eProcurement Toolkit

An independent guide to source-to-pay.

Sourcing, RFPs, suppliers, contracts, procure-to-pay and the software behind them, explained by a practitioner.

The source-to-pay line: sourcing, with an RFx branch through RFI, RFQ and RFP, then contract, requisition, purchase order, goods receipt, invoice, three-way match and payment. Supplier management runs alongside; software sits underneath.RFx events: competitive sourcingSourceContractProcure‑to‑paySourcingContractRequisitionPurchase orderGoods receiptInvoice3-way matchPaymentRFIRFQRFPSelectionOnboardingQualificationPerformanceRisk & renewalPaidSupplier management · runs alongsideSourcing & e-tendering suitesCLMP2P / e-procurementAP automationThe source-to-pay line: sourcing, with an RFx branch through RFI, RFQ and RFP, then contract, requisition, purchase order, goods receipt, invoice, three-way match and payment. Supplier management runs alongside; software sits underneath.SourceContractProcure‑to‑paySourcingContractRequisitionPurchase orderGoods receiptInvoice3-way matchPaymentRFIRFQRFPSelectionOnboardingQualificationPerformanceRisk & renewalPaidSuppliermanagementSourcing & e-tendering suitesCLMP2P / e-procurementAP automation

Every guide is a stop on this line. Each one answers one question first, then shows the steps, the documents and the decisions behind it.

What is procurement?

Short answer

Procurement is the process by which an organisation obtains the goods, services and works it needs from outside suppliers: defining the need, choosing a supplier, agreeing a contract, ordering, receiving and paying. It covers the decisions and controls around buying, not only the purchase itself.

Cite this answereProcurement Toolkit, “What is procurement?”, updated 17 Oct 2026, eprocurementtoolkit.org/

Key takeaways

  • Procurement means obtaining goods, services and works from outside suppliers, from the first statement of need to the payment of the last invoice.
  • Purchasing is the transactional part of procurement, ordering and paying; procurement adds the sourcing decision, the contract and the supplier relationship.
  • The work follows one route, source-to-pay: sourcing, requests for information, quotations and proposals, the contract, then procure-to-pay, with supplier management alongside and software at every stop.
  • Procurement is usually divided by what is bought, direct or indirect, and by who buys, public or private; public procurement follows procurement law and amounted to 12.7% of GDP across OECD countries in 2023.

What does procurement mean?

In everyday English, to procure something is to obtain it. In an organisation, procurement is the set of activities that turns a need into a delivered good or service from an outside supplier, paid at the agreed price. It starts before any order is raised, when someone decides what is needed and how much can be spent, and it ends after the supplier is paid and its performance has been recorded.

Formal definitions say the same thing in their own words. EU public procurement law (Directive 2014/24/EU, Article 1(2)) defines procurement as the acquisition, by means of a public contract, of works, supplies or services by contracting authorities from economic operators they choose. The US federal rules use the word acquisition and, in FAR 2.101, state that it begins when the agency's needs are established, then runs through the description of requirements, the selection of sources, the award of the contract and its administration. A private company has no such legal definition, but it uses the word with the same scope.

The word also names the function: the procurement team, or procurement department, is the group that runs these activities, sets the buying rules and negotiates with suppliers, while budget holders across the organisation express the needs and approve what is bought.

Is procurement the same as purchasing?

Procurement and purchasing are not the same thing. Purchasing is the transactional part of procurement: raising the requisition, issuing the purchase order, receiving the goods and paying the invoice. Procurement is wider: it includes deciding how to buy a category, choosing the supplier through sourcing, negotiating and managing the contract, and managing the supplier over time. Sourcing sits between the two, as the part of procurement that selects the supplier. A separate guide comparing procurement, purchasing and sourcing in detail is being written.

How does procurement work from end to end?

Seen from a distance, procurement is one route with two halves. The first half decides what to buy, from whom and on what terms; the second half orders, receives and pays, again and again, under those terms. The whole route is called source-to-pay; its second half is called procure-to-pay. This guide is organised as six lines along that route, the same six shown on the map above.

