Entrepreneurs from every industry need cash flow to drive business growth. Cannabis business owners are no different, but the obstacles they face in securing business funding vary significantly from typical businesses. Higher perceived risk, regulatory restrictions, and federal laws against cannabis make it difficult for cannabusinesses to secure funds. 

Today we’ll cover the basic financing issues for cannabis companies leading the way in medical and recreational use of cannabis. 

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What is cannabis financing?

Cannabis financing is the process of obtaining business capital through various financial resources to cover the costs associated with running a cannabis-related enterprise. When hearing about a cannabis business, cannabis dispensaries often come to mind. But cannabis cultivators, medical marijuana clinics, and other related cannabis businesses also require funding to drive operations. 

While traditional financial institutions and lenders can provide cannabis business loans, financing is often obtained from private investors or venture capitalists due to the stigma attached to cannabis products. The various options typically available to a startup looking for cannabis financing can include:

Regardless of which form of financing they choose, cannabis businesses must carefully examine legal considerations, interests, and risks to ensure they receive sufficient working capital while protecting their assets.

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What types of businesses need cannabis financing?

There are two types of businesses within the cannabis industry: direct and indirect. Direct cannabis businesses are those that “touch the plant,” such as cultivators, dispensaries, distributors, and laboratories. Indirect businesses offer services that support the direct industry, such as packaging companies, technology providers, and equipment manufacturers. 

Cultivators: Cannabis cultivators produce cannabis plants and components like CBD for both medicinal and recreational purposes. They grow and process plants to create standardized products sold at dispensaries. Cultivators use techniques like adjusting nutrient levels and controlling temperature and humidity to create new strains with desirable characteristics. They must adhere to government regulations and product standards when creating strains and cultivating plants. 

Laboratories: Cannabis quality control labs analyze product samples for potency, terpenes, and contaminants. They provide reliable analytical results to the industry, ensuring all products meet regulatory requirements and industry standards. Labs also offer services such as genetic profiling to trace the plant's origin and authenticate the product. They play a critical role in consumer trust and cultivators' informed decision-making.

Distributors: Cannabis distributors help ensure a safe and secure supply chain for the cannabis industry by handling all steps in the distribution process. They are the link between cultivators and retailers, ensuring that cannabis goods reach the right place at the right time while meeting all government regulations related to compliance and taxation. They also often provide additional services such as inventory management, security, and product tracking. 

Packaging: Cannabis packaging companies provide solutions for both recreational and medicinal products. They offer printing services, including logos, branding, and warning labels that use innovative and custom designs to help differentiate products from competitors. Essential for protecting integrity, they provide an extra layer of security to guarantee quality products by ensuring compliance with health and safety regulations, like child-resistant or tamper-proof packaging. 

Equipment: Cannabis equipment providers are responsible for the production and maintenance of specialized and general equipment used in the industry. This includes a wide range of items, from grow tents and trimming machines to commercial plant driers, extractors, and decarboxylators. They also provide the technology necessary to ensure that cannabis production is safe and efficient, like HVAC systems or water chillers. Cannabis equipment providers help with installation, maintenance, and repair services so that growers have access to reliable tools when they need them. They enable cannabis producers to meet safety standards and ensure quality control throughout the entire process.

Technology: Cannabis-related tech and SaaS software companies design software solutions for the cannabis industry, including inventory management and compliance tracking, plus mobile applications for real-time operations. A suite of analytical tools is also available, optimizing production by gathering data on cultivation and greenhouse environments. These technologies help growers maximize efficiency and profitability while remaining compliant with local regulations.

What are the obstacles to cannabis financing?

Cannabis businesses, particularly those operating in the US, face several obstacles when trying to obtain financing. Cannabis and its derivatives are a schedule I controlled substance in the United States. This means that, despite the recent move by individual states to relax their rules on medicinal or recreational cannabis use, THC remains illegal at the federal level. 

The federal prohibition of cannabis makes it difficult for banks and other lenders to provide funding. Specifically, federal prohibition means that cannabis businesses are ineligible for favorable loans from the Small Business Administration (SBA). 

Two sets of restrictions dissuade banks from financing cannabis-related businesses (CRBs): the Anti-Money Laundering Act (AML) and the Bank Secrecy Act (BSA). 

