Procurement is undergoing a rapid transformation. Two terms dominate the conversation today: Procure to Pay (P2P) and Source to Pay (S2P). The debate around source to pay vs procure to pay is not just about terminology — it’s about how organizations approach procurement maturity. But beyond these two frameworks, enterprises face a maze of related concepts that influence daily operations and long-term strategy.
This glossary brings clarity by grouping procurement essentials into three clusters: process fundamentals, supplier and spend management, and digital transformation enablers. Together, they provide a foundation for understanding where an enterprise is on its procurement journey and how to plan for intelligent transformation.
The transactional and structural elements of procurement. These are the building blocks enterprises must understand before moving toward optimization.
Accounts Payable (AP)
The function responsible for managing money owed to suppliers. It covers the recording, processing, and payment of invoices.
Why it matters: AP directly impacts cash flow, supplier trust, and compliance with payment terms.
Billing Reconciliation
The process of verifying invoices against purchase orders and receipts to ensure accuracy before payment.
Why it matters: Prevents overpayments and strengthens internal controls.
DPO (Days Payable Outstanding)
A metric measuring the average number of days a company takes to pay its suppliers.
Why it matters: Balancing DPO is crucial — paying too late risks supplier relationships, while paying too early strains cash flow.
e-Invoice
An invoice that is created, transmitted, and processed electronically.
Why it matters: Reduces manual errors, accelerates processing, and improves compliance with tax regulations.
Goods Receipt
A confirmation that goods ordered have been received in satisfactory condition.
Why it matters: Triggers the three-way match process and ensures accountability in procurement.
Invoice Automation
Using digital tools to capture, validate, and process invoices automatically.
Why it matters: Improves accuracy and efficiency, freeing AP teams from repetitive tasks.
Invoice Reconciliation
The comparison of invoice data with POs and receipts to confirm correctness.
Why it matters: Reduces disputes with suppliers and prevents payment delays.
Payment Terms
The agreed timeline and conditions under which payment for goods and services must be made.
Why it matters: Negotiated terms directly influence working capital and supplier relationships.
Procure to Pay (P2P)
The process covering requisition, purchasing, receiving, and paying for goods or services.
Why it matters: P2P defines the transactional efficiency of procurement operations.
Procurement Process
The end-to-end steps for acquiring goods and services, from need identification to payment.
Why it matters: A structured process ensures compliance, transparency, and cost control.
Purchase Order (PO)
A formal request from a buyer to a supplier that confirms the purchase details.
Why it matters: POs provide legal protection and form the basis for invoice validation.
Purchase Requisition (PR)
An internal document requesting the procurement of goods or services.
Why it matters: Initiates the procurement cycle and establishes accountability.
Quotation
A supplier’s formal response detailing the cost of goods or services.
Why it matters: Provides the foundation for negotiations and supplier selection.
RFI (Request for Information)
A document sent to suppliers to gather information on capabilities.
Why it matters: Helps buyers identify potential supplier sources before formal bidding.
RFP (Request for Proposal)
A detailed request inviting suppliers to propose solutions.
Why it matters: Used when buyers need both price and approach to evaluate suppliers.
RFQ (Request for Quotation)
A request inviting suppliers to provide pricing details.
Why it matters: Enables cost comparisons for standardized products or services.
Source to Pay (S2P)
The broader process covering sourcing, contracting, and payment.
Why it matters: Unlike P2P, S2P includes supplier discovery and management, making it more strategic.
Three-Way Matching
The process of cross-checking PO, goods receipt, and invoice before payment.
Why it matters: Prevents fraud, overpayment, and compliance risks.
Beyond transactions, this cluster focuses on how organizations engage with suppliers and control spend to extract business value.
Category Management
The segmentation of spend into categories (e.g., IT, travel) for tailored sourcing strategies.
Why it matters: Improves negotiation power and ensures spend alignment with business priorities.
Contract Management / Contract Lifecycle Management (CLM)
Managing contracts from creation to renewal or closure.
Why it matters: Reduces legal risks and ensures obligations are met.
Cost Optimization
Strategies to reduce procurement costs while maintaining value.