The six lines of procurement and what each one decides or produces
LineWhat happensTypical documents
Strategic sourcingAnalyse spend, plan each category and decide how to go to marketSpend analysis, category plan, award decision
RFP, RFQ & RFIAsk the market for information, prices or full proposals, then score the answersRequest for information, request for quotation, request for proposal, scoring grid
Contract managementTurn the award into a signed contract and follow its obligations, renewals and amendmentsContract, amendments, obligation and renewal log
Procure-to-payRequest, order, receive, check the invoice against order and receipt, and payRequisition, purchase order, goods receipt, invoice, payment
Supplier managementOnboard and qualify suppliers, then follow their performance and riskSupplier record, qualification documents, scorecards
SoftwareRun each stop in a system rather than in paper and emailRequirements, selection RFP, implementation plan

Every procurement question sits on one of these lines; start from the line you are working on.

Not every purchase travels the whole route. A one-off, low-value purchase may go straight from request to payment under a simple approval rule, while a large or strategic purchase passes through every line. Running the route in software is called e-procurement. A step-by-step guide to the procurement process, and one to the source-to-pay process, are being written.

What are the main types of procurement?

Two distinctions come up in almost every procurement conversation: what is being bought, and who is buying.

Direct procurement
Buying what goes into the products or services an organisation sells: raw materials, components, packaging, subcontracted manufacturing. It is tied to production plans, and a supply failure stops output.
Indirect procurement
Buying what the organisation needs to run itself: IT, facilities, professional services, travel, marketing, office supplies. Spend is spread across many suppliers and many requesters, which makes control the main difficulty.
Public procurement
Buying by governments, public bodies and other contracting authorities with public money. It follows procurement law, published procedures and rules on transparency and equal treatment of bidders.
Private procurement
Buying by companies and other private organisations. Each sets its own policy, approval levels and procedures, within general contract and competition law.

Public procurement is large: across OECD countries it amounted to 12.7% of GDP and 29.9% of total government expenditure in 2023, according to the OECD's Government at a Glance 2025. Many governments publish their tenders and contracts as open data, for example in the Open Contracting Data Standard. A third distinction, by object, separates goods, services and works (construction), because each is specified, priced and accepted differently. A dedicated guide to direct and indirect procurement is being written.

Why does procurement matter?

For many organisations, what they buy from suppliers is a large share of their costs, so the terms agreed at sourcing decide a large share of the money spent afterwards. Procurement also carries risk: a supplier that fails, a contract that renews without anyone noticing, or an invoice paid twice. Its controls, such as approval before commitment, a purchase order before the invoice and a match of order, receipt and invoice before payment, exist to catch those failures before they cost money.

Finally, procurement is where an organisation's policies meet its suppliers: rules on competition, on sustainability, on data protection or on local suppliers only take effect if they are written into the sourcing criteria and the contract.

Questions

What is the simplest definition of procurement?

Procurement is how an organisation gets what it needs from outside suppliers. It covers deciding what to buy, choosing the supplier, agreeing the contract, ordering, receiving and paying, together with the rules and approvals that keep that spending under control.

What is the difference between procurement and procure-to-pay?

Procure-to-pay is the operational part of procurement: requisition, purchase order, goods receipt, invoice, matching and payment. Procurement also includes the work before it, such as spend analysis, sourcing, requests for proposal and contracts, and the management of suppliers over time.

What does a procurement team do?

A procurement team sets the organisation's buying policy, plans spend by category, runs sourcing events and tenders, negotiates and manages contracts, and qualifies and monitors suppliers. Requesters and budget holders elsewhere in the organisation express the needs and approve them; accounts payable usually pays the invoices.

Is procurement only for large organisations?

No. Any organisation that buys from suppliers does procurement, even if nobody holds the title. A small company may need only a written approval rule, a short list of approved suppliers and a check of each invoice against what was ordered. The steps are the same as in a large organisation; the formality grows with the amounts and the risk.

Which word is used in the public sector: procurement or acquisition?

Both. EU law and the UK Procurement Act 2023 say procurement, or public procurement. The US federal government uses acquisition in its Federal Acquisition Regulation, defined from the moment a need is established to the administration of the contract, which is the same scope as procurement.

Who maintains this guide

Seb Troz, source-to-pay consultant

Every guide is written and signed by a practitioner who designs and implements sourcing, contract and procure-to-pay processes and the software that runs them. The site belongs to no software vendor and to no public institution.

Disclosure: the author works as an Ivalua consultant. Pages that compare software say so next to the comparison.