The purchase request may seem to be but one administrative chore, but can be an actual chain of activities. Someone requires an item, it is approved, a different person in the organisation is responsible for procurement to get a supplier, then create a purchase order, then goods are received, then a Purchase Order invoice is received, then finance eventually pays it. Without these steps happening together in individual systems, a number of errors or delays can creep in. That is where p2p software can provide more structure to the overall purchasing process.
Procurement Starts Before The Purchase Order
Much of the procurement issues start before they are allowed to contact a supplier. Unsatisfied requests can be made, inconsistent description of products written, and products may be selected without an employee being aware if a supplier is already approved.
The effort needed to make purchase requests easier is one part of the transition for a well-organized procure-to-pay process.The transition for a well-organized procure-to-pay process begins with purchasing requests becoming obtainable. The required information can be provided via a standardised flow, and purchasing staff will have visibility of what is truly being required by the business.
Turning Requests Into Controlled Purchases
After a request is in the system it can become a critical milestone for approval. It may be necessary to apply different levels of approval on different purchases for value, category, department, and/or business purpose.
Digital workflows can route requests to the appropriate people automatically. This saves time from manually forwarding emails or asking if the request made has been approved by the right person.
It also has the advantage of a controlled approval process so that a record can be maintained of who approved the purchase and when they approved it. This can help to give internal accountability and future procurement analysis.
Purchase Orders Create A Clear Agreement
Once approved, the purchase order becomes a commitment by the organization about what it will purchase. Can remember amounts, prices, expectations of delivery, details about suppliers and other business information. This information can flow more smoothly through all the different stages of a request to purchase order with p2p software.
If there is no purchase order process, businesses could end up having different versions of the order: what they ordered, what they approved, and what they actually ordered when it ended up in the supplier’s hands.
A OMNIA buy-to-sell workflow that automates the process of purchase orders creation from approved requests can help minimize repetitive data entry.
Three-Way Matching Protects Accuracy
Suppose a company orders 100 and they get 95, and an invoice to them for 100. Failure to verify the records when paying the invoice may result in an unnecessary expense.
The three-way matching is used to compare the purchase order, receipt record and supplier’s invoice. If the information is matching, then that invoice progresses. If an item does not match it can be flagged up for review.
This enables finance and procurement to have more control over payments and minimises the need for manual approvals where transactions are simple.
Where Procurement KPIs Become Useful
A procurement team can make thousands of transactions and not be aware if the process is improving or not. That is where it’s beneficial to have a KPI in procurement.
A KPI is a way of looking at performance that is measurable. A team can track an average approval time; don’t say a process takes too long. Rather than taking it on faith that products will arrive on schedule, it can monitor supplier timely delivery rates.
The correct measurements enable any procurement transactions to be transformed into information for leaders that allows them to recognize improvement potential and bottlenecks.
Connecting Procurement And Finance
There can be many flows of transactions between procurement and finance, but they may be looking at them through different eyes.
In a seamless procure-to-pay experience, the sell-to-pay and pay-to-sell points can be brought closer together. Information can be collected as the purchase occurs, receiving records are collected as part of the purchase, invoice and approval records and payment data can be collected during the purchase.
This creates a clearer transaction history and makes it easier for teams to understand what happened from the initial request to the final payment.
Measuring Speed Across The Purchase Cycle
Time is an obvious measure of the efficiency of the process. They can analyse the time that requests spend in Queue, the time spent to reach a purchase order approval decision and the time between the purchase requisition being created and the purchase order being created. Tracking a KPI in procurement can help teams measure these stages consistently.
Processing invoice time can also flag problems up. When invoices never get resolved after a few days it can be the fault of earlier in the process when a purchase order has been lost, quantity wrong or receiving information incomplete.
It is important for organisations to consider these stages individually so that they are able to identify where the actual cause of the delay is rather than taking the entire procurement process to a holistic route.
Building A Procurement Feedback Loop
The best procurement processes do not view each purchase as a stand alone item or situation. Feedback from the completed buys can contribute to better future buys.
Assume that data reveals that there is a consistent pattern in which certain kinds of data are infrequently awarded. The procurement team may go on investigation on the approval procedure. There is likely a need to examine the purchase process or receiving process when the invoices with a supplier persistently don’t match.
This then forms a loop of purchasing activity which becomes data which shows patterns and patterns become improvements in the process.
Conclusion
When all procurement activities are documented and correlated, it’s easier to manage. Each employee inquiry, and every supplier delivery, can provide data for organisations to manage costs, minimise mistakes and enhance performance. These activities can continue to be linked through the use of p2p software and give greater visibility throughout the purchasing process.
To align such activities, businesses that want to integrate can use a Proprocurement environment which connects their purchasing workflow with approvals, creation of purchase orders, receiving, invoice processing and procurement intelligence, providing a practical basis to have their purchasing action more measurable.