Why it matters: Directly impacts profitability and competitiveness.
Difference Between P2P and S2P
P2P covers transactional procurement, while S2P adds sourcing, supplier management, and contracts.
Why it matters: Understanding source to pay vs procure to pay helps enterprises decide the right path for maturity.
Maverick Spend
Unapproved or off-contract purchasing.
Why it matters: Leads to lost savings and compliance risks.
Minimum Order Quantity (MOQ)
The lowest quantity a supplier is willing to sell.
Why it matters: Knowing what is MOQ helps buyers balance inventory needs with supplier requirements.
Spend Analysis
The process of analyzing spend data to identify trends and savings opportunities.
Why it matters: Provides insights for better negotiations and sourcing decisions.
Spend Management
The discipline of tracking, controlling, and analyzing enterprise-wide spend.
Why it matters: Central to cost reduction and supplier accountability.
Strategic Sourcing
A structured approach to identifying and engaging supplier sources.
Why it matters: Ensures businesses select the best suppliers based on value, not just cost.
Supplier Collaboration
Working closely with suppliers to drive innovation and performance.
Why it matters: Builds long-term value beyond transactional relationships.
Supplier Discovery
The process of finding supplier options that can meet organizational needs.
Why it matters: Expands market options and reduces dependency on existing suppliers.
Supplier Diversification
Engaging multiple suppliers for the same category.
Why it matters: Reduces supply chain risk and promotes resilience.
Supplier Onboarding
The steps to integrate new suppliers into systems and processes.
Why it matters: Efficient onboarding, often through supplier onboarding software, ensures suppliers can transact quickly and compliantly.
Supplier Performance Management
Measuring and improving supplier outcomes against KPIs.
Why it matters: Ensures ongoing value and identifies risks early.
Supplier Relationship Management (SRM)
A strategy for managing interactions with key suppliers.
Why it matters: Strengthens partnerships and improves negotiation leverage.
Total Cost of Ownership (TCO)
The full lifecycle cost of a product, including purchase, operation, and disposal.
Why it matters: Encourages buyers to think beyond price and focus on long-term value.
The technologies and accelerators driving modern procurement.
Artificial Intelligence (AI)
The use of machine learning and algorithms in procurement.
Why it matters: Enables smarter sourcing, demand forecasting, and risk detection.
Compliance
Adhering to internal policies and external regulations.
Why it matters: Ensures procurement activities avoid fines and reputational damage.
Digital Procurement / e-Procurement
The use of digital platforms to manage procurement activities.
Why it matters: Reduces manual effort and increases visibility. It also makes purchasing faster, more compliant, and transparent.
Enterprise Resource Planning System (ERP)
A platform that integrates core business functions, including procurement.
Why it matters: Provides centralized data for better decisions.
Intelligent Document Processing (IDP)
AI-driven tools for extracting data from invoices and contracts.
Why it matters: Improves accuracy and speeds up manual workflows.
OCR (Optical Character Recognition)
Technology to convert scanned documents into digital text.
Why it matters: Supports invoice automation and digital record-keeping.
Visibility
The ability to track procurement data and supplier activity in real-time.
Why it matters: Reduces risk and enables proactive decision-making.
Workflow Automation
Automating repetitive procurement steps, such as approvals or invoice matching.
Why it matters: Reduces risk and enables proactive decision-making.
Understanding procurement terminology is more than a vocabulary exercise. It helps enterprises evaluate where they stand on the procurement maturity curve — from transactional P2P processes to strategic S2P transformation. Recognizing the difference between source to pay vs procure to pay is especially critical, as it frames the choice between efficiency and strategy.
Equipped with clarity on essentials like how finding supplier options can expand sourcing, or the role of supplier onboarding software in faster enablement, procurement leaders can make smarter decisions about their future.
Cherrywork solutions are built to accelerate this journey. From digitizing process fundamentals to enhancing supplier collaboration and enabling intelligent procurement transformation, we help enterprises move forward with confidence.
Explore how Cherrywork solutions support procurement transformation today.
Would you like to do the same for your organization? If yes, then reach out to us at talk2us@cherrywork.com
