How to measure ROI in Procurement?

Unlike traditional ROI, which is evaluated purely on sales, procurement ROI is assessed by comparing department expenses to the overall savings it delivers for the entire business, financially and operationally. A purchasing software can greatly help you measure ROI and here’s how you can do it.

• Total Cost Per Invoice involves full costs of the account payable department divided by the number of total invoices per month or year.
• Total Paper Check Payments And Cost Per Payment which includes all staff time spent executing check runs and resolving bounced checks.
• Total Rebates Achieved will provide you with an overview of the discounts bagged from the suppliers and hint whether you need to renegotiate the terms of contracts.
• Amount of Catalog Compliance will tell you how your employees are locating and requesting the items they require. If this figure is significant, you can save money through online catalogs.
• Length of Purchase Cycle will help you determine the time taken between the placement of the order and the payments getting cleared. This can inform you where things are becoming delayed and where you can cut down expenses.