How much procurement visibility does your firm enjoy?
If your answer is anything less than “complete visibility,” odds are that you’re missing out on a lot of money. For example, according to a recent report, the average firm loses $14 million each year due to outdated technology and inadequate spend management practices.
That’s a lot of money any way you slice it.
If you find yourself in this situation, you’re not alone. The same report also indicated that 77 percent of procurement professionals believe value is lost during the average purchase by their companies.
The good news is that it’s possible to achieve full visibility into your procurement processes with the right approach. As a result, you’ll be able to reduce your expenses and maximize the value of every dollar you spend. Take these seven steps and you’ll be well on your way to managing spend as effectively as you possibly can
1. Build a strong team
Any organization’s procurement will become efficient and optimized only if the right human resources are in place.
By hiring the best data scientists and analysts on the market, for example, you give your company a head start toward perfecting its procurement process. These folks can analyze all the data your organization has under its control and then use predictive analytics to make better decisions about the future.
The stronger the team you’re able to assemble, the better your chances will be to achieve complete procurement visibility quickly.
2. Make sure everything is recorded in a central location
Do you routinely scramble to find documents and files?
Instead of running around your offices trying to track things down, you would be much better off implementing a system that requires all members of the procurement team to store relevant data in one centralized location. That way, whenever you need to access specific data, you’ll know where to find it right away—thus giving you better insight into where money is flowing.
3. Migrate to an electronic procurement system
Just because you’ve been using paper to manage your procurement needs for quite some time doesn’t mean you should keep an outdated system in place.
If you haven’t made the switch yet, it’s time for you to migrate to an electronic procurement system that makes tracking purchases, approvals, associated documents, and other pertinent data incredibly simple. Instead of manually tracking down purchase orders, invoices, and inventory, you can access your new system to find that information in a matter of seconds. This streamlines the entire procurement process, thus giving you more time to focus on other important facets of your operations.
4. Integrate as much automation into your process as you can
Do you find yourself having to jump through a number of hoops that you don’t think need to be there in the first place? If so, it might be time to take a step back and look at your entire process to see if there are any specific areas that can be automated.
Though you might not be able to automate everything, chances are that there’s a lot of clutter in your procurement workflows that slows your company down.
For example, imagine your team is still relying on old procurement tools. When invoices come in, your employees manually process them. Not only does this take a lot of time, but it also leaves your company vulnerable to human error.
By automating the processing and payment of AP invoices, however, your company can reduce the time it takes to settle your accounts while drastically reducing costs as well. One study, for example, found that companies that automate in this manner can reduce processing costs from the $30-to-$60 range to the $3-to-$8 range.
5. Get rid of the time-consuming approval process for routine purchases
You don’t need your CEO to sign off on a routine order for new office supplies.
If your organization makes many recurring purchases, you may want to update the approval process so that executives don’t need to approve every order themselves. These folks are busy enough as it is. Although you will certainly want to run major expenditures by them, the routine and recurring smaller ones serve as speed bumps that can severely slow companies down.
To speed things up, consider curating a catalog of predefined vendors and items that a select group of employees can order directly from that require fewer or, in some cases, no approvals. To reduce significant rogue spending, you can also implement spend limits that prevent employees from racking up major bills.
6. Train your team thoroughly
As you adjust your procurement process, you must make sure that your employees know what’s newly expected of them as changes are implemented.
In addition to hands-on training sessions, be sure to create documentation of your new processes that employees can refer to in the event they’re unsure how to do something. That should keep things running smoothly.
7. Communicate clearly and regularly to keep your team informed
One of the easiest ways to gain procurement visibility is by keeping your team updated and encouraging input on ways to constantly improve or adjust processes to boost departmental efficiency.
When you bring every member of your procurement team into the process and maintain open channels of communication, you’ll gain even more insight into your spend. Nothing will be done behind closed doors any longer.
Additionally, improved communication gives managers and employees alike more ownership over spend management in a collaborative manner. As more members of the procurement team start talking with each other, accountability increases, too.
Achieving perfect visibility into procurement is hard work. But it’s not impossible. By taking a proactive approach to spend management, using modern technology, updating your policies, and cultivating an open and collaborative environment, you can gain comprehensive insight into your spend—thereby enabling you to make better decisions.
The end result? A healthier, more competitive company and a more robust bottom line.