Discover how e-procurement or spend management software can solve Healthcare procurement challenges and assist in streamlining procurement processes.
The true cost of not adopting digital procurement software
Operational or indirect procurement, which refers to buying the goods and services that sustain your organization’s day-to-day business operations, can easily become disorganized and wasteful without effective oversight.
It’s not confined to procurement and finance departments but involves many active stakeholders across a business. Having this many contributors, purchasing for and on behalf of your organization makes it complex to manage, and everyone has their own agenda.
Non-procurement employees, for one, are trying to get new equipment they need, or get reimbursed for their business and travel expenses. Without guidance or accountability, they might not follow the correct procurement procedures for their tasks. Instead, they’ll take shortcuts and circumvent unenforced processes for faster outcomes, creating missed savings opportunities. This stretches procurement and finance teams, burdening them with the admin-intensive tasks of tracing and correcting poor use of your organization’s spend.
These are just a few examples of challenges that are remedied by the deployment of digital procurement software.
Throughout this blog, we’ll cover common challenges that organizations face when they rely on manual, paper-based or legacy processes in the absence of a digital procurement system, and how deploying one can be the difference between running a cost-conscious and profitable business or being in the red.
Challenge #1: An inefficient procure-to-pay process
Acquiring the products and services for your entire organization is difficult without adequate technology. It creates endless admin. Just think of all the time consuming but necessary stages in the procurement process that you and your fellow staff are left to complete manually.
Reviewing backlogged purchase requests. Negotiating contracts with vendors. Tracking down lost documents. Scanning email threads for supporting verification documents. Creating purchase orders and matching them with packaging slips and vendor invoices. Liaising with your AP team to get invoices approved and paid on time. All the while keeping record of every single transaction.
Modern fast-paced organizations that continue to rely on an outdated procure-to-pay process waste valuable time, pay more and create room for error. So how can flexible digital procurement software help your procurement team end an overwhelming, inefficient procurement process?
Firstly, digital procurement software allows you to set up easy and automated workflows. For instance, you can create an escalating purchase request approval workflow that routes requests to the appropriate approver with pre-defined spend thresholds. You can also follow a similar automated process to get new vendors approved. Digital tools enable collaboration between users, ensuring segregation of duties and mitigating risk.
These workflows should allow for flexibility (that serves to strengthen best spend management practices). Authorized users can create assignments that route transactions to an assigned user for additional approval, with permissions in place to participate and comment. A process that could take days or weeks if initiated manually or emailed to an inbox filled with hundreds of other business matters and requests.
Automated workflows aren’t the only way procurement software speeds up the procure-to-pay process. It also solves delays that occur when an approver is out of office. All authorized users can simply access their digital procurement software via a mobile app on their phone, where they can:
- Submit purchase requisitions (and upload documents)
- Capture expenses as they happen and upload or snapshot receipts to eliminate data loss
- Access audit trails
- Review budget insights and potential impact of spend
- Complete approvals and compliance checks
And procurement staff don’t have to keep checking their phones. They can rest assured that they’ll receive mobile, email and in-app messages and alerts when action is required. Or when their procurement system has flagged noncompliance.
In the final stages of the procure-to-pay process, exception alerts flag discrepancies and three-way invoice matching is simplified and streamlined. These features enable fast and accurate invoice approval.
You can claim back even more time in your day if your accounting or ERP system is integrated with your procurement software. Fast-track payment from the accounting system by ensuring that proactive spend management and compliance checks occur beforehand within the procurement system.
By the time your invoices or reimbursements are approved in the procurement solution, and ready for release by the accounting system, you’ll have the peace of mind that all purchases and expenses are tracked, approved, in budget, and policy compliant, and goods are received and matched accordingly. Your accounts payable team doesn’t have to retrace these steps to mitigate the risk of overpaying, paying for goods not received or paying for unauthorized expenses, goods, or services.
These daily factors and risks are a reality for every business. By equipping your team with adequate digital tools, you can drive productivity and responsible spending behavior, while gaining complete visibility and proactive control.
Challenge #2: Rampant rogue spending
Rogue spending acts as an invisible leak that drains your organization’s finances. When your employees make purchases that are outside of supplier contracts and defined procurement processes, your bottom line suffers.
You miss out on the preferred terms and prices for the items you order. And with no contract in place, you have no protection if an unauthorized supplier delivers substandard product or items that don’t meet business requirements. Meanwhile, rogue spending can also damage your preferred supplier contracts and relationships if you are not meeting their minimum order requirements.
Consider why employees are “going rogue” in the first place. The problem could be that your current procurement process is fragmented, or an existing system is intimidating to use, causing your employees to take their purchasing needs into their own hands with a poor understanding of the costs of doing so.
If this is the case, simplify your procurement operations with user-friendly, cloud-based digital procurement software. A solution that gives you full visibility into your organization’s wide-scale spending to immediately get rogue spending under control.
One-way digital procurement software achieves this is through electronic audit trails, which detail every action and user involved in a transaction, with specific dates and time stamps. This transparency drives accountability and deters employees from “going rogue”.
Formal purchasing policies can be configured to stop rogue or unauthorized spending as well as overspending from occurring. These include:
- Purchasing best practices, which ensure requisitions are submitted, routed for approval according to defined rules, thresholds, and delegation of authority.
- Expense claim policies and pre-approval for travel requests
- Vendor onboarding and approvals
- Budget visibility and risk analysis for authorized users, enabling informed decision-making prior to committing to spend
- Enforce quoting policies for high value items to ensure purchasing at the lowest price
These policies support strategic procurement initiatives by ensuring your whole organization is following the same guidelines that prevent rogue spending and fraud from taking place while maximizing contracts. You gain clear oversight of all employee spend and you’re notified of noncompliance or if further verification or action is needed, which speeds up processing times.
Challenge #3: Missed savings and growth opportunities
Finally, by failing to adopt digital procurement software, you miss out on valuable spend analytics, business intelligence and reporting capabilities that help you drive cost reductions and growth opportunities.
In fact, 69% of procurement leaders find digital and analytical solutions especially relevant today, with greater potential to increase procurement efficiency.
In digital procurement software, these tools are accessible throughout the procure-to-pay process. For instance, you can access business intelligence and reporting tools, where you can:
- Review real-time budgets at decision points
- Track spend and projects against budgets
- Report on budgets vs. actuals
- Measure transactional risk
- Analyze spend by employee, supplier, and review price variations
- Measure processing costs
- Gain a holistic view of your organization’s spend
With this data at your fingertips, you can quickly identify savings opportunities and implement cost control measures as you prepare for future budgets and financial periods.
Company spending costs less with digital procurement software
With proactive cost control, time savings, and risk effectively managed, your business is well placed to achieve sustainable savings and growth objectives. Additionally, digital procurement software brings agility to your organization, so you can build resilience no matter the economic climate through remote-enabled business continuity and the ability to make data-driven decisions and identify sources of value.
Want to learn more about how you can leverage your organization’s procurement operations to thrive in your industry? Read our recent blog on the top seven tools you need for effective procurement and vendor management.