13 ways sustainable sourcing and procurement drive ESG efforts
The strategic sourcing process is a cycle, so it cannot be done once and forgotten about. A cycle approach to […]
Procurement 101
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Written by
Majdi Sleimen
Looking for a way to improve your accounts payable process?An often overlooked trick for improving the accounts payable process is streamlining the process of purchase to pay (P2P) in the company. Managing accounts payable is only a single part of the full end to end process of P2P, so it makes sense to structure your purchasing and receiving process to support your accounts payable workflow.It's an especially good idea to organize your purchasing and accounts payable processes as your business is scaling. The larger a company becomes, the more difficult restructuring becomes, but when a data-driven strategic approach is taken, even organizations with complicated processes can begin positioning themselves to mirror the best practices followed by modern purchasing departments.Here are some tips and tricks on how to improve and streamline your purchasing and accounts payable processes at the same time:
It’s important to ensure that everyone knows what their role is during a purchasing procedure. Assigning roles for creating requisitions and purchase orders, approving purchases, managing deliveries, as well as processing invoices and confirming 3-way matches not only makes receiving goods and services faster, but makes accounting documentation a much easier task.The benefits of a structured purchasing process can be optimized through maintaining good team communication, explaining policies and expectations clearly, and ensuring that everyone understands what benefits the new procedure aims to accomplish.
For the benefit of accounts payable, establishing a single point of entry for invoices is a great idea for attaining lean organization, for a few reasons:
Some companies also choose to implement a no PO no payment policy as an extra precaution during invoice processing to avoid paying for unordered goods and services.
Companies that handle purchasing on a regular basis rarely operate without some kind of software to assist their documentation process. Larger organizations lean towards notoriously cumbersome ERP systems, while spreadsheets are sometimes used as a bootstrapping approach for startups. However, there are more efficient options available for handling accounts payable electronically - such as QuickBooks and Xero.The amount of time saved by using these tools to automate and improve the accounts payable process is well worth a small monetary investment for any business that has a large volume of payments to handle each month.In just the same way you choose an accounts payable system, you’re going to want to structure your purchasing process with a purchasing solution. Here’s the real trick, though - when you’re evaluating different options, it’s a good idea to explore procurement software solutions that integrate with the accounts payable solution your organization plans to use.
By doing so, you’ll be streamlining your purchasing and accounting processes, and saving your team a ton of time through automated PO and invoice processing. What’s more is that best practices for enhancing internal control over both disciplines (accounting and purchasing) are often conveniently built right into these kinds of software solutions.
It may seem like a no-brainer, but in order to get a good return on investment on the solutions you choose, your team needs to actually use the tools that you end up paying for. That means getting your team involved in the evaluation process, and getting their expert opinions to ensure the tools you choose meet their requirements.
Many SaaS platforms offer live demos and trial versions of their services, and it’s well worth it to get your team to participate in the evaluation process before committing to a decision. Don’t rush your final choice if you have a large team - it’s not uncommon for some companies to spend a few months going over different options with a fine-tooth comb before locking in.Remember step one? Setting up an intuitive workflow means having a platform that accommodates internal control for each of the roles you’ve assigned to your purchasing and accounting teams. When done correctly, verifying 3-way matches and synchronizing that information with accounts payable should become an effortless, regular occurrence.
If you’ve made it this far, you should have a good idea about where to start when setting up a streamlined purchasing and accounts payable process. But what steps are needed for maintaining this new process? Your purchasing and accounting departments may already be familiar with some of the best practices to follow:
Supplier relationship management (SRM) tools like supplier evaluation reports and vendor scorecards are also very helpful for maintaining working operations with other businesses.
It’s finally time to harvest the fruit of your purchasing and accounts payable process: accurate spend information. Having consistent spend visibility is a privilege that not all companies have access to, and it’s one of the main incentives for improving an accounts payable process.But why is spend data considered so valuable?It all comes down to being able to plan effectively. Accurate spend data lets companies develop agile purchasing strategies, make more informed data-driven decisions, and achieve reliable cost forecasting for their departments - something that can’t be accomplished when accounts payable is lagging several weeks, or even months behind what they should be reporting on.Once your process is established, make full use of spend reports!Ultimately, an efficient purchasing and accounts payable process should allow a business to receive accurate procurement analytics at least once a month for review. The tools that are used to structure purchasing and accounts payable workflows can make this easier if they include automated spend analysis reports, which can save a great deal of time and further increase their usefulness.Creating effective budgets relies entirely on the accuracy of the information used to build them, so it’s not surprising that detailed procurement analytics are highly sought after by leaders, managers, and event organizers in a company. You may also want to read about some common pitfalls associated with budgets, and how to avoid having them hinder (rather than help) your business.Interested in learning additional procurement tips? Check out these procurement best practices to prepare for the future. And be sure to learn why it's so important to undertake a digital procurement transformation.
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