When it comes to purchasing, most organizations are afflicted by a number of inefficiencies. Money is wasted, fraud is a risk, cash flow problems materialize, and employees can experience frustration.
Over half of a typical company's expenses are not scrutinized, budget compliant or approved. Rogue spending could result in millions of dollars in losses each year for the average organization.
By strengthening your procurement strategy and investing in systems that track where money is being spent and who is spending it, you can gain full procurement visibility and fast-track your path to increased profitability.
Cost saving strategies in procurement to improve your bottom line:
1. Develop realistic financial goals
Non-core spending accounts for up to forty percent of the average organization’s costs. Without adequate visibility and analytics, it’s difficult to understand how your business spends, to recognize saving opportunities and implement cost-saving strategies. The first step in your procurement strategy should be sourcing effective technology that enables spend visibility and spend analysis. If you don’t know what you’re spending, and where you’re spending it, it’s simply not possible to improve procurement efficiency.
Your purchasing software of choice should equip your organization with business intelligence tools to analyze spend with real-time reporting power and insight into spending trends across suppliers, departments and employees.
Once you’ve gained full visibility into your procurement process you’ll be able to see where you need to reduce your expenses to increase profitability. From there, you can set realistic goals and develop a strategy that sets you on the path to achieving them.
2. Curb rogue spending
A large number of employees admit to having purchased items without going through a procurement approval authorization process. Rogue spending from unauthorized suppliers can severely impact budgets. Ensure that your business has a solution in place to track onboarding and approvals in the vendor management process. Your purchasing solution should take the risk out of purchasing processes with multi-level approval workflows that ensure the right level of authorization occurs for each and every purchase requisition.
If a typical organization has a five to ten percent reduction in rogue spending, it can translate into millions of dollars in annual cost savings.
3. Get the best deals
Full procurement visibility and access to spend data can facilitate negotiations for more favorable payment terms, and enable the securing of the lowest prices for high-quality products and materials.
If, for example, you find out that you’re paying significant amounts to a vendor that operates in a particularly competitive market, equipped with your spend data, you’re in a good position to negotiate early settlement discounts or pricing concessions.
Furthermore, investing in purchasing software that allows you to host internal catalogs from these approved suppliers, gives your staff access to authorized goods and services, and channels spend to contracted suppliers where negotiated discounts and favorable terms are already in place.
To streamline business purchasing and gain access to business-only pricing and volume discounts, consider deploying PunchOut catalog integration. With a solution that offers the PunchOut process and access to online marketplaces, within the e-procurement solution, you can leverage the system’s automated approval workflows and electronic purchase order capabilities for fast, secure and familiar online shopping experiences.
4. Maintain budget control
Visibility into available and committed spend as well as budget data empowers users to make informed purchasing decisions. Your purchasing software should provide authorized staff with access to real-time data, budget insight at decision points and the ability to report on budget vs actuals.
Tracking all spend and projects against budgets, with dashboard insights into available and committed spend, drives budget control. Budget controls ensure spending remains within defined budgets at the GL account, department, project or vendor levels to protect working capital and save your business money.
5. Reduce procurement fraud
Improve spending behavior through accountability.
Procurement fraud can be a large threat to any organization and without transparency and an internal control framework, can be difficult to trace. With audit trails for every transaction and alerts that flag policy contraventions and unauthorized spend, fraud is less likely to occur. Your spend management or purchasing software should enable configurable purchase-to-pay (P2P) rules with automated approval workflows, spend thresholds and escalating multi-level approval structures. Companies can preemptively reduce risk and avoid most cases of fraud with a robust technology-driven procurement strategy.
6. Gain a more efficient procurement process
Giving your staff the tools to work from any location, within a defined spend framework empowers them to spend responsibly. The mobility and automated efficiency that a cloud-based spend management solution affords, goes a long way in driving user adoption. The ROI of your purchasing software investment hinges on adoption, achieved by deploying a solution that’s intuitive, user-friendly and one that simplifies day-to-day processes.
The purchase requisition approval process can take weeks to complete at companies that use manual paper-based procurement processes. With a cloud purchasing system, the process can take under two days—thereby increasing efficiency, productivity and driving a competitive advantage.
Furthermore, top performing candidates are drawn to companies that use the latest tools and technologies. When you invest in a modern e-procurement system, not only does your company become more efficient and cost-conscious, but you can retain top employees with a solution that simplifies their responsibilities.
Would you like to see how cloud-based purchasing software can facilitate an effective procurement strategy? Get in touch and request a custom demo, we ‘d like to show you how you can save costs in procurement with Fraxion.
By taking a proactive approach to spend management and obtaining full visibility into your procurement process, you can eliminate wasteful spending and boost your bottom line.