Help organizations manage and optimize the source to pay business processes
Applies to: Dynamics 365 Commerce, Dynamics 365 Field Service, Dynamics 365 Finance, Dynamics 365 Project Operations, Dynamics 365 Supply Chain Management, Microsoft Supply Chain Center
This article introduces the Source to pay end-to-end business process. It outlines how Dynamics 365 products can help organizations manage and optimize the Source to pay processes.
Source to pay overview
The Source to pay process (also known as purchase to pay) is a term used to describe the entire process of purchasing goods or services from a supplier and paying for them. The process includes all the steps from the initial procurement request to the final payment to the supplier.
The Source to pay process typically includes the following steps:
Identify the need for goods or services
This process covers both indirect procurement, where the goods or services are not related to the good or service being sold, and direct procurement, where demand for the goods or services exists within the production or sales processes. Dynamics 365 Supply Chain Management supports flexible procurement processes based on business needs. These processes include request for quotations (RFQs), purchase requisitions, contracts (purchase agreements or blanket orders), and purchase orders which can be planned or unplanned. Planned purchase orders can be generated automatically from supply or demand forecasts present. Learn more at Forecast to plan introduction.
Supplier selection
The procurement team evaluates potential suppliers and selects the one that meets the requirements. Dynamics 365 also includes functionality to help automate the supplier selection and portal capabilities to allow suppliers to apply online or even respond to requests for quotations.
Purchase order creation
A purchase order is created and sent to the supplier. It specifies the goods or services required, the price, delivery date, and other terms and conditions. With Dynamics 365, the process may include a purchase requisition, purchase agreement (also known as a contract or blanket order), or a request for quotation.
Invoice receipt and verification
The supplier sends an invoice for the goods or services, and the invoice is checked for accuracy and completeness. Dynamics 365 includes full AP automation capabilities with OCR through Azure Form Recognizer to assist with this process.
Invoice approval
The invoice is approved for payment, and the accounts payable team processes the payment.
Payment
The supplier is paid for the goods or services, usually by electronic funds transfer.
Record keeping
All relevant documents, including the purchase order, invoice, and payment details, are recorded and stored for future reference.
Reporting
Financial and operational report analysis help keep track of performance of the Source to pay process. You can include supply risk analysis, purchase order backorders, vendor performance, and spend analysis.
The Source to pay process is a crucial aspect of business operations, and efficient execution can result in cost savings, increased transparency, and better supplier relationships.
Important
The process defined here does not include the goods receipt process. Learn more at Inventory to deliver.
Every organization has variations to Source to pay. Here, we define the basic outline for any organization looking to implement a technology solution to support the Source to pay process.
Impact
The purpose of the Source to pay end-to-end process is to manage the acquisition of goods and services from suppliers in a structured, efficient, and transparent way. It's an important end-to-end process that can help organizations obtain the goods and services they need at the best possible price, with the right quality, in a timely manner, and in compliance with regulatory and internal policies.
A poorly designed or executed Source to pay process can negatively impact an organization in several ways, such as:
Poor management of procurement processes can result in higher costs due to inefficient processes, errors, duplicate payments, late payments, or disputes with suppliers.
Inefficient procurement processes can lead to delays, bottlenecks, manual workarounds that waste time and resources, reduce productivity, and increase the risk of errors.
Inconsistent or delayed payments, disputes, or lack of communication with suppliers can damage relationships, reduce trust, and limit the availability of future supply.
A poorly defined end-to-end process can increase the risk of non-compliance with regulatory requirements, such as tax or environmental regulations, or internal policies, such as procurement policies or code of conduct.
Inadequate tracking and reporting of procurement activities can limit the visibility into procurement spend, supplier performance, and overall procurement effectiveness.
Poor procurement practices can damage an organization's reputation and credibility, particularly if there are allegations of corruption or unethical behavior.
In conclusion, the Source to pay process is critical to an organization's success. It's essential to have an efficient and effective Source to pay process in place to mitigate these risks and optimize the benefits of procurement activities.
Stakeholders
Implementing a technology solution such as Dynamics 365 to support the Source to pay end-to-end processes involves a range of stakeholders from various departments and levels of the organization. Here are some of the typical stakeholders involved:
Procurement stakeholders - examples: Buyer, Director of Procurement, Purchasing agent, Purchasing manager
Accounts payable stakeholders - examples: Accounts payable clerk, Accounts payable manager
IT department stakeholders - examples: System administrator, Business Analyst, Director of IT, Business Systems Analyst
Finance stakeholders – examples: Controller, CFO, Accountant, or Accounting manager
Audit or compliance stakeholders - Internal auditors, External auditors
Vendors - Vendors are the external stakeholders who supply goods and services to the organization and will interact with the system to receive new purchase orders and submit invoices to receive payments.
