Procurement Software Application – A Must-Have Element for Business Success
CPO is the latest entry to the line of CEOs, CIOs, and CTOs. The humble procurement manager has risen to the level of Chief Procurement Officer (CPO). Procurement as a function contributes actively to business success. Goods and services acquired through the procurement function directly impact the quality of the final deliverables. The scope of the procurement application and its function extends beyond the simple source-buy-pay cycle, it plays an important role in business success. The procurement function is evaluated based on its ability to bring down the costs while improving value and quality. An efficient and optimized procurement application system helps an organization achieve its strategic goals.
Elevate Business Performance with Procurement Management Apps
Having a procurement management application system helps streamline the procurement process. The procurement process accounts for organizational spending on acquiring goods and services and has a direct impact on the cost-saving objectives of the business. The performance of the procurement function impacts overall business performance.
The need for a well-planned and implemented procurement process is driven by volatile markets, dynamic regulatory policies, and consumer expectations. A well-defined procurement process helps businesses manage their supply chain and associated risks more efficiently. An effective procurement workflow enables higher process efficiency and shorter cycle times.
The procurement function is much more than buying goods and services. The procurement manager needs to:
- Gain an in-depth understanding of the requirements of all the business units.
- Identify the right supplier that meets these requirements.
- Negotiate contracts to ensure the highest value for the cost.
- Periodically evaluate supplier performance.
A procurement management system puts the manager in complete control of the performance and efficiency of the procurement workflow. Implementing purchasing and procurement software eliminates redundancies and optimizes the procurement workflow. A procurement application consolidates information on purchasing requirements, supplier availability, and purchase order status, etc. onto a single dashboard. The procurement manager has a bird’s eye view of the status of all the tasks from the consolidated dashboard.
Managing the procurement function efficiently ensures complete control over organizational spend on the raw materials. Cost savings by streamlining the procurement function has a direct impact on the business bottom-line. Processing of vendor invoices is done in a timely fashion by procurement management software. Timely payment of invoices helps establish strong supplier relationships, which contributes to business growth. Automated procurement systems also increase employee satisfaction within the procurement department by relieving them from mundane admin tasks. From the above discussions, it is evident that improving the procurement function impacts business success in more than one way.
Challenges Faced by the Procurement Function
Before we go into details of implementing a procurement application or software it is essential to understand the existing issues or challenges within the procurement function. Manual procurement procedures throw a number of challenges to the procurement team in terms of efficiency and productivity. Identifying the challenges in the existing procurement system helps in choosing the right procurement application that addresses the issues and improves the performance of the procurement function.
- Lengthy purchase requisition to purchase order cycle: The journey from submitting a purchase requisition to submitting a purchase order is lengthy when executed manually. Inordinate delays due to human bias and process bottlenecks extend the PR-PO cycle.
- A number of revisions to PRs: After a purchase requisition (PR) is submitted for review and approval, there may be several revisions to it. These revisions are typically done through email exchanges, making it difficult to keep track of the latest version of the PR.
- Incorrect invoice entries: Inaccuracies and inconsistencies are common in processes that are run by humans. Inaccurate and delayed invoice entries are common in manual procurement processes. Sometimes the applicable discounts may also be missed out while submitting invoices.
- Delay in payments: The invoice approval process is often delayed in manual procurement processing. Lack of transparency in the processing of the purchase order leaves the team clueless on the status of the PO.
- Lack of standardization in supplier approval: Manual sourcing processes often result in a number of unaccounted suppliers. Standardization of supplier approval is not possible in manual processing.
- Large volumes of paperwork: Manual procurement processes involve a lot of paperwork. The Chances of displacing or damaging paper invoices are more in manual processing.
- Improper documentation: Manual procurement processes lack proper documentation. Gathering data from various steps of the procure-to-pay cycle can be challenging in manual processing.
These challenges in manual procurement processing impact the overall business performance adversely. Procurement management tools must focus on tackling these challenges and optimize the procurement process workflow.
What Is Procurement Software?
Procurement software automates and centralizes key procurement processes like purchasing materials and replenishing the inventory. Purchasing software may be used for automating the sourcing and buying processes, while accounts payable software may be used for approving the invoices. A procurement software program empowers the business with tools that streamline the acquisition of goods and services. Cloud procurement applications enable businesses to manage all the functions from one procurement platform. A procurement software portal centralizes sourcing, purchasing, invoicing, and documentation in procurement, which generates greater efficiencies for large organizations or production-focused businesses.
The basic capabilities that procurement software provides to businesses include:
- Ability to manage suppliers and invoicing.
- Digital management of documentation.
- Establish specific auto-approval and access levels in workflows.
- Eliminating redundancies and associated costs.
Procurement automation does not focus on the complete elimination of human intervention, rather it focuses on automating repetitive, mundane steps in the procurement process. Human resources can be utilized for high-value tasks that require intuitive decision-making by automating repetitive procurement steps. What are the steps that are likely to benefit most from automation? The automation potential of procurement tasks may be evaluated based on:
- Potential for cost savings: The tasks that present a high potential for cost savings must be given priority for automation.
