Choosing Procurement Software for Nonprofits

Having IT procurement software is essential to running a streamlined, compliant, and cost-effective non-profit business. Father Joe’s Village, a non-profit serving the homeless in San Diego, was able to cut purchasing costs in half using a nonprofit procurement management solution. You can check out their case study on how they accomplished this feat here.

We will explore the most important features to look for in a software for nonprofit organizations below to ensure you too have the opportunity to run a worry-free and cost-effective nonprofit organization.

Before we go into the details, let’s list out the features you want to see in an IT procurement solution.

1. Spend management tools in the purchasing software to prevent overspending within the procurement process.
2. Workflow management tools in the IT procurement management software to gain visibility‍ and control.
3. Supplier management tools in the procurement solution to ensure optimal relationships & supply chain management

When looking for a nonprofit management platform, below you will see exactly why you should look for these 3 things.

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1. SPEND MANAGEMENT TOOLS IN THE PURCHASING SOFTWARE TO PREVENT OVERSPENDING WITHIN THE PROCUREMENT PROCESS

One of the keys to managing nonprofits successfully is to ensure every penny is accounted for. This is important for both ensuring cost-effectiveness as well as compliance with legal and financial statutes. You need to find the best procurement management solution that enables your nonprofit to track every dollar and report on that spend. This ensures that you are always within budget throughout your end-to-end procurement process as prices and the direction of the organization change.

Look at the infographic below that covers the 3 THINGS TO LOOK FOR IN THE BEST PROCUREMENT SYSTEM FOR NONPROFIT ORGANIZATIONS:

(Source: Chetu – NONPROFIT MANAGEMENT SOFTWARE SOLUTIONS)​

Exceeding the budget can cause negative consequences. You may get into trouble with:

1. Donors where they may choose to stop supporting your nonprofit and donate to a similar or totally different organization with better accountability and spend management.
2. Beneficiaries where you aren’t effectively helping the cause you set out to help
3. Employees may lose trust in the organization and leave
4. Government or worse the IRS where they may find money has been negligently mismanaged

An inventory management solution that helps businesses with responsible budgeting is essential for a nonprofit organization's success. By ensuring every dollar is accounted for using a cloud-based modern procurement solution, you can ensure compliance and the happiness of your key stakeholders.

Contract Management Software for Nonprofits

Nonprofits often face unique challenges in managing contracts due to limited resources and the need for stringent compliance with regulations and donor requirements. Non-profit contract management software is designed to address these specific needs by providing tools that streamline the creation, negotiation, approval, and monitoring of contracts. This software ensures that all contracts are managed efficiently, reducing the risk of missed deadlines and non-compliance.

Implementing effective non-profit contract management software is crucial for ensuring transparency, compliance, and efficiency in procurement processes. This specialized software allows non-profits to maintain a centralized repository of contracts, track key milestones, and manage renewals efficiently. By incorporating non-profit contract management software, organizations can mitigate risks, enhance collaboration, and demonstrate accountability to stakeholders.

Procurement Policy for Nonprofits

Establishing a clear and comprehensive procurement policy for nonprofits is a foundational step in effective procurement management. This policy outlines guidelines, procedures, and ethical considerations that govern the organization's procurement processes. A well-defined procurement policy for nonprofits ensures consistency, fairness, and adherence to regulatory standards, fostering trust among stakeholders.

Non-profit Procurement Best Practices

Adopting non-profit procurement best practices is essential for optimizing operations and achieving mission objectives. These practices include strategic sourcing, supplier diversity, ethical considerations, and sustainability. By incorporating non-profit procurement best practices, organizations can enhance efficiency, reduce costs, and make socially responsible procurement decisions.

Non-profit Inventory Management

Efficient non-profit inventory management is vital for organizations dealing with physical goods. It involves tracking and controlling inventory levels, minimizing waste, and ensuring timely availability of resources. Implementing specialized non-profit inventory management solutions can streamline processes, prevent stockouts, and contribute to overall cost-effectiveness.

Procurement tools for nonprofit organizations can help avoid negative impacts to your relationships with these stakeholders by helping you stay within budget in the following ways: 

1. Approvals - Ensure that your unified procurement management system requires you to give the OK on every dollar amount spent on goods and services procurement. Spending limits can be configured across procurement by dollar amount, department, role, or person. Your non-profit will benefit from this increased visibility and control across the procurement cycle.
2. Budgeting - A budget management software enables forecasting and planning dollar amounts for specific time periods is an important part of business spend management.
3. Tracking - Detailed information about your procurement operation allows you to review how you are trending versus your historical purchases.
4. Reporting - Create, save, and download reports on your spend to track where each dollar is going. Your spend analytics and reports can get as detailed as individual buyers, departments, locations, categories, and items so you have full visibility into your spending.

According to Raj on donorbox.org in, A Guide to Nonprofit Budgeting, he states, “Budgeting should ideally become a part of your nonprofit’s organizational culture, something everyone is aware of and contributes to.” The correct nonprofit management solution gives you the tools to excel at budgeting especially as it relates to workflow management.‍

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‍DOWNLOAD THE FULL GUIDE TO SET A PURCHASE REQUISITION PROCESS

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2) WORKFLOW MANAGEMENT TOOLS IN THE IT PROCUREMENT MANAGEMENT SOFTWARE TO GAIN VISIBILITY AND CONTROL

According to Lawshelf, nonprofit organizations must maintain their nonprofit status by adhering to all IRS rules pertaining to their missions. A nonprofit software can help with this adherence through workflow management, especially those that relate to their business spend and accounting systems.

