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Navigating the future of purchasing: Why a purchase approval system is more essential than ever
Innovation and change are essential to the success of every business function—and purchasing is no exception. Today, businesses leverage purchase approval systems to create a streamlined, automated purchasing workflow to gain time and cost savings that wouldn’t be possible otherwise. The result is a purchasing cycle that takes hours, not days, and helps purchasing departments realize savings of 30% or more per cycle.
The current state of purchasing
Before, purchasing strategies were more linear, and only focused on cost and risk reduction.
Today, purchasing teams must achieve these objectives with enhanced efficiency, agility, and accessibility across dispersed, remote operating models. They face a more volatile market, with 50-75% of costs directly influenced by supply chain disruptions.
Leaders are expected to future-proof their purchasing strategies, and almost 50% have low confidence in their ability to achieve this with their current manual or legacy setups. A prescient strategy relies on a “next-gen” spend management or purchase approval system to be effective in these pursuits.
Why a purchase approval system is essential to the current and projected procurement landscape
A purchase approval system is integral to the future of business purchasing because of its trajectory to becoming more decentralized.
With globalization and the fast transition to remote work, procurement teams and their vendors are becoming more and more distributed, requiring coordinated efforts to make cohesive, compliant, and transparent purchasing decisions.
Without a purchase approval system, this trend in decentralization exacerbates authorization challenges and bottlenecks in the purchase approval process, such as:
- Lost requisitions
- Overdue approvals and backlogs
- Approver delays
- Lack of visibility
- Unauthorized or rogue spend
- Policy contraventions
Manual purchase approval processes, or those managed by repurposed systems like SharePoint and Excel, are not scalable under the best of circumstances. These processes create room for human error and delays, increasing purchasing cycle times and creating conditions that require reactive processes that can be laborious and costly.
In the future, where more teams will be dispersed, market volatility could increase and the purchasing landscape will be more competitive, these stopgap solutions will require even more administration. They'll fall short in providing purchasing oversight or control, and offer no reliable reporting to inform purchasing strategies.
For example, the delivery of items for business purposes, such as IT equipment, will be distributed to remote or home offices. Managing the risk associated with these big-ticket operational purchases could pose novel challenges and risks without a reliable purchase approval system monitoring the veracity and authorization of purchase requests.
A purchase approval system can mitigate these challenges by centralizing visibility and data. Just as importantly, purchase approval systems can provide an internal control framework for decentralized procurement—allowing businesses to turn their purchasing processes into an automated, proactive and cost-efficient function.
Decentralized vs. centralized procurement: Achieve the best of both worlds with a purchase approval system
Decentralized procurement enables employees and departments to make their own purchases, whereas centralized procurement is controlled by a core procurement team. While your business may not be large enough to warrant hiring a team of procurement professionals, having a scalable system and controls in place to manage the remote spending processes of your team should be a top priority.
Both purchasing strategies can be optimized by a purchase approval system. How? It empowers teams, small or large, to request and submit their purchase requests from any location, while ensuring vital approval and policy compliance, and proactive financial control throughout the process.
Users can easily navigate processes and submit purchase requisitions, which are automatically routed to the appropriate approver, based on:
- Approval groups
- Cost allocations
- Escalating approval thresholds
Approvers get real-time system and mobile app alerts notifying them when they have requests to review. They can avoid any back-and-forth with access to supporting documentation and historical transaction data detailed in audit trails. Authorized users have real-time budget insight to accurately gauge the impact of spend at each decision point before any costs are incurred.
The end result is a streamlined, transparent, and proactive purchase approval process that eliminates risk, errors, and quickly wards off any unauthorized spending attempts. It’s a simplified experience for all users – purchasers, approvers, and accounts payable alike.
With a cloud-based purchase approval system, processes are easy to set up, scale and roll out as the business evolves and grows.
Empower a responsible spending culture from any location with Fraxion’s purchase approval system
By facilitating the ease in which spend requests are initiated, assessing if they’re in budget, ensuring policy compliance, and empowering managers with the data they need to make the right decisions, you can keep operating expenses at bay and effectively manage the spending habits of your team, regardless of where they’re operating from.
Looking to digitally transform your purchasing process? Request a demo of Fraxion’s purchase approval system to learn how you can future-proof your business’s purchasing and shrink the requisition-to-purchase order cycle from days to mere hours.