The requirements for both these regulations make it difficult for lenders to confidently offer financing to cannabis-related industries. Lenders that do offer options to cannabis-related businesses often limit their services to ancillary businesses such as general suppliers, labeling and packaging designers, and technology companies like cannabis-specific point-of-sale providers. These businesses, while they support direct cannabis sales, offer a more favorable risk profile to banks since they fall under less stringent legal requirements. 

Though traditional investors may be wary of investing in the cannabis industry due to its uncertain legal standing and liability concerns, options for obtaining funding for a cannabis-related business are improving, providing owners meet the prerequisites for securing credit, loans, or grants. 

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What are the requirements for obtaining cannabis financing?

Although requirements vary by state, most cannabis-related entrepreneurs must meet the following requirements: 

Strong personal credit rating: A strong credit rating is vital for securing financing for your business. Sufficiently high credit ratings from the “big three” credit bureaus make it easier to convince lenders to take on the risk. A high credit score gives potential investors confidence regarding timely loan payments. For the major three credit bureaus, a score of 670 or above is in the “good” category.

Adequate credit history: A long history of good credit is essential when applying for financing, so lenders look for those with experience borrowing money and paying it back on time. As part of this, they review the borrower’s credit history, checking for recent activity and missed payments. A strong credit score coupled with a long history of timely payments makes lenders more likely to take on the risk of providing capital and financing for your business.

Bankruptcy-free credit history: Lenders are often risk-averse, especially when handling a higher-risk loan like cannabis funding. Any indication that debt might not be repaid based on past performance is a major roadblock. Bankruptcy stays on a credit report for up to 10 years and might be used as a factor in approving your application. 

Business account: A separate business bank account is required for cannabis lending, as it meets the increased reporting and regulatory requirements of applying for financing. Establish a separate business account under your business taxpayer identification number (TIN) along with any state filing requirements or permits.

US citizenship or resident status: US citizenship or residency is a requirement for borrowing funds to run a cannabis business. Regulations concerning lending and business permits for cannabis businesses may vary. Consult an attorney knowledgeable in this area for specific requirements. 

Business plan: When seeking financing of any kind, a documented business plan with projected revenues, a mission statement, a SWOT analysis, and marketing plans form an important part of your financing application. 

Uses for cannabis financing 

Like many other retail or medical businesses, brick-and-mortar cannabis businesses like marijuana dispensaries and cultivators must source real estate, supplies, inventory, technology, and services to keep the business running. 

Financing for the business often goes toward establishing locations and buying supplies and equipment for production and sales, including: 

However, risk and cash flow issues particular to the cannabis industry make it difficult or impossible for these businesses to get equipment and get off the ground. 

Alternatives to cannabis financing

For companies seeking flexible, cost-effective ways to procure supplies for running a cannibals business, there are some alternatives. However, access to these avenues of financing isn’t universal. Businesses that have cash on hand most often source goods and equipment through group buying or online ecommerce resources: 

How Order.co approaches cannabis financing

Order.co takes a new approach to cannabis financing, providing risk reduction and reliable access to capital in a way that works for both buyers and vendors. This removes many of the obstacles that keep cannabis companies from reaching their full potential. With vendor and working capital access through Order.co, cannabis businesses can get up and running, source equipment, expand into new locations, and explore wider markets. This is how it works: 

Order.co gives cannabis startups the capital and vendor access they need to perform in new markets, providing a competitive advantage as cannabis access expands into new states and territories. 

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In addition to leading-edge advantages for cannabis businesses, Order.co provides an easy-to-use interface that simplifies the process of researching prospective suppliers, finding the best pricing and terms, and using data-informed insights to grow a thriving business:

To see how Order.co helps businesses of all types grow their operations effectively, request a demo. 

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Good documentation is a major player in preventing chaos in the accounting department. This is especially true when it comes to accounting’s involvement in purchasing, as even small businesses generate dozens or hundreds of purchase orders each month. A strong purchase order system is essential for keeping the details associated with purchasing, invoicing, and inventory management on track. 

Relying on a great purchase order form template is a real life-saver for busy stakeholders trying to source the things their business needs. Today, we’ll cover many of the top questions about the purchase order process, including: 

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What is a purchase order?

A purchase order (PO) is a formal document issued by a buyer to a seller that outlines the products, services, pricing, and terms of a purchase. It serves as an agreement between both parties when placing orders and acts as a legal contract for the transaction. 

