Avoid these 8 costly procurement mistakes with digital procure-to-pay tools

Your procure-to-pay process should optimize your organization’s purchasing operations and make tasks easier, helping you achieve speed, efficiency and cost control. However, if you’re processing large volumes of transactions that require strict oversight with limited resources, you will always be two steps behind without the right tools and approach. 

A lack of visibility and control over manual day-to-day procurement processes can lead to reactive processes to correct inevitable mistakes. Leaving these mistakes unchecked causes long-term spend leakage and impacts your company’s bottom line. Fortunately, even complex procurement mistakes can be avoided by replacing manual, email, and spreadsheet-based processes with digital procure-to-pay tools

8 Common procurement mistakes—and how procure-to-pay tools solve them

Here are eight of the most common procurement mistakes that can eat into your organization's bottom line. Learn how to recognize and solve them by deploying effective procure-to-pay tools.

1.   No procure-to-pay protocol

Finding out an employee has expensed a purchase without following proper protocols is a common occurrence that organizations go through—especially if they’re still building out their procurement function. 

This unmanaged purchasing occurs for three reasons:

  1. Employees aren’t aware of their organization’s purchasing process.
  2. The process isn’t defined or does not exist.
  3. The process is too complex to follow.

In instances when they need to purchase goods or services, they could attempt to circumvent your organization’s procure-to-pay process, and this results in multiple consequences. Surprise invoices, rogue spending, and going over budget, to name a few. 

Automated procure-to-pay tools solve this challenge by standardizing and ensuring compliance with your organization’s approval structures and internal controls. This enables employees to request, get approval, and receive purchases promptly while remaining compliant with your organization’s procurement policies. Procure-to-pay tools facilitate this with requisitions and escalating approvals that are automatically routed with budget and compliance checks built into the workflows.

For instance, with Fraxion, employees can fast-track their required purchases by completing and submitting purchase requisitions via their desktop or mobile device. Whether they need to upload quotes or supporting documentation, or alter a requisition according to their changing needs, the process is easy, on demand and intuitive. They can even shop for a product with authorized suppliers via PunchOut or internal catalogs and their purchase requisitions will be routed through the same budget, approval, and compliance checks.

Once employees hit submit, requisitions are routed to the appropriate purchasing authorities via configured, multi-level approval workflows. These approval workflows alert managers when action is required and enable them to authorize via their web or mobile app, wherever they are. This not only elevates procurement efficiency, but employees are more likely to adopt these procure-to-pay tools due to their simplicity. The best part? You maintain complete visibility of this process with detailed audit trails of all touchpoints and transactions. 

2.   Lack of spend visibility

Like with any challenge, you can’t overcome it until you have awareness and visibility of its scope. Spend is no different; you could be driving 95% compliance with your procurement policy and still losing big money if one department makes undetected purchases or inflated expense claims. 

Not having complete oversight of how your business spends comes at a price. Trying to correct overspending by cutting expenditure blindly can impact operations and further enable wasteful spending by not identifying exactly where it exists. 

With procurement software’s comprehensive procure-to-pay tools, you gain visibility of:

  • All outgoing indirect expenditure
  • Travel and expense claims
  • What goods and services are being purchased
  • Which suppliers you’re purchasing from 
  • And spend by user, budget, and transaction

Quick, easy reports can be generated for more granularity and comparison by financial period, cost allocation, or user.

Procure-to-pay tools provide complete visibility into your entire purchase requisitioning, expense, and approval process with features like: 

  • Audit trails: a detailed history with user log, date and time stamps for actions linked to each transaction
  • Available and committed budget insight at decision points
  • Advanced spend analytics and reporting

This spend visibility is vital and enables business leaders to make better informed decisions. Knowing where to reduce costs, identifying saving opportunities, and budgeting accordingly can give your business a distinct advantage that can benefit your bottom line.

3.   Not enforcing policies

A clear procurement policy that supports your strategy is an invaluable asset. While you may wonder if a strict policy sacrifices flexibility, this couldn’t be further from the truth. A standardized procurement policy creates predictability, security, time savings and strengthens your strategy, and automation makes compliance easy. 

So, how do procure-to-pay tools enable better policy management? The internal control framework that procure-to-pay tools provide ensure that your configured rules and limits are adhered to, from:

  • Collaborative multi-level purchasing approval workflows (set up according to approval structures, thresholds, and delegation of authority)
  • Ensuring that a new supplier is approved by an administrator prior to a purchase being approved
  • Pre-approval of all travel expenditure
  • Expense parameters and requirements for supporting documentation
  • Alerts that notify managers and users when potential overspend or an out of policy request has been raised.

These risk mitigating policy controls proactively guide spending behavior and ensure responsible purchasing decisions.

4.   Exceeding budgets

If you find your organization is exceeding company budgets, it’s likely causing tedious invoice reconciliation, finance headaches and wasted time and money. While budget deficits can be caused by wasteful or unauthorized spending, it’s often due to miscommunication and poor visibility. 

Often this gap is caused by managers not having visibility into real-time budgets. Are they able to see accurate budgets that reflect all approved orders that have not yet been purchased or paid? If not, they could approve expenditure without realizing that they’re out of budget. 

