A Quick and Complete Guide to Procurement Management in 2021
Chaotic procurement management is a way of life for too many organizations. Changes within an organization’s approach towards procurement allow chaos to flourish and blossom. The major reason behind this lurking menace is the manual and paper-intensive procurement practices followed by organizations.
Manual procurement management is filled with high processing costs, lost or misplaced documents, sluggish approval cycles, missed discounts, and uncontrolled costs. Additionally, the supplier relationships take a hit due to late payments, poor vendor management, inefficient dispute resolutions, and more.
All these factors make an already messy procurement management process even messier. Relying on manual tools will create an inadequate, non-uniform procurement process that causes leakage of revenue, missed opportunities for savings and growth, or worse, outright theft.
To prevent the ubiquitous loss of money, effort, and control, organizations need to integrate all procurement functions, control spend, track purchases, and create an environment that enables growth. Here are five ways you can crush the lurking dark menace called chaotic procurement and instill a sense of efficiency in the procurement process.
What is procurement management?
Procurement management is the strategic approach to managing and optimizing organizational spend. Procurement management involves acquiring quality goods and services from preferred vendors within a stipulated budget, on or before the deadline. The procurement management process includes sourcing, requisitioning, ordering, expediting, inspection, and reconciliation.
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Reasons to digitize procurement management
It will be no surprise to you to hear that relying on outdated, manual, paper-based processes to handle your procurement management activities is unlikely to offer your organization optimum speed, accuracy, or efficiency. In fact, it is probably costing you more along the way. It is therefore well worth considering how digitizing your procure-to-pay process can offer you tangible benefits.
For example, you can benefit from automated workflows across all of your procurement activities. This means smarter performing processes with purchase requisitions, purchase orders, and invoices, making them easily trackable because they are automatically sent to the appropriate reviewers and authorized quickly and accurately.
What’s more, you can easily ensure your processes are legal and compliant and also benefit from a shared workspace to efficiently collaborate with your suppliers.
Here are six important reasons why businesses need to digitize their procurement management process:
- Improved spend under management
- Eliminate maverick spends
- Reduced processing cost and time
- Remove approval bottlenecks
- Enhanced spend visibility
- Improved compliance
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Functions of procurement management that need to be digitized
Though there are a number of functions in procurement, here are the top 5 functions that need to be automated to save time, manual effort, and cost.
1. Purchase Requisition
A purchase requisition system offers requesters a guided requisitioning experience. Right from listing preferences or frequent purchases to suggesting the best vendor, it embeds purchasing policy in the process and guides the requester in the right way.
As policies are enforced in real-time and any missing or misleading information in the purchase requisitions are spotted instantly, there is no room for errors or inaccuracy in purchase requests. A procurement management software that offers electronic data capture, routing and approvals will help organizations keep the requisitioning experience consistent every time.
2. Purchase Order
With procurement management system, there is no need for manual paper-based purchase orders or data re-entry. Purchase requisitions are automatically converted to as many purchase orders as required (depending on the number of line items).
Since purchase order software offers complete transparency into the process, stakeholders can easily find out where a PO is located in the purchase order approval chain at a specific point in time. A procurement management system will ensure that purchase orders list out every important detail a stakeholder needs to take an effective decision and process the PO swiftly.
Guide to choosing the best procurement software that suits your business
3. Invoice Approval
Invoice approval and processing is a prominent procurement process that can be made more efficient, and more accurate with the help of procurement automation. Whenever a vendor submits an invoice, the procurement management solution will process the paper invoice, digitize it, and cross-check it with available information like supplier name, PO limit, and contract payouts.
In case of discrepancies, the invoice approval system will prevent the invoice from being paid and decide what to do based on the predefined rules. If everything is in order, the procurement management system will automatically forward the invoice to a desired human operator for approval and final payout.
4. Vendor Management
The vendor management and selection process are often manual, repetitive, and lengthy. A procurement management software can automate several tasks in this process like background checks, supplier RFQ review, and follow-up in case of missing information or documents.
