Initially, inefficiencies in procurement are merely a nuisance. But gradually, these simple manual processes compound to consume time, productivity, and money. Faster than most organizations realize, the pace of growth outstrips the ability of the accounting and procurement teams to keep up.
Automation is the best source of relief from these common business problems. Automation removes mundane tasks and leaves more time for accounts payable (AP) to tackle the problems that truly make an impact.
This article covers many aspects of procurement automation:
- What is procurement automation?
- The benefits of automating the procurement process
- The top five areas vital for procurement automation
- How Order.co helps companies achieve procurement automation
What is procurement automation?
Procurement automation uses technology to streamline traditional procurement processes such as approvals, accounting tasks, and payments. It helps procurement teams take control of their supply chain by optimizing every step of the procurement process, from requisitioning to ordering, fulfillment, and invoice processing.
The process works by digitizing data during invoice intake and using that information to create a centralized transaction history and processing database. The system performs checks, routes approvals, and streamlines payment, all within a single platform.
Streamlining purchasing through automation benefits businesses with complex procurement needs because it avoids bottlenecks caused by manual processes. It provides a reliable platform that reduces risks and costs while improving supplier management and eliminating repetitive tasks.
Why should you automate your procurement process?
Automating your company’s procurement process saves time and money. From invoice processing to spend management and sourcing, automation improves cost savings and reduces the overall amount of time it takes to manage the entire process. The time and money saved by automating can fuel growth and give team members the bandwidth to tackle more important tasks.
Here are the top benefits of procurement automation:
Process automation streamlines invoice processing and avoids costly errors. Human error or miscommunications lead to delays in payment, incorrect data entry, duplicate payments, or misplaced paper invoices. Automated processes reduce the risk of these issues by eliminating manual data entry and creating standardized workflows for every purchase.
Automation increases the transparency of the procurement process. This can ensure that all suppliers are evaluated consistently. It enables strategic sourcing and the use of known vendors that present a lower risk of fraud. Additionally, procurement automation software tracks performance over time to help mitigate risks.
Using procurement automation, stakeholders can:
- Quickly and accurately compare prices from different vendors for the best value
- Track approvals across multiple departments
- Automate the backend processes of ordering, reconciliation, payment, and spend management reporting
This streamlines the entire process to save time and reduce cycle times and burden on accounts payable.
Procurement automation software improves cost efficiency by reducing manual labor and associated employee wages. Rather than expanding the department to handle increased procurement volume, the system scales to handle more procurement activity as the company grows and expands. Automation also improves communication between buyers and suppliers, leading to more efficient buying.
Top 5 procurement processes every company must automate
End-to-end procurement automation is the gold standard for delivering more value within the procurement process while using fewer resources and less time.
These top five business processes to automate are a great place to begin:
1. Purchase requisition and approval
Manual purchase requisitions and approvals result in inefficient purchasing workflows and a weak security review process. But when you introduce an automated system for intake, stakeholders route requests through the appropriate form or a curated supply catalog. They no longer need procurement or finance help.
The automated request proceeds through the appropriate departmental reviews:
- Department head
Each departmental approver sees and responds to the request within the system, moving to the next stakeholder on the list without cumbersome emailed requests, time-consuming back-and-forth, or requests caught in limbo somewhere within the process.
Automating the approval process cuts days or weeks off time-to-close, allowing teams to request and receive the supplies and products they need more efficiently.
If organizations don’t create a streamlined sourcing process, stakeholders will select suppliers themselves. Automating the sourcing process for the organization enables buyers to get what they need while staying within the procurement policy.
Software helps this process by centralizing the list of preferred vendors for every type of purchase. It also creates necessary guardrails for self-service buying, including spending limits based on role, user, department, spend category, and more. It allows budgetary controls while reducing instances of maverick spending.
3. Invoice management
Invoices are one of the most common logjams in procurement. Manual processing creeps along at a rate of only a few dozen per day since each error and issue takes time to research and amend.
Automating invoice processing allows organizations to handle hundreds or even thousands of invoices per day. The automation process digitizes paper invoices, centralizes data for every vendor and purchase, automatically checks and reconciles invoices against the database, and codes them accurately to ensure your accounting system is a single source of truth.
With invoice management, there are no missed payments, redundant invoices, miscoded purchases, or mysteries lurking within your accounting system. The system automatically processes, reconciles, and codes documents to set them up for successful payment.
Processing manual payments, as with invoices, creates logjams and data entry errors. It also increases the potential for vendor fraud.
Automating the payment process enables accounts payable to quickly and accurately process payments, record the transactions, and store the data for later reporting activity, such as month-end close and financial reporting. A software solution gives AP real-time visibility into payments to reduce issues and reap benefits like early payment discounts.
5. Contract management
Contract execution for purchases is only the beginning of the journey. Once a contract is signed, the work of monitoring and upholding the contract begins.
Effective contract management ensures pricing and terms remain competitive. It bolsters supplier relationships and ensures consistent quality in procured supplies.
Manual contract management is expensive and low-visibility. Manual or poorly organized storage of contracts prevents companies from examining contract compliance.
Automating the contract management process through a central repository for documents is the most effective way to achieve effective contract management. Doing so enables notifications and updates, allowing stakeholders to know when contracts renew and creating suitable lead time to evaluate and negotiate for new contract terms.
The procurement system you choose significantly impacts your results. Look for a software tool with the flexibility to meet your individual business needs but structured enough to create a highly effective workflow that reduces costs while increasing productivity.
Select for these features when choosing a procurement software solution:
- Flexible setup to create ideal workflows and customization for your business
- Automatic general ledger (GL) coding for accuracy in accounting
- Access to thousands of vendors within the system, with features like favorite orders and order history
- Dynamic permissions for a variety of user tiers, roles, and needs
- Centralized contract information for vendor management and reporting
Order.co is equipped with all the features that provide end-to-end procurement automation for businesses of all sizes. To free your team from repetitive tasks and unnecessary rounds of account research, start by scheduling a demo of Order.co.
Schedule a demo to see how Order.co can simplify buying for your business.
"*" indicates required fields