Procurement 101

What Can A Web-Based Procurement System Do For Your Team

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5 minute read

Written by

Alan McPhaul

Having the right systems in place is critical for organizations in our age to drive the bottom line. For many modern businesses, a web-based procurement system is a key component in increasing productivity and profit by providing widespread functionality across the organization.

Because of its wide reach, the question of how an organization should use its web-based procurement system is not often a one size fits all solution across all businesses. Some users or teams might find the procurement software adequate in supporting their day-to-day operations, while other groups are left to deal with consequences like mismanaged projects, accounting issues, and delays in action items– all of which may have been completely avoidable.

Are these signs that you are not using your cloud-based procurement platform properly, or are there other factors at play? In this post, you will find areas to focus on to help you maximize the use of your web-based procurement system from the perspective of three key users: purchasing teams, financial teams, and senior management.

WHAT IS A WEB-BASED PROCUREMENT SYSTEM

A web-based procurement platform also known as a cloud-based procurement platform is designed to assist in the purchasing of a product or service at the optimal price and time. They offer visibility into and more control of your purchasing making it easier to realize cost savings. This system facilitates many different actions such as:

  1. Automating tasks to free time and reduce human error
  2. Improving communication within and outside your business to efficiently manage transactions
  3. Providing a centralized place of information for all purchasing projects
  4. Giving real-time data to those who need up to date information
  5. Affords for efficient negotiations and purchasing

The following will give examples of how three types of teams can get the most out of your web-based procurement system.

(1) PURCHASING TEAM

Being part of the purchasing team, your goal is to successfully manage purchase orders. With this in mind, you want to use your software as the source of truth. You want to use the system to ensure the final purchase is done as efficiently and profitable as possible.

REAL-TIME TRACKING

The software will help collect all the information you need from requisitioners and assign orders to the necessary purchaser. The person then can review the items and make the final decision on which supplier to place the purchase order with. The owner of the task can approve, add or remove items as they deem necessary. You want to rely on the information provided but also confirm everything makes sense.

A web-based procurement system enables items required for a purchase to be followed in one system. This ensures that things that are needed won’t be missed. The system will keep tabs on order status as they move through your supply chain and let you know if anything needs to be actioned. You do not have to worry about manually tracking orders and the errors that come in doing so. You should ensure you follow up based on the alerts you receive within the software or automate the software to send follow-up emails for you.

The software will allow you to easily send and maintain purchase orders. You will be able to format your purchase order form to add information and other items that you see fit. This customization enables you to easily export purchase orders and send them to your supplier. It also affords the ability to automate emailing of your orders as well.

ECONOMIES OF SCALE

By efficiently tracking your orders and each item’s status along the way, you are able to gather insights into your purchasing. This affords the opportunity to purchase items at a given frequency to offer cost-saving potential. By lowering your per-unit cost, you increase your margins. This cost-saving potential comes with:

  1. Reduced pure product cost – you can receive a discount in purchasing more of an item
  2. Reduced administrative cost – by purchasing more and less frequently, you decrease the time you and your team spend on managing orders
  3. Reduced logistics cost – by buying in bulk, you can realize better shipping rates, less frequent shipping costs, less handling fees, and other costs associated with getting the products into your warehouse

By making more products, cost savings can happen. You can increase your profits by making your purchasing more efficient and reducing your costs at many points within your supply chain. You should use the information provided within the software to determine if it is possible to save using an economy of scale by purchasing more and less frequently.

Being part of the purchasing team, a cloud-based purchase order system will cause efficiencies by using information and communications stored within the software. With this information, you can determine what items are needed based on their specific details. By having this central place of information, you can streamline your purchasing workflow by having clear and concise action items with data that is readily available. You just have to ensure you take the action.

(2) FINANCIAL TEAM

Staying on top of your company’s finances is no easy task. With so many moving parts, keeping track of your purchasing and determining when and how much to pay can be difficult. A web-based procurement system can help alleviate confusion and miscommunication through the organization of data from reconciling invoices to managing expenses to integrations and automation.

RECONCILIATION

Knowing what was ordered versus received and ultimately what needs to be paid for can be a nightmare for financial teams. Procurement software can make this process easy to follow and very clean for your finance team. Features such as:

  1. Receipt information – complete visibility into receipt dates, receipt quantities, and warehouse location receipt took place, all provide important details needed to pay invoices
  2. PO status information – by notating POs that have either been partially received, fully received, partially paid, or fully paid, finance team members can easily navigate between what needs to be acted upon or review what has already been paid to assist in the reconciliation process
  3. Communication – ability to keep all important documentation and notations in one place and attribute them to items receipts.

By keeping detailed and accurate data, invoices can easily be matched to received quantities to avoid discrepancies. Even if discrepancies are found, team members can communicate issues at each level of the process, from ordering to delivering to receiving. By ensuring documentation at all levels, the financial team is able to efficiently pay invoices even if there is a problem due to data being consolidated all in one place.

AUTOMATION

Web-based procurement software offers automation which helps save time by eliminating inputting unnecessary data and removing points of manually approving invoices for payment. By syncing data between purchase orders, receipts, and invoices, items that match perfectly can be automatically paid or invoices can be automatically generated for a faster review time.

Cloud-based procurement systems can also consider credit note data and if credit is owed, it can be automatically applied to invoices. This way you can efficiently manage any credits on your account without having to manually manage the credit notes. Using a cloud-based procured software will ensure you do not leave this money on the table. You need to make sure to enter the credit once received and it will be applied according to the information you entered.