- Benefits from automation: Those tasks that demonstrate that the benefits from automation outweigh the costs should be given priority.
- Simple and repetitive: Simple tasks that are repetitive in nature are ideal for automation. The tasks that can be automated effectively based on the above evaluation criteria are PO processing, Purchase requisitions, Documentation, and Invoice approvals.
- Purchase Requisitions: Automating the purchase requisition process saves a lot of time and effort for the purchasing department. The Creation of a PR can be done by gathering information from the procurement cloud and combining it with updated catalog data from vendors and contract terms and conditions. Once a PR is created it is automatically routed to the approver based on the preset business rules. Purchasing application software enables the approver to view the status of a PR on a central dashboard that provides real-time visibility into the PR approval cycle. All the stakeholders get 360ᵒ visibility into the status of a PR, enabling easy and quick spotting of bottlenecks and delays.
- Purchase Order: Upon approval of a PR, the data is automatically populated onto a Purchase Order that can be generated based on pre-designed forms. The supplier information is automatically pulled from procurement sourcing software applications. The application provides managers real-time insights into spend at the time of PO approval, which empowers them to make informed decisions on purchases. You can create a list of preferred suppliers, set purchase budgets, and assign user permissions through the purchasing application software. Integrating the purchase order application with the procurement cloud helps maintain consistency and accuracy in PO processing.
- Invoice Approvals: A procurement SaaS solution provides a single interface for managing invoices from any source, in any format. The integrated procurement cloud allows complete visibility and automatic matching of invoices with the approved PRs and POs. Billing errors or amount mismatches are avoided by automating the invoice approval process.
- Documentation: Consistent documentation of all the procurement tasks is extremely important for compliance management and audit purposes. Automating the documentation in procurement ensures error-free, consistent record-keeping.
Key Features of Procurement Software
Businesses opt for procurement software to bring inefficiency into the procurement function. Here are the top must-have features of procurement software:
Easy to operate mobile interface:
The procurement software must have a simple, easy-to-use interface that even a layman can use comfortably. The time spent to train and acclimate the team to use an overly complex user interface cannot be regained. Operating the procurement system must be simple, anything complex will eat up time and resources. A simple user interface means faster induction at all employee levels and flexible transition that does not affect productivity. The procurement software platform must provide mobility, simplicity and integrate seamlessly with other operations.
Clear and transparent communication between all stakeholders is essential in procurement management. The status of PRs, POs, and invoices must be available on a centralized dashboard so that all stakeholders stay updated. Multi-device mobility, automated email notifications, and alerts boost approval rates of the procurement system. Purchase teams, users, and management should be provided with complete visibility into all transactional activities so that they can make informed purchasing decisions.
Efficient supplier management:
Your procurement application must provide an efficient and quick supplier onboarding process that ensures that all purchases happen only with approved suppliers. Purchasing from approved suppliers that offer the best value for money helps maintain the spending under management KPI. The purchasing power can be increased by leveraging supplier data and negotiating higher volume purchases and early settlement discounts.
Compliance and risk management:
A cloud online procurement system improves the auditability of the procurement function through accurate and consistent documentation. The procurement software must provide audit trails that offer complete details on the user transactions with the date and time stamps. Availability of such detailed information promotes accountability and could drive changes in spend behavior. The procurement application helps businesses in compliance management by configuring compliance policies and regulations in the software.
Cost and time-saving automation:
Efficiency and time-to-value are the basis for automation solutions. Your procurement software must automate workflows, minimize human error, improve accuracy and consistency, and free-up employee time for productive work. The purchase-to-payout cycle must be shortened by implementing the procurement software. Based on the procurement data, the software must be able to guide you on identifying potential saving opportunities, maintain budgets, and avoid rogue or maverick spending.
Configuring procurement workflows should be a smooth and quick process with the procurement software. Workflows should be automated easily with multi-level escalation and zero human intervention. Approvers must be intimated of the status of the PRs and POs and potential risks through email notifications and alerts.
Visibility and transparency:
One of the main focus areas of the procurement software is to provide visibility into the expenditure by spend category. 360ᵒ visibility into the spend data helps procurement managers to analyze and understand how money is spent and come up with cost-cutting ideas.
Your procurement management system must be able to seamlessly integrate with existing financial systems in real-time. Seamless integrations improve the accuracy and efficiency of the procure-to-pay process.
Quick, easy, and flexible deployments:
Some procurement applications take months to deploy, while some others may even take up to a year. Your procurement solution must be easy and fast to deploy without any complex, cumbersome deployment procedures. It must be flexible to be deployed on the cloud or on-premises. The software must be extendable to various security levels, allowing special access levels to approvers. Sensitive data must be protected well and access to such data must be given only to designated employees.
Cflow is a powerful workflow software with procurement apps that comes with a rich feature set catering to the procurement needs of small to large enterprises. It provides procurement management workflows that enable businesses to improve the performance and efficiency of the procurement function.