Automated vendor management systems can enhance supplier collaboration by performing all steps in vendor onboarding with increased accuracy and timeliness. Additionally, a procurement management software can perform due diligence across a number of stages—processing, reviewing, and scoring of vendors—in a fraction of the time it would take manually.
5. Contract Approval
Manual contract approvals take forever to process. Generally, contract management involves collecting and managing contracts across the organization and storing them in a secure location.
A procurement system will review these contracts, compare them against pre-defined templates, and point out fluctuations in terms and conditions. Automated contract management systems can monitor contracts over time to spot nonfulfillment of terms, contract expiration, and other issues that could lead to a dispute if left unnoticed.
Five ways to improve efficiency within procurement management
Although organizations can derive a lot of value by identifying the reason behind the procurement management process and regulating it, most organizations keeping pushing it back as they have no clue where to start.
Here are five major aspects that procurement teams can digitize to improve the efficiency of their procurement process:
1. Use the latest in automated processes
Using a purchasing system is a great way to automate your existing procurement management activities to improve efficiency. You can benefit from paperless approval so that all documents relating to the procurement process are authorized digitally for maximum speed and efficiency.
It is also possible to communicate with your vendors in real-time within a procurement system, allowing you to deal with issues that have the potential to lead to blockages in the process.
2. Improved vendor management
Imagine how much easier it would be to deal with all issues relating to your suppliers all in one place. This includes the screening and onboarding of new vendors, as well as monitoring performance, and dealing with issues relating to payments or receipt of goods.
An e-procurement solution gives users the unique functionality of managing everything you need with your vendors on a single digital platform.
3. Greater control over the business spending
There is a great alternative to complicated budget spreadsheets and the messy transfer of information across multiple systems or data points. Moving to an online procurement management system allows users to set and monitor budgetary limits and restrictions across transactions for maximum financial control.
This also gives users the ability to access and analyze a range of reports that give unique insights into procurement spending across your business. You can also keep your product catalogs up-to-date and online, improving accuracy and consistency and reducing the workload of your employees.
4. Better compliance
Procurement software is able to compile all relevant information in an easy-to-follow dashboard, offering a 360-degree view of data relating to the purchasing performance of your business. This can include adherence to deadlines, quality standards, and other compliance issues such as policy, regulatory, and legal compliance.
This software gives you confidence that your goods and services are being sourced through the correct processes and are leading toward improved accuracy and consistency across the board.
In addition, its straightforward reporting functionality can reduce the likelihood of fraudulent or off-contract purchasing that, if left unchecked, could potentially cost your business a large amount of money.
5. Valuable reporting features
Using procurement management software gives users the opportunity to dive into a wealth of meaningful data within the system to assess and compare vendor performance, recognize risk areas relating to your purchasing processes, and identify areas of improvement.
Key areas to look for in a procurement management software
Dealing with your procurement management activities using procurement software has a whole host of benefits. Just remember that not all e-procurement solutions offer the same results. Thus, it is vital to determine what you need your procurement management software to handle before investing.
Key areas to look for when comparing procurement management systems include the following:
- Sophisticated vendor management features, allowing you to monitor the performance of suppliers at every step, as well as easily onboard new vendors
- A range of customizable workflows and template documents that allows you to go paperless and automate the key parts of the procurement management process for greater speed and efficiency
- Powerful reporting capabilities to analyze procurement performance and ensure compliance across the spectrum of procurement management
- Tools to support you in setting and enforcing budgetary controls across the purchasing cycle to prevent fraud and costly errors
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Benefits of Managing Procurement with Kissflow
Working with procure-to-pay software such as Kissflow’s Procurement Cloud is a smart way to improve the procurement management activity in your organization.
By implementing its sophisticated automated features, you can reduce processing time, error rates, and employee intervention, leading to lower overall costs and power given back to your procurement team to focus more on value-adding activities. Kissflow works with organizations of different shapes and sizes to streamline their purchasing cycles and better manage supplier relationships.
Take a look at Kissflow to see how its Procurement Cloud solution can maximize the efficiency of your procurement management.