Procurement

When and why it's time to consider an automated procurement system


Indirect procurement is a fast-moving process essential to effective business operations, large or small. After all, the key purchasing factors that make up “the 5 rights of procurement” (the right quality, quantity, place, time, and price) require many tedious, manual tasks, market research, negotiations, approvals, and an overall high level of coordination–especially if your organization processes hundreds of transactions. These factors that measure the performance of your purchasing process make the case for automated procurement systems as technology has the power to standardize and simplify complex business purchasing while speeding up processes.

What is procurement automation?

Purchasing or procurement professionals spend most of their time:

  1. Maintaining best-practices for documentation storage and data management
  2. Managing suppliers and contracts
  3. Implementing processes that enable successful purchasing operations no matter the size of their business
  4. Ensuring cost containment and compliance with company policies and procedures

If these tasks are carried out via paper-based or manual processes, there is certainly a high-volume of repetitive, time-intensive tasks, and a level of risk involved with the potential data loss and human error associated with these procedures. Policy compliance is difficult to enforce, and the time spent deciphering where processes have gone awry, and to what end, can quickly ramp up hours of administration. 

As organizations grow, and employee needs expand, so too does an organization’s indirect spend. Expenditure starts becoming unmanageable, with more and more unauthorized purchases occurring and overspending becoming more apparent. This is a clear indicator that an automated procurement system is required to streamline processes, implement approvals and controls, and drive accountability. 

Procurement automation enables purchasing managers to improve process efficiency, and gain visibility and control of key areas of procurement while cutting their processing times in half. They can leverage improved, automated processes and centralize data management to promote better informed decision making and a more agile procurement strategy. 

Procurement automation completely transforms the procure-to-pay process while reducing costs and processing time. It keeps your business operations efficient, enables scalability, and promotes a cost-conscious and responsible spending culture.

5 Benefits of automated procurement systems

Before we talk about the top five areas to automate in the procure-to-pay cycle, here are five reasons why an automated procurement system is so important in today’s procurement landscape. 

1. Increased productivity

Automated procurement systems keep your procurement function moving. Email threads and manual spreadsheet checks are replaced with automated workflows that route requests to approvers in order of authority and track expenditure against budgets. Collaboration between remote and distributed teams is easy, moving requests along effortlessly with reminders and notifications that prevent expensive delays, reducing your organization’s purchasing cycle time by as much as 30%

2. Greater spend visibility

Automated procurement systems enable greater spend visibility in multiple ways. With each transaction, the system provides detailed digital audit trails of:  

  • Dates
  • Times
  • Actions
  • Users
  • Supporting documentation 

Historical spending data can be reported on and analyzed, giving you the tools to identify problematic areas that need more budget control, and uncover saving opportunities. You’re equipped to better understand spend predictability, giving you the power to forecast and budget accordingly. 

3. Eliminates human error

Leveraging an automated procurement system—one that simplifies data entry and centralizes documentation—significantly reduces human error and offers more accurate reporting. 

By integrating your automated procurement system with your ERP or accounting system, you gain end-to-end efficiency and accuracy, ensuring that all purchasing workflows are tracked, approved, compliant, in budget, and accurate prior to being released for payment from the financial system.

4. Lower costs and more savings

An automated procurement system is a necessary resource for any company looking to maximize efficiency and ultimately, profitability. Every business will achieve significant cost and time savings from day one thanks to automated features that eliminate:

  • Time-consuming paper-based, manual processes
  • Repetitive t tasks
  • Process bottlenecks
  • The margin for human error
  • Lost documentation

By leveraging an automated procurement system to reduce the amount of admin-intensive tasks your team has to focus on, you do two things. Firstly, you eliminate the need to hire seasonal or temporary staff—especially if you have a smaller team with limited resources. Secondly, you give your purchasing staff the ability to prioritize improvements and strategic initiatives like: 

  • Process improvements
  • Data analysis to identify saving opportunities 
  • Negotiating better contract terms and pricing

You can easily reduce the time and costs associated with processing, qualify for bulk and early settlement discounts, and gain access to better pricing by leveraging your purchasing data via easy, on-demand system reports.

5. Compliance

Automated approval workflows that escalate based on policies, thresholds and delegation of authority ensure that compliance is maintained for all purchasing processes. This establishes purchasing parameters and enforces compliance via configured internal controls.

Managing risk is streamlined and you’re able to protect working capital, improve spend management, and ensure adequate cash flow by eliminating:

  • Rogue or unauthorized spending
  • Fraudulent purchasing activities
  • Overspending 
  • Wasteful spending behavior

Optimize these 5 areas of the procure-to-pay cycle with an automated procurement system

1. Purchase requisitions 

Purchase requisitions are a fundamental process in any business, but one that can cause the most delays and issues if the process is not defined or enforced. By automating the requisition process, you can rest assured that all goods and services are requested, tracked, and justified. 

By routing requests via an automated procurement system, each request is subject to defined budget and policy compliance checks. Low-value, unauthorized purchases can no longer slip through the cracks and silently eat into your budgets. Visibility and proactive controls are in place to guide and monitor all spending processes, while making it easy for staff to comply by equipping them with mobile, user-friendly software.

2. Approval workflows

By automating approval workflows, you remove the unreliable paper or email threads that cause frustrations and approval bottlenecks. Requests no longer wait in unattended inboxes, or get delayed by approvers that are out-of-office. With automated procurement systems, all requests are routed according to defined approval structures, from simple to multi-level hierarchies that manage risk and ensure authorization. Managers are empowered to review budgets and approve with confidence, on any device, wherever they are. 

3. The purchase order cycle

Getting requests approved, ensuring approvals and sending and storing POs while ensuring they don’t get lost along the way is a tedious process. Despite having formal purchase order cycles in place, a majority of businesses state that it is undermined by other areas in the purchase order management cycle, such as inconsistent or unauthorized purchase requisitioning. Automated procurement systems solve this by automating the entire purchase-requisition-to-PO cycle and enabling collaboration between relevant departments to deliver greater process efficiency, productivity, and savings. 

4. Invoice workflow management

Relying on manual invoice management is a risky business practice today. With all the documentation that needs to be linked and verified—from purchase orders, to receipts, and complex  spreadsheets, coordinating these efforts across distributed operations with no centralized documentation can add weeks to AP processes.

By leveraging an automated procurement system for invoice workflow management, you can centralize documentation, avoid data loss, streamline invoice approvals and matching, and eliminate the risk of duplicate invoices, overpayment and late payment penalties.

5. Supplier contract approval and management

Taking on a new supplier can generate significant savings and prevent rogue spend by giving employees access to the products and services they need. Although important, supplier take-on can also become a lengthy process to get approved. Even once approved, it’s important to keep tabs on supplier contracts to measure their performance to make sure that you’re getting the full value of your agreed upon terms before you renew or terminate. 

Within an automated procurement system, you can configure an automated approval process to achieve a simple and faster supplier take-on process. Once approved, all supplier contracts are stored within the platform’s central repository, so you can access consistent and accurate records. 

Gain a competitive advantage with an automated procurement system

Automation is key to effective procurement operations.You need a solution that scales as your business grows, streamlines processes, and guides and empowers users to purchase responsibly and spend wisely. Fraxion’s automated procurement system makes it easy to transition from manual or paper-based processes by simplifying and accelerating purchasing workflows. Request a demo of Fraxion today to see how you can get more done in less time and ensure transparency, compliance and spend control in your purchasing process. 

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