Failure to accurately track and visualize spending against budgets can quickly send your organization into the red. Procure-to-pay tools can align your team on spending limits through real-time budget insight.

With Fraxion’s budget insight, authorized employees can view real-time budgets at decision points—budgets that factor in available and committed spend. This proactive approach ensures that employees know the true impact of spend before it’s incurred and how much they can actually spend and approve.

5.   Refusing technology

One mistake you may be making is not taking advantage of technology to improve your organization's procurement process. Organizations may be reluctant to make the move to digital procure-to-pay tools based on cost, change management, or security concerns, or for fear of getting stuck with a long implementation process that has slow time-to-value. 

However, these perceptions are flawed. Digital procure-to-pay tools help eliminate manual inefficiencies, lost requisitions, data errors, risk of fraud, overspending and more—while accelerating the requisition-to-purchase order cycle time from a week to mere hours. This efficiency saves purchasing managers 30% of total costs that are incurred throughout the purchasing cycle.

Security concerns can be allayed by the robust authentication and security certifications that exist in modern procure-to-pay tools, with enhanced access management, and scalability via reliable delivery platforms.

An additional benefit of cloud procure-to-pay tools is that they can be deployed rapidly, and they enable continuous feature updates and enhancements, saving IT from having to maintain the technology and significantly increasing time-to-value. 

6.   Duplicate invoices and overpayment

Duplicate invoices are a common costly mistake. Companies lose approximately 0.5% of their spend via undetected duplicate invoices. This occurs when the same or variations of an invoice—with different invoice numbers, dates, and amounts—are submitted to pay for the same purchase, causing multiple processed payments and spend leakage.

What makes this mistake so easy to make is that traditional manual invoice verification doesn’t always catch duplicate invoices. Matching an invoice with the purchase of a received item and service by supplier, invoice ID, invoice data and amount will often still check out and be approved if the purchasing manager doesn’t recognize that the invoice is a duplicate. 

Digital procure-to-pay tools offer multiple features and protocols to protect your company from this costly procurement mistake. They prevent duplicate invoices via electronic invoice approvals, centralized data, and in-app notifications for exception or variance alerts.

These protocols include strategic approval routing to ensure delegation of authority and transparency into all purchases to prevent wasteful, duplicate orders. Meanwhile, audit trails are easy to access to view change requests or alternative requests for items that are out of stock, further preventing any chance of duplicate invoices. 

7. Late payment penalties and paying for goods not received

Another time-consuming challenge that can lead to costly mistakes is performing 2 or 3-way matching manually. Cross-referencing purchase orders, goods receipt notes and supplier invoices without the right digital procure-to-pay tools results in long paper trails and tedious admin and discrepancies that can lead to late payment penalties or paying for goods not received. 

AP departments waste hours on these day-to-day tasks and it becomes even more laborious in decentralized environments. From tracking down relevant staff members across locations for relevant documentation, to delays that follow when they’re out-of-office or unreachable. These all lead to bottlenecks and reactionary inefficient procurement processes. 

Not to mention, these consequences that often ensue:

  • Delayed and lost documentation
  • Human error
  • Missed payment discounts
  • Late payment penalties
  • Paying for goods not received
  • And high costs

Procure-to-pay tools completely remove these obstacles by automating processes, centralizing access to data and replacing manual inefficiencies and risks with a streamlined digital process. AP managers gain real-time visibility into the entire process and can electronically match purchase orders to invoices and goods received notes via 3-way matching system capabilities, prior to releasing payment.

8.   Non-PO (Purchase Order) based invoices

Non-PO invoices occur for two reasons: they either can’t be matched to a purchase order or do not have a purchase order associated with them, and are the result of spend that doesn’t comply with the procurement policy or formalized process.

Although a headache and often a mistake, non-PO based invoices can be indicative of a lack of procurement policy enforcement and more deep-rooted problems if they occur consistently. 

Procure-to-pay tools, if effectively utilized as the single source of truth for all purchasing activities, offer the compliance framework to ensure that employees can only purchase from approved suppliers via system-generated requisitions, and only once approved in the system can a purchase order be generated and emailed to the supplier. Once the invoice is received, it’s captured for approval, and once the goods are received, the invoice matching process above follows, closing the loop and ensuring that no overpayment or unauthorized spending can occur.

Fix procurement mistakes for good with the right procure-to-pay tools

With the right digital procure-to-pay tools you can avoid making these costly mistakes and enable your organization to build an efficient, accountable, and cost-conscious purchasing process. If you’re considering automating your manual purchasing, expense, and approval processes, and need more details around the transition, we’d be happy to share insights from over twenty years of helping companies achieve automated procurement efficiency. 

Learn how Fraxion's procure-to-pay process ensures that all spend is tracked, approved, budget and policy compliant in this live workflow video:

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Fraxion’s cloud procure-to-pay suite is built for ease of use, complete transparency and effective spend management. Click here to schedule a free demonstration of our solution and see how it can solve manual challenges and get spend under control fast.

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