By Patrice Orenes-Lerma
For an organisation’s procurement function to operate at full efficiency, it needs to connect seamlessly to other corporate-wide systems. This can be achieved – with the right processes and the right technologies linking them together. But it’s not easy. Sometimes, processes can slip and the overall procurement effort suffers, leading to missed deadlines, cost overruns and reduced profitability. How can you tell if your procurement process needs fixing? Here are eight signs things are going awry – and some corresponding tips on ways to improve business processes.
1. You are overwhelmed by managing your suppliers
You must monitor proposals, tenders, requests for information, reverse auctions, certification and accreditation of suppliers, audits, fraud avoidance and many other activities, and you still need to meet your objective of reducing the procurement cost. A BPMS (business process management suite) can bring all of these processes together and give you control over them via monitoring dashboards and predictive analytics.
2. Your purchase orders are going around in circles
Isn’t it annoying that every PO requires some sort of feedback from the accounting team? Spending limits, type of purchases, duplicate POs, and PO-invoice match all burden the accounting team. Add intelligence to the procurement process, so the system can provide immediate feedback to the user on policy compliance – for example, forwarding a PO to a higher level if it exceeds a set price threshold.
3. Your vendors complain about not being paid on time
Paying a vendor is the last step in the procurement process. Rigorous management requires payment at the right time in order to optimize the working capital requirement (WCR) while avoiding the legal and financial consequences of a delayed payment. It is important to use automated monitoring in the process, to monitor the progress of invoices, and create alerts when there are potentially late payments on the horizon.
4. You can’t tell whether you should pay a purchase order now
The CFO ensures that all purchases are within given budgetary constraints. Thus, the procurement process should provide the CFO with information regarding cash flow, both historic and forecasted. For example, Spend Analyses can reveal areas of “over budget” and “under budget.”
5. You have a constant struggle with PO-invoice discrepancy
Invoices may come in different formats – paper, PDF, XML, EDI, and so on – so to manually match them with the right Purchase Order may be a challenge. An automated process management application can generate purchase order numbers to facilitate the association between PO and invoice.
6. You need insight to negotiate better terms with suppliers
To optimize the procurement process, you need business intelligence information about the pricing, quality and quantity of procured items. This data can help you negotiate better terms with suppliers. For example:
• A report of the top consumed products and services can help negotiate a volume discount.
• A report of items purchased at premium prices can help negotiate “net terms” with suppliers (i.e. Net-90 instead of Net-30).
7. Compliance is governed by hard-to-find information
Many policies are either written in text-based documents or are “common knowledge” shared orally. The company has to depend on the approvers, the accounting team, and the CFO to manually enforce such policies. Building compliance rules into the procurement process in BPM takes the uncertainty and confusion out of compliance and renders it auditable.
8. Your employees complain that fixing issues in the procurement system takes too long.
Employees are real customers for the Procurement service. A BPM suite allows you to create easy-to-use web interfaces based on their input, and you can define and easily modify your own validation steps and business rules. For example, it’s simple to modify the lead time required for travel purchases, change the escalation time for POs, enable/disable approved vendors, and so – without IT intervention.
Improve your finance department processes by connecting to other corporate-wide systems or extending the capabilities of your ERP. Your team is more efficient in their work with quick-deploying process-based applications and monitoring dashboards tailored for Corporate Finance.
Patrice Orenes-Lerma is a senior process solutions manager for BonitaSoft, a provider of business process management solutions, specializing in corporate finance, human resources, IT management and claims management