4 Ways Automation Improves Your Procurement

8 Min Read

If you’re still managing your procurement process manually, you’re creating costly bottlenecks that waste money. The solution is simple. Streamline your procurement process with automation. But where do you begin? This post will show you how to optimize your procurement process strategically. 

What is a Procurement Process System?

A procurement process system handles the ordering and payment for goods and services. It also tracks communication between vendors and ensures timely deliveries happen. Additionally, it automates these processes with integrations and dynamic applications. 

In short, it makes adhering to procurement process best practices simple. Plus, you can start thinking about procurement more strategically. Why? Your software will automate procurement. In the end, this increases efficiency and reduces errors.

As a result, you’ll get more time and resources to focus on growing your business. You’ll also get better insight into how you leverage your procurement process to scale your business.

Strategic procurement is about managing vendor relationships as well. For example, it helps govern and support vendor onboarding, contracts, and timely payment. Plus, it supports and tracks communication. As a result, you can keep your vendors in the loop and maintain successful relationships. 

All in all, a procurement system helps you keep your vendors happy and your supply line strong. And that’s crucial for any business.

Which Areas Do Procurement Systems Improve?

An effective procurement system needs to reduce the number of spreadsheets and manual paperwork. If you don’t cut out menial tasks from your procurement process, you’ll struggle to scale your business effectively.

To see how a procurement system does this, you need to take a look at these four key areas. 

1. The Procurement Process

Procurement covers the purchasing side of a business. The process starts when a team member or a customer requests goods or services. This can come as a formal request to a specific vendor with a price point in mind. On the other hand, it can be a request for more information before a decision can be made. 

From there, you lock in the pricing with a formal purchase order and agreement with the vendor in question. 

The Key Components for an Effective Procurement System: 

  • Successful receipt, tracking, and logging updates to orders/requisitions
  • Ability to request quotes from vendors
  • The functionality to receive and compare competitive pricing
  • Ability to create and send purchase orders to vendors with the right documentation
  • Active review and tracking of in-flight purchase orders
  • Ability to monitor expiration dates, potential funding issues, revisions, and closures
  • Open communication with your vendor throughout the process

2. Receiving and Managing Delivery

Once an order has been made, you’ll need to manage expectations and deliver the goods and services. To ensure you have the best system for managing deliveries, your procurement system should handle:

  • Managing expectations and the communication between your vendor and customers
  • Track delays and any potential holds to keep your customer informed
  • Facilitate release of invoicing upon delivery of goods and services

3. Accounting, Payment, and Reconciliations

Once goods and services your vendor delivers your goods or services, you need to issue payment. Thankfully, the accounting feature of your procurement system manages receiving, reviewing, and processing invoices. In short, this ensures you pay the right amount of the invoice on time.

The Central Accounting Features of Procurement System Are:

  • Invoice receipt and entry of vendor invoices
  • Quality assurance and audit invoices to ensure proper payment
  • Quality assurance and audit to ensure the PO has enough funding to pay for services
  • Ensuring extra charges have been dealt with correctly
  • Approval and processing of invoices for payment
  • Reconciliation of transactions in your primary accounting system

4. Vendor Management

Keep in mind that a successful procurement system needs to consider what information should be shared with vendors. While you need to keep your vendors in the loop, you also need to make sure that you keep them up to date. In short, you need a way to rapidly alert them of any changes so they can adjust accordingly. 

Remember: Keeping your vendors happy is crucial to maintaining your supply chain.

A Quality Vendor Management System Includes:

  • Maintaining an active list of authorized vendors
  • Ability to score/rank vendors for priority and preference for certain types of work
  • Maintaining contact information for communication with key vendor stakeholders
  • Updating vendors after key milestones or after processing invoices
  • Keeping up to date on vendor documentation and compliance requirements

How Procurement Systems Streamline Workflows

How exactly can procurement software make your inventory process a breeze? Software solutions for procurement store all the paperwork required for procurement in one place.

Additionally, you can collect store financial and vendor information into modules. This makes finding and using those documents much faster and easier.

You can also take it a step further.

Users can institute controls such as workflow approval with restrictions based on the person. As a result, you can prevent maverick spending by controlling who can process payments. More so, you can organize documents by vendor and type of work for certain dollar values. 

You can also easily track daily activity and provide insight into your forecasted spend. Plus, you can create summaries of spend by person, QTR, and PO/Service type.

A reliable procurement system will remove the manual elements of your procurement process. In the end, you’ll get you more time (and more money) to focus on more critical objectives.

Procurement software can perform actions like:

  • Issuing documents automatically to your vendors
  • Logging and sending emails to vendors.
  • Visibility into what was sent, when, and to whom
  • Hourly tracking of spend and billing percentages to close and re-open POs
  • Notifying your internal and external stakeholders of spend and billing
  • Extract and merge data between multiple sources

The key is to find software solutions that have these features. As a result, you can quickly transition your business manually processing orders to automating invoicing. 

Why Your Business Needs to Automate the Procurement Process

At the end of the day, there are many manual processes in your organization that you can optimize simply by transitioning to the right software. As your business grows, your workflows need to grow and scale with it. Procurement software makes that happen.

Move manual invoices and ordering processing into a streamlined, automated solution. Reduce waste and menial tasks. Free up time for employees. And make your vendors happier. By automating procurement, you’ll make your business more stable. As a result, you’ll be able to scale easily without tripping over your systems.

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Kevin Shuler is the CEO of Quandary Consulting Group, a team of tech consultants that specialize in business process management. They use integrations and automations to help businesses scale as they grow, giving them more time to focus on what matters most.