With your mission in mind, you can abide by standard regulations by using a cloud-based procurement solution. Workflow management features in procurement solutions are perfect for this as they intuitively allow you to put checks in place to ensure compliance and automate key processes to minimize errors.

You can structure workflows for approvals from managers or even peers to ensure adherence to your unique legal and financial rules. This feature is a safeguard within your software system for nonprofit organizations. This way mistakes are less likely to happen.

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Your nonprofit management solution can block certain procurement professionals on your team from taking certain actions or limit their actions within the scope of your organization that could otherwise jeopardize your nonprofit.

For example, your purchase order software can structure approval for every new procurement this way:

1. Restrict Purchaser A from approving items from Account B without Manager C’s approval
2. Restrict a purchase of $XXX unless approved by Manager C
3. Allow Purchaser A access to approve all items from Account B except those exceeding $XXX. Anything exceeding this amount would then need the approval of Manager C
4. Restrict all approvals from Account B due to a high risk to your business
5. Restrict visibility of parts of the software so Department D can not see for security purposes or get confused at parts of the software they do not need to worry about.

Your nonprofit management software’s abilities to establish approval hierarchies within the sourcing and procurement department will serve your organization's needs immensely. With customization for projects and departments, this will further ensure all business impactful decisions are being looked at.

Process management from an IT procurement platform can revolutionize your business. It gives you, your stakeholders, and even your employees peace of mind. You can see more about what an IT procurement solution can do for your team here.

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3) SUPPLIER MANAGEMENT TOOLS IN THE PROCUREMENT SOLUTION TO ENSURE OPTIMAL RELATIONSHIPS & SUPPLY CHAIN MANAGEMENT

According to Jennifer Devon in her article Identifying and Developing Strong Relationships for Nonprofit Success, “Whether it is relationships within your organization, external partners, donors, clients, or volunteers, success is dependent on the support from others. Nonprofit organizations rely on the engagement of constituencies to ensure successful delivery of mission and sustainability for the future.”

Utilizing nonprofit management platform for supplier management and sourcing, you can successfully navigate relationships with external partners and leverage collaboration tools to maintain the flow of work internally as well.‍

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Specifically for nonprofits, you have to stay financially and legally compliant. This means your external suppliers will have to maintain such compliance as well and this comes easily with efficient relationship management. It's easier to do this with a procurement solution that provides supply chain management or vendor contract management features. In an IT procurement solution, you can maintain a list of approved suppliers with contact information and evaluations to ensure such compliance.

The nonprofit procurement management software can also help procurement teams keep records of supplier scorecards. This way you can ensure you are getting the best service and prices compared to other options.

Also, software for nonprofit organizations can allow for full visibility into transactions with external partners for full disclosure and accuracy within the procurement and sourcing structure of your organization. Actions are logged and recorded by each one of your employees to track and monitor each transaction.

Furthermore, an IT procurement solution has the ability for keeping records of communication. By using the native messaging function, you can keep track of your collaboration with suppliers ensuring any future employees or stakeholders have access to necessary conversations related to your organization's procurement process.

On the same note, all relevant documentation and files relating to the entire procurement process and other financial systems can be stored within the nonprofit e-procurement software. This allows for easy reference points and a centralized source of truth so you always have something to go back to.

Some important documents the IT procurement platform can store are:

1. Vendor contracts which you can also apply to relevant transactions. Contract lifecycle management allows you to set time limits for when the contract will expire to make sure you are always operating with the most up-to-date terms
2. RFP/RFQ forms that the nonprofit software will create for you. It will also serve as a place for completed forms to be stored for your records
3. Purchase orders can be populated from RFP/RFQ form as well as sent automatically through the system to your partners. You can then upload other important documentation that relates to the Purchase order into your nonprofit management software for safekeeping. Such things can include certifications, bills of lading, and other order management documents which can also be uploaded at the supplier level.

As you can see, the best procurement management solution can be a very important part of managing your supplier relationships while guaranteeing effective expense management. You can easily ensure partnerships that are in line with your mission statement and budget by tracking vendor relationships through the software.

Any red flags will be documented and quickly seen to ensure you do not have relationships with bad actors. By ensuring you have upstanding partnerships, a nonprofit management software can uphold the legal and public standards of your business.

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CONCLUSION

Managing your procurement can be tricky, and as a non-profit, this business essential function is even more delicate without software for nonprofit organizations.

According to Don Simkovis, in his article How to Run A Non-Profit Organization, “Nonprofit organizations, like businesses, succeed in their mission by refining operations inside the organization and relating well outside the organization.”

Using an IT procurement system to manage spending, streamline workflow and manage suppliers, can take your business to the next level.

With nonprofit management software that helps with both internal and external management of essential business tasks, you can save money and stress.

A nonprofit management software can afford you the peace of mind that other solutions may not. You can read through the feasibility of managing procurement outside of an IT procurement solution here.