What's the key difference between document management systems and procurement software? Here are a few considerations and why you need both.
Great companies are constantly focused on increasing their efficiency. This way, they are able to reduce their operating costs and transform into agile organizations that remain competitive and innovative year in and year out.
Procurement is one of the more commonly overlooked areas wherein efficiencies can be found. By optimizing their approach to it, companies can not only source the exact materials they need quickly, but also considerably reduce expenditures by negotiating the best contracts and taking advantage of any and all payment discounts.
However, businesses are only able to leverage procurement efficiencies if they are able to accurately predict spend. Otherwise, projects can grind to a halt as cash flow dries up unexpectedly, thus making it impossible to meet deadlines and stick to schedule.
The good news is that, with the right approach, procurement teams can increase the chances they accurately project spend. With that in mind, let’s take a look at five critical ingredients in such an approach.
1. Leverage big data
The big data revolution promises to provide value to all facets of an organization, and procurement is no different. The more data you capture, the better informed your decisions will be.
While a number of organizations have already integrated big data into their procurement process, many still have yet to update their procedures. If your competitors are using big data to strengthen their procurement decisions and you’re not, you will almost certainly be at a severe disadvantage. Your competition will be able to make quick decisions with certainty while you’ll have to trust your gut. It’s not enough hoping you will find the breaks in your procurement process on your own. When you use big data to support your procurement process, you can identify the exact areas that could use some help.
Using big data can also help you understand which suppliers provide the most value to your business. With more information at your disposal, you’ll also increase the accuracy of your spend forecasting.
2. Create a detailed, company-wide spend analysis and update it every quarter
Many organizations rely on low-quality information—which tends to be incomplete, vague, or not specific—to manage spend. This translates into a reality in which a company might have a pretty good idea what’s going on at a departmental level but is likely to be left in the dark when looking at spend across the entire organization.
Accurately projecting spend starts with understanding exactly how your company is investing its cash. To do that, create a comprehensive spend analysis and update it at least once a quarter. That way, you’ll be able to easily figure out what your total spend is, who is spending money, what they’re buying, which vendors are supplying multiple business units, which business units buy the same types of materials, and more.
While it may be difficult to put together a spend analysis for the first time, it’s an incredibly valuable tool once all of the hard work is finished. Many companies use it to influence a majority of their decisions.
3. Know your suppliers and vendors well
Procurement teams need to take tax laws, customs, and excise duties into consideration. This way, there won’t be any sticker shock when invoices arrive. When making their projections, managers won’t forget to tack on any fees or other expenses associated with procuring materials from certain foreign countries. The more familiar they are with the taxes and duties different foreign governments charge, the more accurately they’ll be able to project spend.
4. Monitor commodity prices in real-time to note fluctuations
Procurement teams have been tracking commodity pricing for several years. By coupling commodity price monitoring with historical spend data and predictive modeling, however, procurement teams will have a much easier time predicting spend and budgeting while giving sourcing managers a great tool to use during contract negotiations.
5. Use a customized e-procurement system that caters to your organization’s specific needs
There’s no sense in making things any harder than they absolutely need to be. Instead of forcing your procurement team to use old-fashioned methods to source the materials and services they need, invest in an innovative e-procurement system that streamlines the entire process. The right platform caters to your organization’s specific needs, thus providing a ton of efficiency without making you give up any control. Before investing in such a platform, speak with our spend management Software Specialists to review savings potential and quickly see how much money your organization stands to save by modernizing its approach to procurement.
Leverage procurement to grow your business
Businesses need healthy cash flow to continue growing. By refining and optimizing your approach to procurement, you can drastically increase the accuracy of your spend projections. In doing so, you make it more likely for your company to have access to cash needed, the moment it's needed.