Purchase orders contain item descriptions, quantities, payment terms, and delivery dates. They also include other important information, such as taxes or shipping fees that may need to be paid by either party. A purchase order is typically generated using software and is usually signed off on by both parties before any goods or services are delivered or invoiced. 

Most purchase orders use a template to ensure all order information is complete and accurate. Many businesses use Google Sheets, a Microsoft Excel template, or a proprietary system to create a form for general use.

Is a purchase order the same as an order form?

A purchase order is not the same as an order form because a purchase order is legally binding and serves as a contract between two parties. An order form, on the other hand, is simply an itemized list of goods or services requested. It does not have any legal power or contractual obligations attached to it. Additionally, a purchase order typically includes payment terms and delivery details not usually found in an order form.

A purchase order includes several specific elements for tracking the order, such as a PO number, payment info, terms and conditions, order details, shipping method, shipping terms, and other information vital to processing the transaction. 

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What is the difference between an invoice and a purchase order?

An invoice is a document a seller issues to a buyer that serves as a bill for goods or services. It typically lists each item's price, applicable taxes, and the grand total of all items purchased. The purchase order, once completed, prompts the processing of the invoice for payment.

Benefits of a strong purchase order process

Purchase orders are an important source of information and documentation for your procurement process. They outline vital information for every purchase, create a paper trail for order research, and ensure that the items you purchase are the same as those you receive. 

Legality: Purchase orders serve as a legally binding agreement between two parties and provide protection in the case of a dispute about the goods. They establish the parameters of a sale and outline the responsibilities of each party in the transaction.

Accuracy: The body of a purchase order provides an itemized list of goods or services requested. This ensures orders are fulfilled correctly, the goods match those agreed upon, and the pricing of those goods is consistent with the items you receive. Accurate purchase orders also eliminate costly cash leaks from your procurement process.

Payment: Purchase orders outline the payment terms and conditions of the supplier. They list the repayment terms for orders with net terms and itemize any fees, delivery charges, or late charges that may apply to the purchase. 

Documentation: Purchase orders ensure accuracy and efficiency in the procurement process by providing detailed information for each transaction. This enables matching between the purchase requisition, purchase order, bill of lading or packing slip, and invoice.

Visibility: The information on the purchase order informs many other finance and accounting processes, including order tracking, payments, spend analysis, price benchmarking, and vendor performance management. 

What are the important components of a purchase order?

Although the template for purchase orders may vary between companies, every purchase order should feature several key components for completeness and order tracking.

Internal stakeholder information: Purchase orders should have the company's name and the person or department submitting the purchase order (in case of any questions or communication needs during processing). It should also have contact information for the AP department. 

Vendor information: Each purchase order should include the vendor’s name, business address, phone number, fax number, and sales representative or AR contact’s information.

Order details: Include the order date, purchase order number, and an itemized list of products and services on each PO to prevent discrepancies between orders and receipts, unauthorized payments, and vendor fraud.  POs offer clear records of all items and costs for effective budgeting. 

Payment details: Including vendor payment information is part of arranging proper payments. It’s also integral to document payment terms and methods to ensure timely payment, which can cut down on the over 20 percent of invoice exceptions businesses face when processing payments. Acceptable forms of payment or preference for electronic payment should be noted, as should any early payment discounts negotiated during the sale. 
Terms and conditions: The general terms and conditions of the purchase should appear on the PO for reference. In the event of issues or discrepancies, the PO serves as the final legal word on the terms agreed upon by the parties.

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What are the steps to create a purchase order process?

Creating a purchase order should be a documented, repeatable process. This ensures the PO is accurate and complete each time. 

Use these steps to ensure strong purchase order management for your organization. By relying on a template, you highlight all necessary information to guarantee it’s included in every transaction:

1. Terms negotiation

Vendor management includes negotiating terms and conditions for purchases, such as payment details and delivery dates. The cost of goods or services should also be documented in detail, along with any agreed-upon discounts. 

2. Submit the purchase requisition or intake form

Once all information is settled, the buyer generates a purchase requisition or purchase order document that includes all negotiated details. They then submit the document for approval from internal departments, including their direct manager and any legal, IT, security, or finance team reviewers. Once approved, the accounting team creates the purchase order. 

3. Issue purchase order to the vendor

Once internal approval is complete, the accounting team produces and submits the purchase order to the vendor. The vendor then reviews and accepts the purchase order before preparing to fulfill the order. The vendor’s review process also ensures that they understand what is in the order and verifies that the correct items and quantities are available. 

