July 10, 2018
The Procurement Process: Is It Time to Streamline?
Posted by Steve Chapman
Procurement can be a messy business. Members of your staff want what they want, when they want it—and your procurement process is probably in their way, which can have some unintended consequences.
Letting individuals manage purchases for themselves or their departments may speed up the process, but can result in over- or under-buying, untracked purchases and out-of-control spending. Yet managing all procurement through a rigid workflow can cause approval delays, which can lead people to circumvent the procurement chain and make purchases with the corporate credit card. When that happens, corporate oversight goes out the window as purchasers use unauthorized vendors, meaning your company loses out on previously negotiated discounts with suppliers.
There’s also a good chance that any procurement process in your organization might be managed via mile-long email chains, which can create a time-consuming lack of transparency around purchasing. If your organization has a buyer, for example, whoever made the purchase request can only track its progress if they are looped in to correspondence between the buyer and supplier. Updates to the purchase order (PO) or a change in supplier results in a blizzard of emails that is a nightmare to manage.
Managing approvals and invoicing is also cumbersome. The individuals who need to approve or sign off on the purchase can vary by product, project, department, etc. You have to take the time to find and loop in the proper people, and an email that gets forgotten or filtered can bring purchases or payments to a halt.
Sound familiar? If you’ve experienced some of this pain, it may be time to consider automating your procurement and accounts payable (AP) processes. Cloud-based procurement solutions can enable you to define the products and suppliers you want to make available to your employees, automatically create POs and automate the approvals and invoicing workflow to remove major bottlenecks.
What to look for in a procurement solution
Your procurement software should include a web-based interface to provide an easy way for employees to create and manage their purchase requests. To make things even easier, solutions such as Coupa can create supplier punch-outs, which pull shopping cart data from supplier sites you’ve pre-specified—like Amazon—and automatically create requisition line items for the contents once the cart is closed.
The solution should also enable you to do pricing comparisons on an item, by showing you pricing variations across all approved vendors. Some best-of-breed procurement software offers the option for you to put together a catalog for employees that specifies items available for purchase from pre-approved vendors (with whom you’ve already negotiated discounts or other cost-check measures).
Your solution should also be able to streamline purchase management controls by creating pre-defined approval workflows to ensure that every purchase of a certain type—be it based on dollar amount, item type, purchasing department or other variables―goes through the same approval process. Employees can be notified as requisitions route through the system and POs are generated, so they always know the status of their request. And approvers should be able to access and act on requisitions requiring their review and approval via a web interface, mobile app or email.
Improve vendor relationships
Procurement automation can also make life easier for your vendors. A good implementation team can integrate the procurement solution into your ERP, allowing account numbers, suppliers and vendors to be pulled in automatically. To eliminate processing lag time, authorized POs can be matched with invoices. If an invoice comes in with an associated receipt, the platform can send that to the ERP system as “OK to pay,” avoiding a lengthy payment approvals process. Once the ERP system pays the invoice, payment information will be sent back to the procurement platform, closing the loop.
Some solutions also include a network supplier portal, which enables vendors to log in and submit invoices. Software can communicate with suppliers via cXML, which can allow transactions between you and your suppliers to be electronically communicated and updated in both parties’ ERP systems. If you have smaller vendors without a robust ERP, look for a solution that also offers the option for them to submit documents via an email portal, which will keep all work in the platform.
By using a cloud-based procurement automation solution to streamline purchasing, automate approvals and process invoices, you can reduce your requisition-to-pay cycle times, slash or eliminate paper processing, better control spending and improve the overall efficiency of your procurement process. The end result is your people get what they want, when they want it, so they can do their jobs better. And isn’t that the ultimate goal?
Steve has over 15 years of experience in business systems consulting, and 20 years of experience in management accounting and finance with small and mid-sized businesses in the construction, distribution, service, and technology industries.