Looking for ways to improve cost saving strategies in procurement? Find out how purchasing software can facilitate and enhance your procurement...
Strengthen your procurement process as economies reopen
During the past few months, organizations have raised concerns about global economic stability. However, as governments worldwide begin to ease restrictions, organizations may find relief in this recovery period, with the overall situation improving over time.
Reevaluate your processes
This recovery period lends itself to an invaluable opportunity for organizations. During this time, your organization should adapt and pivot to mitigate losses incurred during the pandemic. It is also an opportunity to future-proof your business, so that you can maintain your resilience and sustainability during possible challenges ahead.
A good starting point for this process reevaluation is to trim the fat from your procurement process. After all, your procurement management practices represent a great opportunity to save money and streamline activities, while also ensuring business continuity.
Organizations that have already adopted digital procurement have enabled the continuity of their respective industries due to process automation and remote work capability. If you have not yet digitized your organization's procurement process, this period presents the perfect opportunity and climate in which to investigate the benefits of the digital transformation of your strategies. It is therefore essential that you ascertain whether your current procurement process is primed for digital optimization.
Comprehensive procurement management
Procurement management merges three vital divisions of purchasing: Process, People and Paperwork.
Process refers to your business's unique set of rules that govern the requisitioning, approval, ordering, obtaining and paying for goods and services.
The people or stakeholders involved in your business each have a responsibility to fulfill within your procurement cycle. The number of stakeholders may increase or decrease according to the risk or value of each specific purchase.
Referencing, auditing, invoicing and compliance procedures entail a significant volume of paperwork being generated and recorded during the procurement process. Generally, the larger the organization, the more attention is required for the curating and safekeeping of all relevant documentation. The administrative burden of handling paperwork, records and documentation leads to increased manual processes, necessitates a larger staff complement, and causes a reduction in efficiency and productivity. Mitigating these shortcomings by migrating all documentation to the cloud via a digital and automated procurement process is central to your organization being able to save time, money and resources.
10 Steps to a successful procurement process
Successfully managing your process ensures that all your products or services seamlessly transition from requisition to purchase order (PO) and invoice approval—provided that all steps in your process are thorough and fluid.1. Identifying needs
Each organization has specific product or service needs. Whether first-time or recurring purchases, all product or service requirements need to be analyzed and cross-checked against availability before purchase requests can be created.2. Purchase requisition
A purchase requisition—whether paper-based, electronic or made telephonically—is initiated once a requester puts in a request to the purchasing department for a product or service; thereby launching the procurement process.3. Request review
Next, the purchase request is reviewed by your finance department or procurement team. The department either rejects the request and returns it to the requester due to budget restrictions or availability, or approves it. If the purchase request is approved, it can be used to generate a purchase order (PO).4. Budget approvals
Prior to a PO being raised, it is usually sent to the accounting department for budget approval. This insight into budget availability is critical, as your procurement process and budgetary classification should align with your organizational goals.5. Quotation requests
When budget requests have been approved, the required requests for quotation (RFQs) are sent to vendors, to compare pricing and to shortlist supplier options.6. Negotiating and contracts
Once vendors are selected and approved, cost negotiations and contract signing can commence. If all relevant stakeholders are in agreement, the PO is sent to vendors. The vendors then accept the PO, and, in doing so, activate a legally-binding contract. This step often applies to larger departments within organizations.7. Receipt of products or services
The vendor will deliver your goods or services within a predetermined and agreed upon timeline. The order should then be examined, and you should notify the vendor of any issues immediately.8. Three-way matching
Three-way matching refers to reconciling your purchase orders, receipts (or delivery notes) and vendor invoices, to identify discrepancies and to ensure that the transaction is accurate.9. Invoicing and payment approval
With three-way matching complete, prepared invoices need to be approved by the relevant stakeholders in your organization, so that they can continue to payment processing.10. Record keeping
Once the payment process is complete, buyers are required to keep a record for auditing and accounting purposes. All documentation, from purchase requests through to approved invoices, should be stored in a centralized database—whether digital, in the form of cloud or software storage, or by means of traditional, paper-based filing.
While different businesses each have a unique approach to their process, people and paperwork, the underlying course of every procurement process is similar. The most significant differences are found in the platforms, tools and software that different organizations employ in their processes, and the time and other costs involved.
Why go digital?
Simply put, digitizing not only streamlines your procurement process; it also ensures security, compliance and absolute transparency. With approval workflows, policy enforcement and audit trails, your entire process can be automated. This saves time, and alleviates some of the major challenges that legacy procurement solutions often encounter.
Common challenges overcome by implementing procurement software
Robust procurement software eliminates the need for many unnecessary steps found in the traditional procurement process, and negates the human error that legacy systems are prone to.