4. Fulfillment and review

The vendor fulfills the order according to the details in the PO and delivers the order to the buyer. The buyer verifies the shipped goods against the data in the PO and invoice. This review process allows the buyer’s receiving team time to check for incorrect, damaged, or poor-quality products, all of which cost companies big, with an average of 8 percent of inventory getting wasted annually. Once approved, accounting pays the invoice and completes the transaction according to the terms outlined in the agreement. 

5. Documentation

Once the transaction is complete, a strong procurement process also includes centralizing the purchase data into a platform for future use. This allows teams to review historical purchase data, compare prices year-over-year, and evaluate vendor performance. Purchase order software tools and procurement platforms make this process significantly easier and more accurate.

Make purchase orders easier with a procurement platform

A procurement platform like Order.co enables automation throughout the purchasing process. With a few clicks, users can generate a single purchase request across multiple vendors, get the necessary approvals, and submit their POs to the vendors electronically. Received goods are easily tied back to the PO and invoice data, saving hours of manual reconciliation. A platform also makes it easier for accounting teams to review transactions, research issues, and account for every purchase at month-end. 

Order.co offers robust features to automate and streamline purchasing while maintaining optimal spend controls: 

To see the power of purchase order automation, request a demo of Order.co.

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Managing processes in an organization is a complex and ever-evolving task that takes time and effort to complete and document correctly. Without proper oversight, managing processes like tracking financials and reviewing employee requests can quickly become overwhelming. Even so, fewer than half of organizations formalize their business process management to streamline and administer these tasks. 

The unspoken truth behind that fact? Automating processes is a competitive advantage for companies that commit to it. It creates happier workers, lowers costs, and even allows smaller companies to compete with the leaders in their industry.

One of the easiest and most beneficial processes to formalize? Your approvals process. 

Today we’ll share the essential information and steps in creating better approval processes: 

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Top elements of any approval process

In general, every approval process — whether for a petty cash purchase or an annual budget — requires some common approval elements.

Documentation: Documentation of your purchase or request provides a detailed history of the approval process, from initiation to completion. It also serves as evidence of due diligence and a record of compliance with internal policies and external regulations.

Documents may include purchase orders, invoices, contracts, payment authorizations, records of communication between stakeholders, and more. By properly documenting each step in the approval process, organizations gain greater control over their accounting processes and maintain the accuracy of their data.

Approvers: Approvers are essential to the approval process because they provide a necessary review and validation of every aspect of the purchase or budget request. Common approvers include the person’s direct manager, department head, finance personnel, legal personnel, and security personnel. For high-ticket or sensitive purchases, it may be necessary to involve executives from the C-suite who provide additional oversight and review.

Involving multiple approvers ensures that all aspects of a purchase have been properly vetted before being approved. Multi-step approval also reduces wasted spending and instances of fraud, as each request receives scrutiny from multiple layers of the organization. 

Permissions policy: The criteria for an effective approval process must also include a permissions policy that outlines roles and responsibilities. This ensures that only authorized personnel can approve invoices and helps reduce the risk of fraud or misuse. The permissions policy should determine who has access to the accounts payable system, as well as define the type of information each user can access and edit.

A permissions policy also allows for proper authentication when approving requests, ensuring that all requests have been adequately reviewed before payment. By having clear permission levels in place, companies protect their financial data while still maintaining an efficient approval process. 

Performance dates: Having due dates in an approval process keeps everyone on track and prevents delays in completion. Deadlines also help maintain efficient workflows, as each step of the approval process is anchored to a timeline. This ensures approval requests are processed promptly and reduces the risk of bottlenecks that slow down the entire process.

Performance dates are especially important when approvals are tied to larger project management milestones, RFP (request for proposal) deadlines, or other impactful circumstances. Setting deadlines helps prioritize internal tasks and imposes accountability for meeting them to further encourage efficiency.

Approval reporting: Approval reporting means tracking and recording all approvals during an approval process. Approvers provide visible feedback and insight into why certain decisions were made. This provides valuable transparency that stakeholders need for quality control purposes and, if necessary, to ensure compliance with regulations. Approval reporting during the process helps the original requestor keep track of their request and sets expectations about completion times. 

Additionally, approval reports reveal trends in decision-making processes over time, giving organizations a better idea of how to streamline their approval processes in the future.