Successful implementation of Dynamics 365 to support Source to pay processes requires collaboration and coordination between these stakeholders. It's essential to involve all stakeholders early in the project planning phase and communicate regularly throughout the implementation process.
Source to pay benefits
When your organization plans to implement technology solutions to assist with the Source to pay process, there are several benefits the solution can help provide. These key benefits should be used to determine if the solution is a good fit for your business and to drive the specific business requirements for implementing the solution. As a side effect, these benefits can be used to create a baseline for your goals and objectives for the project so that you can measure the success of implementing solutions to meet those business requirements.
Increased efficiency
Dynamics 365 can automate and streamline many aspects of the Source to pay end-to-end process. This way, organizations can reduce the time and effort required to complete tasks, such as creating purchase orders, receiving goods, and processing invoices. Dynamics 365 Supply Chain Management includes various tools including a robust workflow engine to help you streamline the procurement process, reduce data entry errors, and enforce and validate your procurement policies. Dynamics 365 Finance includes invoice automation, payment automation, and other tools to help make the invoice and payment processes more efficient while remaining compliant with tools like the Audit workbench.
Improved accuracy
Automated processes reduce the risk of human error, such as data entry mistakes or duplicate payments, leading to more accurate financial reporting and fewer accounting discrepancies. Dynamics 365 can capture data automatically from invoices and purchase orders to help minimize errors. Intelligent matching capabilities are available out of the box and can be extended with Azure Machine Learning to even further automate the process. Coupled with the robust workflow engine available, you can streamline the approval and routing process and audit every step of the process.
Greater visibility
A technology solution can provide real-time visibility into the status of purchases, orders, and payments, allowing users to track progress, identify bottlenecks, and resolve issues quickly. Dynamics 365 uses a real-time inventory system and a double-entry accounting back-end that automatically generates the appropriate vouchers in real-time. Dynamics 365 also includes tools to ensure the subledger and general ledger are always in sync. When coupled with powerful reporting tools such as Power BI and the Azure Data Lake with Azure Synapse, the reporting capabilities deliver near real-time results to end users to make important business decisions.
Better supplier relationships
Improved communication and collaboration with suppliers, as well as faster payment processing, can help to build stronger relationships and improve supplier satisfaction. The portal capabilities with the Power Platform along with the communication tools available in Dynamics 365 Marketing and Dynamics 365 Customer Voice help make the process with your vendors streamlined and automated.
Cost savings
The increased efficiency, accuracy, and visibility that you achieve from implementing a technology solution can lead to cost savings in several areas. Such areas include reduced processing times, better negotiated prices with vendors, and lower accounting costs. Dynamics 365 offers tools such as purchase agreements to help you keep track of the contracts with your vendors and advanced pricing and costing capabilities through trade agreements to help you keep track of your negotiated prices. It can even track your rebates and help you manage the entire cash back process with your suppliers.
Enhanced compliance
A technology solution can help to enforce compliance with procurement policies, reduce the risk of fraud or corruption, and provide an audit trail for regulatory compliance. When you use Dynamics 365 Sustainability, you can get a full view of your environmental impact from your purchases and use other tools like our Audit workbench to help you ensure compliance. When you combine this with procurement policies, electronic reporting, and other application lifecycle management tools we offer a plethora of tools to help organizations around the world stay compliant and competitive.
Increased scalability
As organizations grow and their procurement needs increase, Dynamics 365 is a scalable platform that can accommodate larger volumes of transactions and adapt to changing business requirements.
Next steps
If you want to implement Dynamics 365 solutions to assist with your Source to pay business processes, use the following resources and steps to learn more.
Define the goals and objectives of implementing a Source to pay technology solution. Learn more at Implementation strategy.
Define the business process scope of your project. Learn more at Process-focused solution.
Request a demo or get a free trial of Dynamics 365 solutions for the Source to pay process. Learn more at Request a demo.
Get an overview of the Source to pay process at Source to pay end-to-end overview
Related resources
You can use the following resources to learn more about the Source to pay process in Dynamics 365.
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