Modern-day firms adopt all the necessary measures to ensure their employees have what they need to be productive and keep the production operations running. Businesses are purchasing office supplies to raw materials to machinery parts so that their employees can perform the best whatever the situation. No doubt, procurement is an integral part of a business and most marketers tread this path for reducing their manufacturing costs. Furthermore, an effective procurement strategy also helps businesses in consistent supplier performance, uninterrupted supply, risk mitigation, and cost control. With the assistance of procurement consultants, organizations are able to get greater insights relating to their purchasing process.
How Procurement Activities Hold the Line on Expenses
Procurement covers several activities and is a complex discipline in every aspect. Most companies fail to control their basic purchasing activities. In most cases, the procurement tools that firms use are to be blamed. New-age firms are realizing the importance of smarter spend management more than ever. Several small and medium-sized businesses struggle to bring their spending under control as they lack the systems to support it. With the advent of e-Procurement systems, organizations are minimizing this problem. However, there are significant differences between legacy e-Procurement systems and smart procurement tools. Some companies are focusing on financial management systems rather than e-Procurement tools to control their expenses.
How Unchecked Spending Impacts Productivity Levels of Organizations
Consider a situation, a fast-growing company has implemented a financial management system to monitor its expenses. Some days later, the controller of the firm deciphered that his finance department was overwhelmed with vendor invoices that had no reference to a purchase order. The worst is that his finance staff had no clue of the employee who made the purchase.
Under such circumstances, it is advisable for the firm to attest that processing “orphan invoices”. No doubt, it would take hours to complete the task but it needs to be done rightly. This will also help the controller to realize the several big problems in his organization. More often, these issues come in the form of out of control spending, burdened employees, entering the vendors’ name into the ERP system, and an invoice that is lacking a purchase order had to be verified with the purchaser in order to approve it for payment. The suggestions of procurement subcontractors also come in handy to organizations in this regard.
Benefits of Integrated E-Procurement and Financial Systems
The major benefits of integrated e-procurement and financial systems are discussed as under:
Reduced costs: If organizations implement e-procurement tools in their operations, they can save money by preventing duplicate spending, leveraging volume buying, and saving costs with paper-based systems. This is indeed a great advantage for organizations.
Transparent spending: More companies are preferring to conduct their procurement processes electronically. There are several reasons for it. In this case, it’s easier to write and analyze reports on a firm’s procurement systems. This will also help the managers of companies to ensure their procurement processes adhere to the organizational objectives.
Increased productivity: Unlike traditional procurement, e-procurement systems are less time-consuming. If the records are stored electronically, it becomes easier for the purchasing department of firms to get access to the data instantly during emergencies. Paperwork can be completed more quickly if templates are used.
Eliminating paperwork: This is another major advantage of implementing e-procurement tools in an organization’s procurement activities. There is no need for finding new space to store all the paperwork. Not only does it give more room to the purchasing department of a firm but it also lessens the time of finding older tenders.
Increased transaction speed: Another benefit of implementing e-procurement tools is that it is both time-saving and efficient. Besides simplifying the purchasing process, the electronic handling of tasks also accelerates the transaction speed. The speed of the procurement cycle is further increased owing to e-enabled relationships with suppliers. If an organization implements the e-procurement process, it can eliminate unnecessary activities while concentrating on their core functions. More often, companies hire procurement consultants as they help the firms in implementing their e-procurement tools effectively.
Standardized buying: When it comes to making procurement decisions, there are high chances of differences in opinion if various departments are allowed to participate. If purchasing is conducted electronically, it eliminates these chances. Moreover, it becomes easier for every department to adhere to the procurement standards set by the firm.
How a Better Procurement Strategy Creates Strategic Value
Companies that are focusing on their strategic activities should control their transactional procure-to-pay processes. With the emergence of e-procurement cloud systems, casual users can easily find their requirements. These e-procurement tools are combined with compliance enforcement policies through approval rules and purchase order creation. It makes the accounts payable process easier in absolute terms.
The more effective an organization’s procurement policy, the better will be its strategic value in the global market. There is no doubt about this aspect. Procurement subcontractors help organizations in building long-term relationships with their suppliers. It also facilitates a firm’s purchasing activities at large. Implement e-procurement tools if you want to streamline your firm’s purchase operations while bringing in greater transparency.