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Basic steps necessary for any approval process

Every approval process follows the same basic order: request, review, and approve. Depending on the type of approval process, the specifics of the workflow may vary. For instance, a purchase approval may need to go through multiple steps or approvals before completion, while a small-dollar invoice approval could be a single-step process. 

In some organizations, approvals are broken down further, with different approvers at each spend or request level signing off on the request before it moves to the next level. 

Some organizations set up automated workflows for approvals to include additional checks and balances, such as budget limits or time-based constraints. Regardless of the type of approval process, careful planning and clear communication are necessary to ensure that all stakeholders fully understand how their requests will be handled. 

What is approval automation?

Approval automation is a digital process that streamlines the workflow associated with invoices and other requests. By automating the steps of the approval process, businesses reduce paperwork, simplify communication, and keep track of progress in real time. Automation also reduces potential errors by ensuring all necessary steps are followed in order, thus ensuring an invoice is accurate before it's approved for payment. This automated system allows businesses to complete their invoice processes more quickly and efficiently, freeing up time for more important tasks.

Types of approval processes

Although approval often brings spending to mind, it’s not the only place where process and automation benefit an organization. Many processes within a company may be systematized and automated for better results.

Creative: For marketing managers and creative teams, the multi-step content approval process can be complex, requiring careful planning to ensure all stakeholders are on board with the proposed strategy and budget. Such steps are especially important for creative campaigns because they usually involve larger amounts of money and have a lasting impact on customer perception.

A typical workflow for this type of approval process involves creating a detailed proposal outlining the objectives, potential risks, timeline, budget, and other relevant information. This is reviewed by the appropriate stakeholders, who decide if it should move forward. Marketing managers and strategists then lay out briefs and milestones for creative teams (content writers, video teams, graphic designers, and others) to execute the work. 

Employee leave: Employee leave requests impact more than just the employee — they touch every aspect of the business, from production to finance. An approval process for employee leaves ensures that time off is properly documented. This helps to reduce disruption to workflow and helps managers establish contingency plans. A clear leave approval process also helps Finance plan budgets and compensation expenses. 

Purchases: Purchase approval processes are important to ensure that every expenditure falls within the budget and is necessary for the organization. They start with a request (usually generated by an end user) and proceed through a series of spending and interdepartmental approvals. The purchase approval process is vital to ensuring spending stays within budget and within policy. Purchasing approvals help curb maverick spend and keep the indirect spend category (usually the most expensive for a business) under control. 

Budgets: Annual budgeting is a company-wide planning and approval effort, requiring clear communication and expectations for all stakeholders. This process allocates budget pools and establishes budget limits and other constraints. The overall budget approval process is the first step in the purchasing approval process, as it sets up the parameters for spending and the policies under which funds may be expended. 

Invoicing: Invoice approval ensures the company’s spending is tracked and all invoices are properly authorized. This usually involves comparing the invoice to the original purchase request or purchase order (PO). Invoice approval helps to prevent fraudulent purchases or unapproved changes to previously approved requests. Finalized approvals for invoices typically trigger the back-end payment and AP processes.

What is an invoice approval process?

An invoice approval process is a set of steps to authorize an invoice for payment. This process can involve multiple stakeholders, such as department heads, accounts payable leaders, the procurement team, and the CFO. They all work together to ensure that invoices are accurate and valid before they are paid. 

The invoice approval process typically kicks off when the invoice arrives by mail or email, but the groundwork for successful approval starts as soon as a need is identified. Building an end-to-end process for invoice approval that captures data at initiation is vital to a streamlined and time-efficient accounting and procurement process.

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How to create an approval process

Planning out the details of your approval steps before implementing it is important. Planning ensures all stakeholders have a clear understanding of how the process works and what their responsibilities are. Consider integrating automation technologies to facilitate workflow management, save time, reduce workforce costs, and eliminate errors.

Use the following steps for building your first or next approval process:

Develop a written approval policy

If you don’t document a policy, you can’t enforce it. The most successful companies carefully document all policies, including their approval processes. For purchase approvals, policies detail who can approve orders, what information needs to be provided, and what happens if there is a discrepancy between the order and receipt. This ensures that all invoices are verified quickly, without errors or delays.

Consider your approval hierarchy

Dynamic approvals bring just the right amount of control to the procurement process. When outlining your approval workflow, consider the following: 

By asking these questions, it’s possible to get a clearer picture of your process and how it will serve procurement within the company. 