To further enhance your automation, web-based procurement systems can integrate with your accounting systems. Having this level of synchronization ensures your bookkeeping matches your receipts. Data flows between the software save time, flag missed entries, and provide detailed line item and payment information.

By procurement software automating the synchronization of invoices, purchase orders,s and receipt records, hassle-free payment is enabled. By streamlining this process and removing manual entry points, the finance team will make fewer errors and spend their time on more business-critical tasks.

MOBILITY

The beauty of web-based software is that you do not have to be at a physical location to take advantage of its features. With a web-based procurement system, you can effortlessly manage your company’s expenses.

Employees can expense items on their credit cards and phones and it will be recorded to the software. Attaching receipts and other documents while the expense is taking place, cuts down on not accurately expensing items. No more paper receipts, you can capture items directly from your phone via screenshots or photos and upload them directly into the software.

You can easily track your business’s expenses through users and see who is following guidelines. You have full visibility into reimbursement requests and who needs to get reimbursed. Approval features within the software allow for timely reimbursements by showing who has been approved to be reimbursed in real-time.

Allowing your procurement software to manage your expense workflow produces efficiencies. You can seamlessly review paid expenses and expenses needing attention for prompt action. By containing processes to capture expenses and approval for these expenses, your team saves time. By accurately capturing expenses as they are happening, your team may save money from costly errors and inaccurate expense reporting.

(3) SENIOR MANAGEMENT

The goal of the senior manager is to develop the strategy of the business, set and measure goals, manage objectives, and establish efficient processes all in the name of cost savings and profitability. With this in mind, web-based procurement software is the right tool for a senior manager. By managing cost-saving opportunities in contract negotiations, managing approval workflow, and providing accurate reporting, procurement software can help you drive your business in the right direction.

CONTRACTS

By carefully managing your contracts with suppliers, you can increase profitability through cost-saving. Using a web-based procurement software, you can track suppliers’ performance and hold them accountable for late deliveries, missed shipments, cost increases, and other business impactful metrics. Using this information, you can negotiate and tailor contracts with partners emphasizing your business’s actual data and historic needs.

Within the system, you can also manage your business operations to ensure the most up-to-date pricing and terms are being used within your purchases. These items will automatically flow instantly into your requisitions and purchase orders once the contract is activated in the system. You have full visibility into the tasks completed from each contract and monitor the performance and impact of the terms for that specific agreement.

Procurement systems will let you know how contracts are performing. It will also ensure your team is operating within the terms of the contracts and won’t allow them to go outside any of the guidelines of the contract. The system will let you know when a contract is ending and based on its performance, you can easily decide whether to renew or not go forward for another term of the contract.

You can also manage requests for quotes within the software. You can send the same requests to multiple suppliers and by consolidating information obtained from requests, software allows for greater negotiation power. By having all information at your fingertips, you can compare quotes in real-time to easily identify the best pricing and terms.

By tracking important information regarding your terms and pricing with suppliers, a procurement system can ensure you are getting the best deal. You should pay attention to the information presented to you from the software to ensure you agree to the most profitable terms available to your business.

APPROVAL WORKFLOW

Within a procurement system, approval workflows help reduce unwanted spending from purchases to expenses. Having control of how money is spent is key to ensuring costly mistakes do not happen as ultimately it will be the senior manager who will be accountable for the financial hit. Having the visibility and ability to authorize or reject an expenditure can prevent costly mistakes.

A web-based procurement software will let managers know when something needs to be approved. They can opt to also receive emails or other messaging to ensure things don’t get missed and are improved in a timely fashion. Once approved, other team members can get the same alerts to ensure action is taken once approval is given.

To make the process more efficient, you can grant team members certain limits on expenditures or activities. You can set parameters on certain user restrictions to prevent unnecessary bottlenecks. You can also set up different levels of approvals to ensure by the time it gets to your desk, you are the final approval needed.

Managing spending is important to any business. Part of this is ensuring that certain items over a certain limit need to be approved. Web-based procurement software manages this process and ensures money is not being wasted. By setting up rules and limits, you can ensure that your time is being spent on only items that you need to see and allow for your team to operate efficiently.

approval workflow

REPORTING

Tracking progress is important. Without knowing your previous performance, you will not know areas of opportunity and most importantly, you won’t know how or if you are improving. A web-based procurement system can help by tying all the data together and generating reports to help analyze your business.

Procurement software allows you to create your own custom reports. Part of the data that can be generated in your reports are:

  1. Purchase order data – purchasing cadence can show gaps or too frequent purchases
  2. Category level data – examining category information can show underperforming areas of your business that may need to be addressed
  3. Item level data – cost changes over time or by different suppliers can lead to sourcing discussions or price updates to customers
  4. Suppliers – see how suppliers are performing over time and compare performance against each other
  5. Spend data – complete visibility into how you are spending your money and track areas where you can cut costs

Using up-to-date data can drive your business forward. Being able to quickly identify any areas of opportunities within your company at all levels can prove to be invaluable. You can strategically drive action and more importantly, you can confidently speak to your business’s performance and your game plan to improve.

CONCLUSION

Overall, procurement software solutions help synchronize communication and approval workflow, track supplier and business performance, manage processes and documentation, and provide action items to appropriate teams. This drives efficiencies, enhances margins, and increases profits.

There are many benefits to using a web-based procurement software and incorporating it into your existing business process is recommended. An effective procurement system will help your business across all levels of your organization.

It will cut down on costly mistakes that are common in manual processes. With the ability to easily manage cross-functional collaboration and streamline workflows it will greatly make your business processes more efficient for your whole team.  

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