Source-to-Pay (S2P) vs Procure-to-Pay (P2P) in SAP Ariba- What is the Difference?

Source to pay (S2P) is the complete procurement life cycle, from spend analysis and supplier selection through contracts, purchasing, invoicing and payment. The operational slice inside it is procure to pay (P2P) which starts from purchase requisition and ends at final payment. In SAP Ariba, the upstream side (sourcing, supplier management and contracts) covers the “source” half and the downstream side (buying, invoicing and guided buying) covers P2P.

This guide explains both processes in plain language, compares them side by side, shows how SAP Ariba works as a source to pay suite and tells you which one to focus on if you want a SAP Ariba career.

What Is Source to Pay?

The source to pay process is the entire cycle that an organization uses to find suppliers, agree terms, buy goods and services and pay for them. It starts well before a purchase order is in place asking questions such as: what are we spending, who should we be buying from and on what terms?

The source to pay process usually includes:

• Analysis of expenditure and planning of demand
• Supplier identification and evaluation
• Source events including RFIs, RFQs, RFPs and auctions
• Evaluation of bids and award
• Drafting and administration of contracts
• Buying, receiving, invoicing and paying
• Supplier performance review

S2P links strategy and execution to enable procurement teams to control cost, risk and compliance throughout the cycle.

What is Procure to Pay?

Procure to Pay meaning: P2P is the set of transactional activities a company undertakes to obtain what it needs and pay for it. It starts with someone raising a purchase requisition, and ends with the supplier being paid and the books reconciled.

If you are asking what is procure to pay process in practice, consider it as a day to day buying engine. This includes the approval, purchase order, receipt of goods or services, invoice matching and payment. The goal is speed, accuracy and financial control, not supplier selection.

P2P (procure to pay) assumes that suppliers and prices are already agreed. This is often done through an earlier contract or catalogue.

Source to Pay vs Procure to Pay: What’s the Difference?

The difference between source to pay and procure to pay revolves around scope, timing and purpose. Procure to pay is a subset of source to pay, not a competing process.

Here's a rule to remember when comparing P2P vs S2P: All S2P suites include P2P, but not all P2P tools include sourcing.

The Procure to Pay Process, in Steps

The procure to pay cycle, also referred to as the procurement to payment process, usually includes the following steps.

• Requisition. A requester creates a purchase requisition for goods or services, typically from a catalogue.
• Approval. The requisition is approved based on rules based on value, cost center or category.
• Purchase order. The system creates a purchase order and forwards it to the supplier.
• Order confirmation. The supplier confirms and may issue a shipment advance notice.
• Receipt of goods or services. The buyer acknowledges what he received.
• Receipt of invoice. The supplier invoice is entered into the system, preferably electronically.
• Matching. The system matches the order, receipt and invoice (two-way or three-way) and flags exceptions.
• Payment and reconciliation. Accounts payable pays the invoice and posts the entries to finance.

You can see these steps in the system in our detailed guide on SAP Ariba procure to pay process flow.

The S2P Cycle: The Source to Pay Process

The S2P cycle includes the strategic phases that precede P2P and the review phase that follows P2P.

• Spend analysis. Look at what the company buys, who they buy it from and at what price, to identify opportunities for savings.
• Sourcing strategy. How to obtain each category, e.g., competitive bidding or a sole-source deal.
• Supplier discovery and qualification. Identify suppliers, collect information and assess risk and compliance.
• Sourcing event. Run an RFI, RFQ, RFP or auction to gather bids. For this stage, see our SAP Ariba sourcing end-to-end guide.
• Evaluation and award. Evaluate the bids and choose the winning supplier.
• Contract management. Write, negotiate, approve and sign the contract, track compliance. Read more in our SAP Ariba contract management guide .
• Procure to pay. Buyers purchase against the contract through the P2P steps above.
• Supplier performance and renewal. Measure delivery, quality and compliance and then renew or re-source.

The last step feeds back into the first, which is why people call it a cycle and not a one-way queue.

Source To Pay Solution SAP Ariba

SAP Ariba is one of the best known sources for payment suites. It naturally divides into two sides and it is the connection between them that makes it a suite rather than a collection of discrete tools.

Your ERP still does core accounting and inventory so Ariba and S/4HANA work together. Our sister brand’s article on Ariba upstream and downstream modules explains how the two sides connect.

How to Assess Source to Pay Software

Other vendors like Coupa, Jaggaer, Ivalua, and Zycus also sell S2P suites if your company is choosing source-to-pay software. Compare them on these points:

• Coverage. Does it provide sourcing, contracts, supplier management, purchasing and invoicing in a single data model?
• Integration with ERP. How does it integrate with your finance and inventory systems?
• Supplier network. How easy is it for your suppliers to do business?
• Control and compliance. Can you enforce policies, tolerances and approvals?
• Analytics. Do you have spend, savings and supplier performance in one view?
• Rollout effort. Can you start with P2P and add sourcing later?

SAP companies often choose Ariba because it integrates with their ERP landscape, but the right answer depends on your own systems and goals.