Establish a list of approvers

Having designated approvers ensures each request is reviewed by the right people in the right order. These defined approval actions help prevent any unnecessary delays or bottlenecks in the workflow. They also provide visibility into who has completed departmental approvals, which allows you to quickly track down stoppages when they occur. 

For every approval process, determine which approvers should be involved in decisions, such as:

The approval list and process may look different depending on the dollar value of the purchase or contract. For instance, a high-value contract may involve executive sign-off and potential security review. Small, routine purchases could be served through department-level approval to keep the process efficient and prevent higher-level approvers from becoming bogged down in every purchase. 

Build an approval workflow 

If requestors are asked to follow a policy, you need a path that leads them to success. Start by defining initial submission actions for each request. Build an intake form or use a purchasing platform that allows users to document their needs, outline possible solutions, and direct their requests through the proper channels. 

A purchasing platform helps automate these workflows by allowing users to select what they need from within a predesigned, curated list of vendors or items. It can establish and enforce spending limits, approval routing, and permissions rules to reduce time-consuming manual approval processes common in request management. 

Create a document retention system 

Your approval process should include a document retention system that allows easy retrieval and review of current and past invoices. Centralizing invoicing and the associated contracts enables many benefits, such as easier contract research, negotiation, vendor selection and onboarding, and procurement management. 

Steps in an effective purchase approval process

Invoice approvals are especially important for organizations since they impact the company's operational health and financial position. To maintain high confidence in your invoice approval process, you need proofs that verify the accuracy of the bill and goods received.

The purchase and invoicing process typically proceeds as follows: 

  1. Purchase requisition: A purchase requisition is more than an order form, and it’s not the same as a purchase order. It’s the first piece of documentation in the invoice verification process.  A complete purchase order should include:

This information will be used to draft the rest of the documentation, including the purchase order, vendor documentation, invoice, and payment.

  1. Approvals: After submittal, the request passes through internal approvals before it’s routed to the accounting department. This process helps ensure all appropriate checks have been completed and no fraudulent activities occur. Each purchase order follows the approval workflow and relevant reviewers assess any risks associated with the purchase before signing off.
  1. Purchase order: Accounting uses the initial request and subsequent departmental approvals as the basis for the purchase order (PO). Once complete, accounting transmits the PO to the vendor, who reviews it before signing off and confirming the purchase for fulfillment. For net terms purchases, the vendor provides an invoice outlining the repayment period. Otherwise, the total amount due is payable on receipt.  
  1. Fulfillment and receipt: The vendor then fulfills the order receipt manifest or other fulfillment documentation. Upon delivery, the receiving department confirms that the goods have been delivered to your organization and that they match the purchase requisition, PO, and invoice. This process is called three-way matching.
  1. Payment: Once fulfillment and matching are complete, the invoice heads through final approval and gets scheduled for payment through the accounting department. 

Software can automate every aspect of the invoice process, as well as create documentation for later reporting, tracking, and performance management.

Effectively manage approval workflows with Order.co

Process improvement isn’t just a nice concept — it’s a competitive advantage for growing companies. Order.co offers robust features that empower buyers with choice and managers with visibility and control combined with a dynamic automated approval process. With an intuitive interface, it allows users to find vendors and items that suit their needs without worrying about spending limits, vendor selection, or chasing after requests.

To put the power of easier buying and effortless approvals into your procurement workflows, get to know Order.co in a free demo. 

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Procurement is one of the biggest cost centers in an organization — representing as much as 30-50% of revenue — yet often, support for procurement practices falls behind the investment of other major functions. While many organizations wait until the last possible juncture to implement an automated procurement process, doing this can result in overspending, a lack of transparency in spending, and frustration for accounts payable staff trying to keep up with manual processing. 

The better course of action is to implement a procurement solution before it becomes a problem. Not only can this ease the burden on your stakeholders, but it can also:

  1. Power strategic sourcing and better supplier relationships
  2. Surface cost savings and improve profitability
  3. Stabilize your supply chain and inventory management
  4. Automate cumbersome contract management processes
  5. Help procurement teams introduce business process improvements

If you’re starting to feel the friction of inefficient manual processes, it’s time to begin the evaluation process. There are an array of solutions out there, each with distinct strengths and advantages, so we’ve curated data on some of the best procurement solutions for growing organizations to help make the selection process easier. These procurement tools are rated by trusted software marketplace G2, and each consistently rates high (above 4 stars) for form and functionality.

