Despite obtaining goods and services essential to the operation being an essential function of most businesses, many organizations still lack a comprehensive procure-to-pay system or any type of well-organized procurement system. This can lead to problems keeping track of important data, difficulty reconciling accounts, inefficiencies in the procurement process, and frustration among team members. Through a procure-to-pay system, companies can better integrate their procurement systems with accounting systems and create a comprehensive, holistic system that streamlines the process of finding, acquiring, and making payments for needed goods and services.
What is Procurement?
Procurement is the process by which organizations seek out and obtain needed services or goods in a strategic manner that aims to fulfill future and current needs. While procurement is often confused with purchasing, they are distinct terms with different meanings.
In fact, purchasing is usually a part of procurement–but one of the last parts. While a purchase is a transaction in which goods or services are supplied, procurement involves the process of determining what needs the organization has, determining which types of purchases will fill those needs, determining suppliers–which may involve soliciting bids and/or determining criteria for viable suppliers, negotiating purchases, purchasing, and finally payment for goods and services.
Some organizations may have additional or similar steps in the procurement process. As procurement is an essential function of an organization, procurement management, and automation can help organizations increase efficiency.
Despite goods and services being essential to the operation of many organizations, many businesses still lack an optimized standardized procurement system or could benefit from revamping their procurement process in order to be more efficient, transparent, and consistently adherent to standard operating procedures. Another challenge that organizations face with procurement is ensuring that accounting and procurement are on the same page.
Organizations implementing a procure-to-pay system can address these challenges by dedicating standardized operations to ensuring that accounts are properly reconciled after purchases. A procure-to-pay system is an approach to integrating the components of procurement with accounting, which can result in increased efficiency, more robust reporting at each level, easier procurement for team members, and simplified policy adherence.
The procure-to-pay process is similar to that of a “Source to Pay” process, yet there are some key differences between the two system formats; most notably, source-to-pay generally refers to a system wherein new vendors are found, vetted, and added to an organization's internal vendor list or database. Conversely, procure-to-pay systems might only deal with existing vendor lists and databases and integrate those systems with accounting systems so that payments for purchases can be more easily reconciled.
So, when it comes to the source to pay vs. procure to pay, the primary difference might be whether an organization already has trusted vendors and potentially an approved vendor list or an organization needs a comprehensive approach to finding new vendors, ensuring that they’re viable as vendors, and integrating the same system used to source new vendors with accounting systems.
By creating a well-managed procurement system, organizations are able to streamline a process that is already essential to the operation and make it more efficient, effective, and even cost-effective.
Benefits of Procurement
Some potential benefits of well-managed procurement include the ability to automate otherwise complicated processes, enhanced visibility and reporting capabilities, improved overall efficiency, and potential cost savings.
Automation of Processes
By implementing the automation of lengthy procurement processes, organizations can enable teams to focus on holistic issues and spend less time running through motions that can be otherwise preset to run automatically. Processes such as invoice and purchase requisition management can be automated to free up team members to carry out other vital operations. Procurement automation doesn’t only offer organizations increased efficiency, however. Procurement automation can lead to improved outcomes at every step of the process, making reporting, reconciliation, purchasing, and approving purchases less time-consuming and less labor-intensive.
Automation of procurement can also lead to increased adherence to internal policy, with systems in place designed to ensure that purchase orders aren’t made without the proper approval or to unapproved vendors or outside of budgetary constraints.
Enhanced Visibility and Reporting
Through the implementation of a well-managed procurement system, organizations can enjoy the benefits of enhancing visibility and reporting. Enhancing the way invoices, purchase orders, purchase requisitions, SOP documentation, and other essential documents are tracked, stored, and recorded can improve visibility and streamline the process of reporting at each step of procurement. With a dedicated procurement system in place and automated reporting procedures, organizations can work to ensure that things are less likely to fall through the cracks. By automation reporting, later finding purchase orders or other important information pertaining to procurement can be as easy as searching for them in a digital system rather than finding them in person by hand, manually. What’s more, through the integration of procurement and accounting systems, organizations can more easily make needed reconciliations.
Automating crucial processes and organizing procurement processes into streamlined systems adherent to well-documented and clearly laid-out standard operating procedures can create a more efficient overall procurement system. With more procurement tasks optimally automated and increased visibility throughout the entire procurement system, team members are empowered to focus less on time-consuming yet consistently carried out tasks, and can instead focus on other vital tasks which require human nuance and understanding.
With a procurement system in place as well as clearly outlined standard operating procedures in place for procurement, team members are better able to understand how to approach procurement and internal policy.
What’s more, important decision-making that can be bottlenecked through management systems can instead be distributed amongst teams so that individuals within the organization can quickly make important decisions rather than being bogged down waiting for the proper channels to give approval. With a well-established and comprehensive dedicated procure-to-pay system, even low level team members can make important decisions on needed goods or services without diverging from established standard operating procedures. Through automation and clearly outlined procedures, systems can be optimized to ensure that purchase orders are only made to approved vendors or that they’re within relevant established budgetary constraints.
