Procurement Trends to Watch in 2023

If you need a word to summarize the economic mood in 2023, “pensive” comes to mind. After the drastic market fluctuations of 2020 to 2022, we enter the new year with an over 60 percent likelihood of recession, according to leading economists.

Tech giants, previously full-steam-ahead on fast hiring and generous salaries, are now engaged in layoffs and cost-savings measures to preserve cash flow in response to this new normal. Every business is looking at its bottom line, eager for ways to tighten spending.

“In a market environment of rising interest rates, sustained high inflation, and universal corporate belt-tightening, it’s more important than ever for businesses to get the most of their resources (time and money).” - Mark Skrapits, SVP of Operations, Order.co

As one of the largest centers of addressable spend, procurement departments need to optimize cash while still creating value for the organization. The good news for these procurement teams? There are plenty of ways to prepare for the coming year. In that spirit, we compiled the top five procurement trends of 2023 as well as tips to ensure economic stability for years to come.

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Top 5 procurement trends of 2023

Procurement success depends on visibility, flexibility, and human performance. The most successful procurement teams aren’t just order-takers but active partners in the success of the organization at large. Procurement professionals must explore several trends to strengthen their cash position and do more with less in the new year.

Higher standards for order matching

Three-way matching has long been a staple of well-managed purchase-to-pay processes. Matching the purchase requisition to the purchase order and final invoice creates a three-legged stool of verification. It cuts down on fraud and ensures the accuracy of data.

But three-way matching is the beginning of a better process, not the end. In 2023 and beyond, look for higher matching standards incorporating more data points along the procurement journey:

Purchase order
Receipt of goods
Vendor invoice
Confirmation of payment
Integration to accounting record
Financing of payment

Automated five-way matching will become the standard for mature accounting practices, with six-way matching emerging for those (like Order.co) with the platform capabilities to offer it.

Five- and six-way matching incorporate valuable enhancements into the procure-to-pay process. Automated five way matching saves time for finance and accounting teams at month-end close and reduces the need to hire additional analysts & bookkeepers as the business grows. Embedding the ability to easily spread payments out over time (the sixth match) allows finance leaders to better manage cash flow, with less effort.

Tightening net terms from vendors

Only two years ago, vendors enjoyed the ability to offer extended repayment terms. Lower interest rates, better capital reserves, and generous lines of credit from lenders made it possible to extend 60-day terms to well-qualified customers without excess risk or expense.

We begin 2023 in considerably different economic conditions to pre-pandemic times. Interest rate hikes, inflationary impacts, and the looming recession push vendors to tighten their financials and improve risk management.

The consequence of these economic shifts is less wiggle room for extended terms. This will force some stakeholders to either agree to shorter terms or seek agreements with more flexible vendors.

The rise of “pay your way"

Flexible payments have become standard practice for consumer spending in the last few years. Companies like Affirm, Klarna, and Afterpay offer no- or low-interest options for making purchases and paying over time.

The same flexibility currently available to consumers will soon come to the procurement process. These “pay your way” options within established procurement platforms allow Finance to plan and adjust its spending to meet organizational goals, make the best use of cash flow, and create options for surprise expenses.

Currently, planning for contingencies means tying up cash funds in savings, keeping a line of credit, or taking a short-term loan to handle large or unexpected procurement. These methods are moderately effective but may take days to settle. As economic conditions evolve throughout 2023 and beyond, these methods will also become more costly.

A specialized payment system based on the consumer “buy now, pay later” model benefits vendors as much as buyers. Sellers can offer extended payment terms without introducing outsized expenses or risk, allowing buyers the flexibility to make needed purchases that drive forward their organizational objectives.

“B2B pay your way is going to happen inside your ERP or Procurement Software, but only with platforms that understand the finance side of procurement. You need a platform that is just as good at handling POs & invoices as it is enabling finance & accounting functions.” -Warren Brown, Head of Embedded Payments, Order.co

Full organizational alignment on spend

Talk of optimizing the procurement process often centers on C-level and director-level coordination. But to take control of addressable spend, it’s essential to consider the complete chain of users and decision-makers that move deals from requisition to completion.

In 2023, companies keen to optimize cash flow will look to full organizational alignment. This transformation regarding approach will take many forms:

Clear and consistent documentation and communication regarding spending and budgetary guidelines
Alignment across the organization's critical functions: Finance, Legal, Operations, Security, and Executive
Consistent communication up the chain of command to address challenges and opportunities with the procurement process or its outcomes
Practices and new technologies that support strong spending rationale, due diligence, supply chain management, and supplier relationships

Aligning these factors allows organizations to respond to needs and procure goods with agility and visibility. Using digital procurement solutions to drive this alignment empowers advanced methods such as strategic sourcing, sustainable procurement, and supplier performance management.

Leveraging people + technology for results

To improve procurement strategy and streamline cash flow, it’s time to reframe the people versus software debate. Savvy procurement leaders are finding ways to enhance their workforce through procurement technology that improves business processes.

Bringing your data into an automated, organized structure facilitates the work only humans can do. It empowers finance and accounting teams to perform quick and confident decision-making, informed by access to centralized data analytics.

Contextualizing these massive amounts of data is only possible with assistance from software. Businesses may need to aggregate data from a dozen platforms to bring everything together. Using technology to unify these disparate data streams into a single source of truth makes it possible to see your entire procurement organization holistically.

“A marketplace that simultaneously connects businesses with vendors and financial partners can not only create a single source of truth for all your spend data, but it can predict and perfect things like what you are buying, how you are buying, and the way you are paying over time.” -Zach Garippa, Co-Founder & CEO, Order.co

Piper Sandler points out that integrating purchase orders, invoices, accounts payable, and general-ledger accounts data creates a more multidimensional view of external spend.

This centralization has huge implications for tackling addressable spend and cash optimization, as 40 to 80 percent of a company’s total cost is wrapped up in external spend with suppliers.

Prepare your organization for procurement success in 2023

Centralizing data and automating processes are keys to weathering economic change. A procurement platform like Order.co offers organizations real-time data, features, and flexibility to make data-informed decisions and reduce the manual management of their procurement function.

Centralized procurement with automation that enables future-ready matching across the p2p cycle
Approval and role-based purchasing guidance to ensure every purchase is fully vetted and compliant with documented policy
Features for accounting process improvement, reduced manual work, stronger spend analysis, and fast and flexible payments to vendors

If your procurement function is ready to make future-focused improvements to ensure stability through 2023 and beyond, request a demo of Order.co.

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