Further reading: Learn more about what procurement is and why procurement is important to your business.

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5 Best Procurement Software Solutions

The best procurement software options available today include: 

1. Order.co

This first of its kind Spend Efficiency Platform allows users across departments and locations to order the goods they need from a curated catalog of approved vendors. Order.co is reported as a solid mid-market tool, specifically helpful for organizations that buy for many departments or distributed locations. Order.co improves the procure-to-pay process with full order management, invoice processing, integrated payment, and data reporting functionality. 

Order.co’s G2-verified reviewers are enthusiastic about the ease of ordering through the platform. Features such as dynamic search, past order favorites, and user-based item searches make it easy to get the items you need — whether you’re placing a first-time order or replenishing your most-requested items. 

Pros 

Ease-of-use is consistently mentioned as one of the platform's standout features. Users enjoy having all their preferred vendors in one place in a curated marketplace, which makes purchasing fast and easy. The intuitive UI makes it easy for new users to begin using the product. Quality of customer service also earns consistent praise. The customer support team is reported as highly responsive to questions or support requests such as custom product additions or shipping issues.

Cons

While the UI is user-friendly and stable, some customers report a desire for more robust filtering functionality when searching for products.

2. Planergy

Planergy is a SaaS-based procurement and spend management system that gives businesses more control over their financial operations. The Planergy platform, regarded by users as one of the best options for small business users, helps organizations administer their procure-to-pay cycle and manage inventory effectively. 

Reviewers find Planergy most useful for its extensive integration options. The platform offers easy solutions for linking between many top accounting and ERP platforms including Quickbooks, Oracle, SAP, and Microsoft Dynamics. In addition, it scores high with users for its supplier information and supplier management functionality. 

Pros

Planergy consistently garners ratings of 9 or above (of 10) in all general categories from G2's verified users. The platform is reported as being easy to set up and use. Multiple reviewers noted the responsiveness of the customer support staff who helps users with setup and issues. 

Cons

Several reviewers found issues with the flexibility of the platform’s search features. Rigid search parameter rules mean that small issues such as typos or syntactical changes may result in cases of zero returned search hits. Other users reported other minor glitches in the search function, particularly the inability to retain search parameters when paging back from a completed search result. 

3. Procurify

Procurify is a purchasing platform that streamlines your purchasing process and workflows. It helps organizations speed up the approval process and remove budgetary bottlenecks. With its simple procurement system, Procurify lets buyers submit purchase requests through a dynamic interface. The system keeps user spending on track through real-time, customizable budgets.

Procurify offers distinctive features such as a virtual and physical spending card system. Using this system, organizations can issue cards to every employee, apply balances to those cards for corporate spending, and maintain full visibility into spend practices by user. The card also allows organizations to realize between 1% to 3% cashback for purchases made on any physical or virtual card. 

Pros 

Procurify users point to ease of use, flexible and speedy approval workflows, and ease of doing business as the major selling points for this platform. This platform is ideal for mid-market organizations whose procurement software needs are beginning to outpace less robust vendor management solutions. 

Cons

Users report that some of the platform’s accounting and budgeting features could use improvement. In addition, catalog functionality is limited to simple ordering. Analytics and important data such as order duplication or trend/usage reporting are not available via the catalog. 

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4. Precoro

Precoro is an e-procurement software tool that aims to simplify users’ procurement processes and user experience. Where other systems lean heavily into integrations that communicate to a wider array of tools, Precoro delivers on a promise of easy onboarding with short implementation times and out-of-the-box functionality for users that want to get up and running quickly. It also offers more robust features and plenty of integrations to meet the needs of advanced users.

Pros

Users enjoy the Precoro platform for its accessibility and financial insights, giving it high ratings on its visibility, spend management, and purchasing automation functionality. The company focuses on delivering complete freedom from paper-based and manual processes in order to save time and money. This flexibility makes Precoro a solid mid-market solution that serves a variety of business needs. Many reviewers commented on the useful spend analysis capabilities of the system. 

Cons

Some reviewers pointed out limitations regarding flexibility improvements for building purchase orders. While Precoro offers integrations, some users experienced issues with implementing these successfully. 

5. Coupa Procurement

The Coupa Procurement module is one component of the Coupa Business Spend Management (BSM) suite of tools and services. This large procurement tool, serving enterprise customers in the healthcare, retail, and education space, offers a host of use cases including procurement of goods, services, and administration of contingent worker spending. 