Increased Cost Savings
Cutting costs is another potential benefit of a well-managed procurement system. By improving efficiency across the board, freeing up time for team members through automation, and improving the visibility and reporting of each component in the procurement system, organizations are likely able to find cost savings along the way.
Advantages of an Automated Procurement System
Through implementing an automated procurement system, organizations can see several benefits across the various stages of procurement. Many procurement process components can be automated for further efficiency, including policy enforcement, purchasing requests, purchase approvals, purchase requisition, reporting, invoice management, payment reconciliation, and more.
This can empower team members to obtain supplies they need to operate more easily, streamline the procurement process for increased efficiency, create an easy-to-navigate system with enhanced visibility, and help ensure adherence to standard operating procedures.
An automated procurement system can also bridge gaps between procurement and accounting, increasing visibility and organization and making it easier to reconcile accounts or even automating the reconciliation process entirely.
On top of increased efficiency and easier adherence to internal policy, an automated procurement system can also lead to increased visibility and more robust reporting throughout the procurement process. This can help organizations make more informed decisions, ensure that budgetary requirements are being met, and easily review documents if needed.
Purchase Orders and Approvals
The benefits of automating purchase orders and approvals can be numerous; automating the processes of creating purchase orders and approving purchases can reduce the amount of time it takes for important procurements to take place and can enable team members to operate more efficiently. Automation can be set up ahead of time to automatically approve certain purchase requisitions or mandate them to be reviewed first. By automating the approval process with the standard operating procedure in mind, you can not only reduce the amount of time it might take for employees to obtain needed supplies and services but create a system that helps enforce policy at the same time–whether that policy might outline approved vendors, budget constraints, or something else.
Management of Purchase Orders
The management of purchase orders can also be automated, enabling ease of finding needed documentation and enhanced tracking and reporting. This enables businesses to better understand what goods and services are being purchased or needs to be purchased, as well as more easily maintain a viable budget and ensure that purchases are being made within crucial budgetary constraints.
Optimized management of purchase orders doesn’t just offer organizations increased efficiency; being able to easily find and track purchase orders can also offer insights into operations and help organizations understand costs associated with projects. Well-managed purchase orders can also be easily found in the event that a discrepancy appears or if accounts must be reconciled. Being able to easily locate a purchase order through a digital system with automated tracking, on top of being less difficult, can be much faster than locating purchase orders physically.
Digital Vendor Management
Keeping track of vendors can be as complex as it is important. Automating vendor management can be a huge help to organizations that must keep track of internal vendor databases and physical lists, as well as organizations that must source viable vendors who can supply goods and services within the organization's budget and to the level of quality that the organization needs. Automating vendor management doesn't only offer increased efficiency–it can improve the system overall, automatically finding duplicate information, automatically tracking vendors, and enhancing the way team members source vendors during the procurement process.
Whether organizations are working with an approved vendor list or they’re working to build an internal database of new vendors, automating the process of digital vendor management can offer a range of benefits to employees and the organization.
Aside from enhancing efficiency in terms of the speed at which team members are able to submit purchase requests and receive approval for needed supplies and services, automated procurement systems enable organizations to glean invaluable insights regarding spending on procurement, the performance of vendors, cost-effectiveness of purchased goods and services, and cost-effectiveness of projects within the organization. These types of purchase-related insights can be much more difficult to come by when manually sorting through data spread across multiple departments or systems. With a comprehensive automated process-to-pay system implemented, however, organizations are able to see how purchases affect operations from start to finish and understand how cost-effective various purchases are or how they might affect the organization's bottom line. With procurement and payment integrated into one system digitally, it’s possible to see a clearer picture.
Unlock the Full Potential of your Procurement Process with Teampay
A well-managed procurement system can lead to improved outcomes for an organization, from onboarding vendors to paying bills and at every step between. Businesses are taking advantage of digital technology in nearly every facet of their operations–from marketing and sales to people management, yet many still lack comprehensive procure-to-pay systems. This amounts to a vast untapped potential in terms of operating efficiency, communication between departments, and vendor management.
With Teampay, you can unlock that potential in your own business. Easily automate your procurement process and replace old disjointed systems with a robust, seamless platform that helps you ensure that all invoiced purchases are approved and adhere to company policy, while bills are paid efficiently and on time.
You can also easily keep track of your vendors, ensuring you have the most current payment information and required documents. Automatically manage approvals and keep a detailed audit trail of transactions, so you always have a clear picture of your procurement process activity with each vendor.
With Teampay's easy setup, you can quickly change the way your business approaches procurement. Automate tedious and time-consuming tasks so that the data you need is easily accessible and you can focus on more strategic projects. Be sure to reach out today and get started with a free demo!