According to Report Ocean’s recent market research, the procurement software industry is predicted to grow at a compound annual growth rate (CAGR) of 10.1% by 2023 as more and more enterprises rely on it.
And with good reason. Today, procurement is expected to be fast, data-driven and compliant, no matter how quickly an organization is growing.
Effective procurement software seeks to meet these goals by streamlining the entire procure-to-pay cycle with a suite of features. Whether your organization is trying to speed up purchase requisitions and approval workflows or optimize expense management and spend analysis, procurement software digitizes the process and provides a fully automated system.
There are many procurement solutions on the market right now, with little information on what features should be included, or the appropriate deployment processes that should be followed. That’s why we’ve created a buyer's guide to help you navigate your options this year.
To begin with, what benefits does procurement software offer over legacy systems, manual processes and spreadsheets?
Benefits offered by procurement solutions
Incorporating procurement software into your current business processes offers many benefits. Overall, effective procurement systems improve efficiency, transparency and interdepartmental collaboration while reducing human error. Automation and internal controls facilitate sustainable savings in time and costs that positively impact your bottom line.
To get a full grasp of procurement software uses and benefits, let’s run through the specific benefits offered to different teams within your organization.
As procurement roles expand their reach and take the lead in driving cost reductions and agility for an organization, it’s essential to have adequate tools in place to facilitate these objectives.
First and foremost, procurement software should offer advanced requisition-to-purchase order functionality. Empowering users to create and submit requests, upload supporting documents and allocate their requests to cost centers, projects or departments goes a long way in establishing accountability from the outset. Requests should be routed through pre-configured multi-level approval workflows that ensure segregation of duties and escalation based on value or department. With a proactive solution-driven procurement process, all purchase requests are tracked with centralized documentation to verify spend, and approved with delegation of authority and policy compliance, eliminating the need for corrective action.
To proactively manage indirect spend with suppliers and get the most out of your contracts, choose procurement software that enables effective supplier onboarding and approvals, catalogs and PunchOut, you can rest assured that requisitioning and approval workflows configured in the system will ensure budget and policy control, and eliminate rogue spend.
Put simply, procurement teams benefit from significantly reduced purchase order cycle times, accuracy and compliance, ensuring that purchasing occurs with authorized, contracted and high-performing vendors. All of these benefits empower procurement teams to be highly efficient, gain more spend under management and ultimately, reduce costs.
For accounts payable:
AP inefficiencies can waste hours of productivity, while discrepancies and lost documentation can lead to unnecessary costs being incurred. So, to reduce risks in AP processes, procurement software includes electronic invoice capture and approvals. The benefits of increased collaboration, automated AP workflows, exception alerts and data centralization enable AP teams to gain extra time to focus on important tasks. Such as making sure vendors are paid the correct amount, early, or on time to strategically improve supplier relationships and achieve better pricing and early settlement discounts.
Plus, by achieving faster workflows, AP departments can significantly reduce invoice processing costs. This is achieved without sacrificing accuracy thanks to an effective procurement system’s three-way matching capabilities that prevent overpayments and duplicate invoices.
Accounts payable can easily track and verify payments and expenditure with a centralized platform for:
Procurement software should also provide internal controls essential for optimized expense management. Accounts payable should be able to rely on defined corporate spending policies within one system while receiving real-time notification of expense claims that need to be reviewed or that are flagged for noncompliance.
Electronic expense claims simplify processes for employees, enabling them to accurately capture expenses from mobile devices as they happen by attaching snapshots of receipts and eliminating data loss and expense backlogs. This capability allows accounts payable to verify expense claims with ease and reduce risk while speeding up the reimbursement process. Which is a win-win for both accounts payable and the employees they reimburse.
Procurement software can help finance leaders maintain financial discipline across their entire organization. Increased visibility drives responsible spending and automated internal controls ensure that spend is always tracked, approved, and budget and policy compliant.
Electronic transaction approval cycles are detailed in audit trails. These logs include all relevant data, timestamps and user activity with access to in-process status information. With this overview of each stage in the transaction’s life cycle, approvals, supporting documentation, quoting procedures, and requests for additional information are archived and accessible, improving an organization’s auditability.
Authorized users should be able to access budgets at decision points throughout the procure-to-pay cycle. With increased visibility into departmental or project budgets, approvers can make informed decisions and accurately gauge the impact of spend before authorizing it.
When combined, these features and risk analytics help finance leaders identify saving opportunities and implement cost control strategies that ultimately increase long-term operational profit margins and year-over-year savings.
Now that you know why the right procurement software is becoming more and more of a necessity in modern businesses, let’s explore some must-have features that you should look for when considering a system.
Must-have features of effective procurement solutions
Effective procurement solutions should provide a feature set that enables time-to-value and ROI in quick succession.
What is important and what should you look for in your evaluation stage?
Cloud-enabled mobility and agility are key to driving productivity and business continuity. There are some key outcomes that your procurement solution’s features should enable, these can be categorized as follows:
A procurement solution should eliminate the need for manual, paper-based and repetitive processes. A user-friendly and intuitive user interface with mobile access and workflow automation will drive user adoption; a determining factor in the success of any software investment. By making processes easier and reducing the time and effort required for day-to-day processes, you can drive the vital buy-in from your team and benefit from the time and cost savings that will ensue.
Effective procurement solutions should free departments from admin-intensive processes, so they have time to focus on big-picture, strategic initiatives. Departmental silos may block or delay processes, approval bottlenecks from slow, manual or incorrect routing and out-of-office staff can cause further delays and inefficiencies. Procurement software automates workflows and should enable collaboration between users, regardless of their location. Whether you’re trying to reduce procure-to-pay cycle times or increase the number of accurately processed purchase orders, collaboration tools can fast-track and streamline procurement processes.
Your procurement solution should promote accountability and guide spending behavior by providing an efficient framework that mitigates risk and ultimately protects working capital. By providing preventive internal controls you can proactively manage your spend before it is incurred and ensure that non-compliant or fraudulent transactions cannot slip through the cracks, eliminating the need for reactive processes. Your internal control framework should not only manage risk but standardize and streamline processes to ensure accuracy and efficiency.
When reviewing solutions, a key focus area should be the procurement solution’s ability to integrate seamlessly with key business systems in your technology stack, such as your ERP or accounting solution. Connecting your procurement data with key business solutions improves efficiency and accuracy, while ensuring end-to-end visibility and proactive spend management before any payments are released from the ERP.
Visibility is the key to identifying cost and risk reduction opportunities. In order to assess where costs need to be reduced, you need to understand how your business spends money. Your procurement solution of choice should provide advanced spend analytics and adequate data insights to reduce discretionary or non-essential expenditure.
Preparing for a digital procurement transformation
The successful deployment of your cloud procurement solution, backed by a healthy adoption of the system is essential for realizing ROI and time-to-value. So, what are the steps you should take to make this process as expedient and efficient as possible? Download Fraxion's complete 2021 Buyer's Guide to Procurement Software for feature insights and key considerations, tips for introducing a new procurement system to your team, and important metrics you should be tracking. We hope it helps you expedite your journey to an improved digital procurement experience.