitions into orders involves workflow steps like approving requests, creating POs, budget checks, and transmitting orders to fulfill. Procure-to-order automation provides:

  • Self-service employee purchasing portal
  • Configurable approval workflows
  • Integration of PO data to financials and inventory
  • Analytics on spend patterns

SAP Ariba offers best practice procurement workflows and policy enforcement tailored to specific industries and categories.

Invoice Processing

Invoice processing entails receiving, digitizing, validating, and reconciling supplier invoices. Automating this area delivers:

  • Document intake from multiple channels
  • Intelligent OCR and extraction of invoice data
  • Auto-matching invoices to POs
  • Exception handling and discrepancy resolution

For example, Medius automates 98% of invoice processing using self-learning algorithms tailored to customer data.

Payment Management

Payment activities include scheduling payments, determining methods, and releasing funds to suppliers. Automating payments:

  • Centralizes supplier and payment data
  • Automatically applies payment terms
  • Selects optimal payment types
  • Executes payments and manages confirmations

Ivalua‘s payment solution automatically schedules payments based on contract terms, risk profiles, and disbursement options.

Top 10 S2P Automation Use Cases

The highest value S2P automation use cases include:

1. Invoice Processing

  • Digitizes invoice receipt and data extraction
  • Reduces manual handling by 80%+
  • Accelerates approval cycles from weeks to days

2. New Supplier Onboarding

  • Automates workflows for enrollment, compliance, risk analysis
  • Cuts onboarding from 4 weeks to 4 days

3. Spend Analytics

  • Centralized data for spend analysis, savings identification
  • Reduces maverick spend by 40%+

4. Contract Repository

  • Centralizes contracts in searchable database
  • AI extracts key terms and metadata
  • Optimizes renewal timing

5. Strategic Sourcing

  • Enhances supplier selection, qualification, and management
  • Manages bids and e-auctions

6. Requisition Management

  • Employee self-service purchasing
  • Automated approval workflows
  • Budget visibility and control

7. Project Procurement

  • Centralizes spend across projects
  • Automates PO and invoice workflows

8. Tail Spend Management

  • Consolidates and analyzes tail spend
  • Applies automation to tail suppliers

9. Contract Compliance

  • Automates contract compliance monitoring
  • Flags issues like missed discounts or threshold violations

10. Supplier Collaboration

  • Supplier portal for order/invoice management
    -Accelerates inquiries, change orders, and disputes

Critical Capabilities for S2P Automation

When evaluating solutions, key criteria include:

Functionality

  • End-to-end coverage and configurability
  • Support for global and local requirements
  • Self-service interactions for suppliers and employees

Technology

  • Integration, APIs, and cloud deployment
  • Advanced automation through AI, ML, and RPA
  • Analytics and reporting

Implementation

  • Speed of rollout and user adoption
  • Ongoing enhancement and success management

Vendor Strength

  • Company size, growth, customer base
  • Industry expertise and partnerships
  • Ongoing investment and product innovation

Total Cost

  • Pricing model (volume, transaction, user license)
  • Implementation and change management services
  • Ongoing maintenance and support costs

Comparison of Leading S2P Automation Platforms

SAP Ariba

  • Strengths: Market leader, deep integration to SAP ERPs
  • Limitations: Complexity, cost, slower innovation pace

Coupa

  • Strengths: Easy to use, fast deployment, consumer-like experience
  • Limitations: Smaller supplier network, light change management

Ivalua

  • Strengths: Comprehensive capabilities,especially back-end integration
  • Limitations: Heavier implementation effort, less flexibility

Tradeshift

  • Strengths: Specialized in e-invoicing and payments
  • Limitations: Narrower solution focus

Zycus

  • Strengths: Strong abilities for procurement and supplier management
  • Limitations: Emerging outside core sourcing capabilities

There are also specialists like Jaggaer for strategic sourcing and Sievo for spend analytics. Multi-vendor approaches may suit some organizations.

Implementation Best Practices

Successfully implementing S2P automation involves:

  • Executive sponsorship – Ensures organization-wide commitment
  • Stakeholder inclusion – Engages procurement and AP teams to represent needs
  • Hybrid deployments – Balance cloud agility with on-premise control
  • User-centric design – Intuitive interfaces and self-service models
  • Change management – Ongoing training, support, and communication
  • Data governance – Cleansed supplier and material master data
  • Phased rollout – Prioritize by pain points, impact, and capability gaps
  • Continuous improvement – Optimization after deployment is key

The Business Case for Investing in S2P Automation

The business case focuses on hard and soft benefits across three areas:

Operations

  • Cost savings from process automation
  • Productivity improvements through digitization
  • Working capital gains through cycle time reduction

Management

  • Enhanced spend visibility and control
  • Data insights for decision-making
  • Proactive risk management

Relationships

  • Strategic supplier management
  • Internal customer satisfaction
  • Foundation for collaboration and agility

Typical ROI periods are 6-18 months. Value comes from both tactical gains like invoice cost savings as well as strategic impacts like better supplier terms.

The Future of S2P Automation

S2P automation will continue maturing with developments like:

  • Expanding use of artificial intelligence for touchless processing
  • Tighter integration to complementary processes like planning and logistics
  • More self-service models and supplier/employee collaboration
  • Turnkey SaaS options requiring less customization
  • Greater focus on deriving insights vs. just cost savings

Organizations should start their S2P automation journey by assessing current processes, pain points, and quick win opportunities. This builds the foundation for long-term transformation.

Summary and Recommendations

S2P automation delivers compelling benefits from enhanced process efficiency, insights, visibility, and working capital optimizations. Solutions are reaching new levels of intelligence and completeness.

Leading practices involve taking an enterprise approach, strong executive sponsorship, embracing cloud platforms, and balancing implementation speed with change management.

This guide provided a comprehensive overview of S2P automation including leading use cases, technologies, implementation best practices, solution comparisons, and the business case for investment.

Organizations should develop automation roadmaps reflecting their maturity, priorities, culture, and existing systems. While the journey takes time, positive returns are realized quickly from targeted, phased implementations. By intelligently automating source-to-pay processes, enterprises gain strategic advantages in managing spend, suppliers, and working capital.

Similar Posts