The most common mistakes that can be avoided by implementing a digital approach to procurement include:
- Administrative complexity: Traditional legacy systems make use of documentation that needs to be recorded and stored securely. The sheer volume of paperwork creates enormous administrative complexity for teams across the organization.
- Rogue spending: Rogue spending is common in organizations still conducting traditional methods of procurement. Without proper audit trails in place to ensure compliance, vendor relationships and agreements to meet budgetary requirements, or recognized approval thresholds, invisible costs and maverick spend may harm your organization's bottom line.
- A drawn-out procurement life cycle: Switching to an automated approach ensures that your organization's procurement life cycle is drastically shortened, as manual processes become automated and the time and effort involved at each step is reduced.
- Human error: The elimination of human error is of immense benefit to your organization, as it leads to greatly-improved accuracy across all steps of the procurement process.
- Workload : The significant reduction in workload for all stakeholders frees up more time and resources for other processes to take place efficiently within the organization.
- Consistency - Being consistent not only yields accuracy in your forecasting and insights, but allows for easier reporting and compliance so that your organization fulfills all legal obligations.
- Transparency: Transparency among all stakeholders, including vendors and other external parties, is paramount. Transparent processes allow all responsible parties to have visibility at any given time during the procurement flow, leading to greater confidence and improved relationships.
- Security: Up-to-the-minute software updates, cloud storage and permission settings allow specific individuals to have more or less impact at various stages of the process. These extra layers of verification and security result in your valuable data being positioned safely behind shared secure logins, with little-to-no risk of data-tampering, and the reassurance of the safe backup of your online data storage.
The benefits to evolving from a legacy procurement process are evident, and there are really no impactful disadvantages to migrating to an automated procurement system. The digital features of procurement software will shorten the procurement process, while at the same time allowing for accurate and concise reporting that can be generated by a simple click of a mouse.
Benefits of migrating to an automated, cloud-based spend management system
With the global economy having experienced immense strain recently, digitization has proven to be one of the strategies that ensure the ongoing success of organizations worldwide. In today's pandemic-stricken world of self-isolation and social distancing, migrating your spend management system to an efficient, online, digital solution will greatly enhance your organization's chances of triumphing over the economic crises that have arisen over the past several months.
Organizations that have adopted on-site solutions have reported issues around security, reduced automation and lack of flexibility. Automating your procurement process by means of a cloud solution produces near-immediate efficiency gains, with a reduced need for large teams of employees, greater flexibility and security over multiple devices, and tangible ROI, with overall cost reductions typically ranging from five to eleven percent.
Another benefit of a solution that allows for end-to-end functionality is that it is scalable, and can be adjusted according to your organization's needs alongside business growth.
What should my organization's spend management software entail?
All-in-one solutions like Fraxion’s spend management software eliminates the need for disparate systems.
These are the key areas of functionality that should be included in your spend management software:
- Spend control: Rogue or maverick spending and lack of accountability is a notable issue that organizations face when reconciling spend. Research shows that maverick spending can add up to twenty percent to the cost of items. Approval workflows mitigate these risks. Spend management software such as Fraxion ensures a certain level of commitment around spend control, and aligns individual behavior in order to be compliant with the organization’s goals, ensuring accountability.
- Mobility: On-the-go requests and approvals, accessible via any device, allows for ease of use and contact with all relevant parties, as needed.
- Transparency: Access audit trails on demand, with detailed transaction histories. This promotes accountability and improves auditability.
- Risk mitigation: Conditional visibility, segregation of duty and permissions should be present in your spend management software, to ensure that only the necessary levels of access are provided to the relevant parties.
- Integration: Integration with your current system should be seamless, with a comprehensive solution that employs superior, cross-platform API integrations.
- Reporting: Your spend management solution should provide actionable insights from all your reports.
- Spend analysis: Spend analysis within your software will allow for visibility over every category of your spending, budgeting and business trends.
- Templates: Customizable templates will help to shorten procurement cycles for all users.
- Cost, time and effort saving: Digital automation allows for time and cost saving, freeing up staff and budget resources. Your spend management software should be suitable for organizations of all sizes, should not require developer resources for configuration and usage, and should have an intuitive interface where users can transact with ease and minimal effort at any step in the procurement life cycle.
Future-proof your business
Future-proofing your business for any eventuality can be attained by implementing a robust procurement process via the deployment of an automated, cloud-based spend management solution. This will ensure your business is fully-supported, profitable and well-positioned to thrive as economies start to recover throughout the world.
Get in touch—we’d be more than happy to discuss your procurement challenges and share spend management advice.