ERP vs P2P Software for Procurement – How do they fair against each other?
ERP systems can be found in nearly every company. They are commonly used to connect and manage data from different business divisions and usually attract the attention of finance or IT departments.
While this may appear to be a one-stop shop for all company data, ERPs cannot handle all procurement processes effectively.
Procurement is a complicated process that necessitates a great deal of flexibility and teamwork. Unfortunately, ERPs are frequently cobbled together carelessly to offer companies the services they require. Procurement is the sector that suffers the most as a result of this.
That leads to teams seeking answers outside of the ERP system, which has its own set of issues, such as a lack of visibility, inefficiency, or a lot of money wasted on a technology that procurement can’t and won’t utilize.
Shortcomings of ERP
To begin with, traditional ERPs are expensive, and that doesn’t include the additional costs connected with the time it takes to get up and operate. When procurement processes require an extra module, the prices quickly escalate.
ERPs are notorious for taking a long time to implement. According to Gartner, the actual time spent on ERP deployments will surpass their original projections by at least 50% for 40% of companies adopting these systems.
Poor User Experience & Complexity
Because so many ERPs must be augmented with improvised solutions, users get frustrated and confused. Traditional ERPs are excessively complicated, and add-ons must be functionally compatible with the rest of the ERP package. In addition, being compelled to switch between various user interfaces can harm both productivity and adoption.
Many businesses try to save money by not allocating enough funds for ERP training for their employees. As a result, there is a lack of understanding of the specific Enterprise Resource. Employees may mishandle technology as a result, resulting in the loss of vital information.
To meet all the requirements, end users are driven into systems with limited flexibility due to the all-in-one philosophy. Running procurement through an ERP is like forcefully fitting all the goods inside a box that will eventually throw up.
Benefits of ERP Integrated With P2P Software
ERP solutions cannot handle the procurement process to the same level of sophistication as a P2P solution. However, you can avoid these hurdles if the ERP gets linked with P2P Software.
It is also easier now to successfully integrate these two platforms. Thanks to its flexibility, integrating ERP and P2P can also provide significant long-term scalability benefits. Some of them are as follows:
Cost-Cutting and Direct-Spending Reductions
Automated P2P Solutions and ERP allow you to break down and analyze spend across complex buying categories while keeping track of your budgets and savings. In addition, defined quantities can manage purchasing with the help of automated approvals.
Companies can use a digital P2P system to spot missing early payment chances and bulk order discounts, pointing out the prospect of better negotiations and cost savings.
Increasing the Automation of Workflow
Even though 41% of firms utilize eProcurement tools in conjunction with their accounting or ERP system, just 20% of organizations employ a cloud-based eProcurement solution. Invoices may be sent directly to the organization’s ERP for payment via an automated P2P system.
Automating such procedures saves time and money, allowing staff to focus on more strategic projects than mundane duties. Purchase requisitions may be authorized and distributed to suppliers more quickly with automated P2P systems.
Using Spend Analysis to Get Insights
Real-time strategic data helps buyer departments obtain improved visibility, develop more profound insights into the supply base, and control spending by eliminating the need for paperwork and enforcing human inspections at each level of the procure-to-pay process.
Before issuing payment, a procure to pay system can give end-to-end visibility between POs, goods receipts, invoices, and other documentation to confirm items are as specified. Moreover, Procurement intelligence can also be used for finance-driven forecasting, scenario creation, and budget creation.
Increasing Vendor Cooperation
Buyers would frequently have to contact each of their suppliers personally if there was no digital repository source. As more organizations aim to grow their vendor base, they must improve vendor collaboration.
Using an automated P2P approach, both buyers and providers would access real-time data, allowing them to make correct and educated decisions.
Buyers and sellers will work together more effectively with end-to-end insight into purchase orders, invoices, and other receipts. In addition, suppliers may use the supplier portal to get a comprehensive picture of their payment status so they can plan.
How Kissflow Procurement Cloud works with an ERP
Kissflow Procurement Software helps you plan your procurement strategy through the following steps:
Step 1: Identifying Needs
Once a valid requirement is determined, procurement teams develop high-level specifications for goods/products, terms of reference (TOR) for services, and task descriptions (SOW). This helps in assessing the needs of the organization and later on creating purchase requisitions.
Step 2: Creating Requisitions
Kissflow Procurement Cloud creates a PR containing goods or services and generates buying channels. For example, request items from a hosted catalog, request items from a punchout catalog, request non-catalog items or duplicate/ copy a previous PR.
It classifies item categories specific to a customer along with recommending suppliers for a non-catalog request. Moreover, it captures billing information at the line level, which enables real-time budget tracking.
Step 3: Approving Requisitions
Kissflow procurement cloud lets you skip any subsequent confirmation steps for an approver who has already approved the PR and pull-in only needed approvers to support/ act on a PR based on their approval limits.
Purchase requisitions that are incomplete are returned to the initiator for modification and resubmission. Others are rejected or approved after validating and evaluating the organizational needs and existing budget.
Once the PR is approved, it enables you to buy the goods by following these steps:
Step 4: Creating a PO
Kissflow auto flips PR to PO & splits PO based on supplier, contract, date, payment terms, shipping terms, and shipping methods. In case of unmanaged category buys, one-time unique purchases, or low-value commodities, Kissflow procurement software also provides an option for spot purchasing.
Step 5: Purchase Order Approvals
Once the PO is sent to the vendor, it may approve, reject or negotiate the terms of the order. If the order is accepted, a legally binding contract is generated to ensure legitimacy.
Step 6: Goods Receipt
When the material arrives at the gate, the ERP system generates an entry form filled out with the correct date, time, and kind of material.
Kissflow procurement software also provides an option to capture variation between the weight of the received item and the weight of the item in PO. The goods receipt is then accepted or refused based on the requirements set in the purchasing contract or purchase order.
After the goods receipt is generated, the following steps take you closer to your payment process:
Step 7: Invoice Approval
Then the invoice is authorized and sent to the finance team for payment distribution in case no inconsistencies are discovered. But if an error is detected, the invoice is denied and returned to the seller with an explanation.
Step 8: Vendor Payment
After the authorization of the invoice, the finance team will execute payments in accordance with the contract conditions. Any modifications to contracts or evaluations of liquidated financial security will be considered. You can also classify payment to a supplier into one of five categories: advance, partial, progress, installation or retention.
By adopting Kissflow procurement software, you can streamline your procurement process in the best way as:
- It shows you exactly what to order and when to order it.
- It shows the availability of stock in real-time.
- It facilitates the purchase approval and follow-up procedure with vendors.
- It removes the need for inventory management paperwork computations.
- It evaluates vendors based on pricing and previous experience to assist you in selecting the most cost-effective purchase choice.
- It employs the JIT technique to schedule orders far ahead of time to prevent buy delays. It assists you in making substantially better purchasing and financing selections.
- It reduces the need for manual intervention, allowing your employees to focus on more productive tasks.
To meet your business needs, we may add, alter, or modify all ERP functions. For more information about how Kissflow Procurement Cloud, request a free demo!