The platform offers guided buying as a feature, and some of its top features as reported by users are purchasing functionality, spend visibility, and procurement sourcing. It is useful for organizations seeking an enterprise-class, all-in-one solution with a modular approach.

Pros

The Coupa Procurement platform receives high marks for fast processing time and easy generation of POs and purchase requisitions.

Cons

Some users describe the UI as needing a steep learning curve. Some users reported reliability issues, and others pointed to stiff reporting functionality that requires workarounds to increase visibility. 

—

If you’re ready to take the next step with an automated procurement platform, begin your evaluation process with a live demo of the Order.co platform today. 

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The procurement function plays a critical role in every company’s financial health and performance, even in early stage businesses. The nature of purchasing and procurement is such that organizations swiftly find themselves overwhelmed by valuable data with no meaningful way to analyze or benefit from it. This volume of information can lead to wasteful spending and lost opportunities.

Fortunately, good procurement management practices can help even small organizations organize their invoicing and keep track of spending. Codifying and streamlining processes makes it easier for stakeholders to raise their hands when needs arise. It further helps your organization quickly approve the request and arrange for payment of goods. 

When companies build successful procurement initiatives, they realize cost savings that could otherwise remain hidden in a sea of line items and renewal contracts.

To achieve these outcomes, it’s important to understand the basics of procurement and how to manage it effectively. As your company grows, you’ll have a process that translates into more automation and software to help you scale.

In this article, we cover the important features and benefits of good procurement management, as well as ways to advance your procurement practice using technology. 

By the end of this post, you’ll know:

  1. What procurement management is
  2. The role of procurement management in saving money and time
  3. Why and when to automate your procurement management process

Let’s start by understanding exactly what procurement management is and how it fits into your organization.

Download the free ebook: The Complete Guide to Procurement Management KPIs

What is procurement management?

Procurement management is the process by which an organization conducts, approves, tracks, and optimizes its spending on supplies and services. The main mission of a procurement team is to reduce the bottom-line costs of purchasing and streamline the process of getting the goods and services a company needs to produce products. 

A strong procurement management plan comprises many functions, including:

Procurement management is a component of the larger supply chain management (SCM) function, dealing with internal materials sourcing and management. While many organizations treat procurement and supply chain management as separate functions within the organization, their operations and objectives are closely related. 

Procurement serves as a support system for supply chain operations. It’s the sourcing partner that enables the supply chain to find and acquire products that meet or exceed quality standards. 

The importance of procurement management

If you’re running a household, getting a handle on spending is the number one way to improve your long-term personal finances. If you’re a growing business with a vision for long-term success, getting a handle on your procurement practices has the same effect. 

Solid procurement management strategies are the first line of defense for reducing costs and stabilizing cash flow. They form the basis of your budgeting and forecasting functions and ensure that your revenue is used as efficiently as possible. The money you save with insightful procurement can then be invested in business growth, ensuring stability for the long term. 

To establish a functional procurement management system, you must be able to: 

By establishing this process, you realize many benefits and surprising cost savings in the short term.

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The Complete Guide to Procurement Management KPIs

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Key benefits of a strong procurement management process

Creating a well-documented, structured procurement management process offers many ways to increase efficiency and reduce costs, such as:

5 Ways to improve procurement management

Procurement management requires dedicated resources, processes, and metrics management to create accuracy and scalability. The below activities and upgrades ensure your procurement practice continues to grow in step with your organization. 

Document: Formalizing the procurement management process with a documented policy helps teams identify and address gaps in the current approach. It sets standards for procurement activities like spending, purchasing policies, and performance measurement. It also ensures stakeholders are well-informed about the process and have access to the information and tools needed to perform their role within policy. Lastly, it creates an audit trail for regulatory compliance and eliminates the conditions that lead to maverick spend.

Centralize: Bringing procurement activities into a procurement platform helps streamline operations and improve visibility over the entire process. Centralization offers a comprehensive overview of the entire process, from request to delivery, enabling real-time tracking and reporting. Enhanced visibility helps identify improvement opportunities and address potential issues promptly. A centralized platform also minimizes the work associated with purchase orders, invoicing, and payment tracking, reducing errors resulting from manual data entry.

Integrate: Procurement doesn’t operate in a vacuum. Integrating procurement data with other data systems in your finance organization ensures that all relevant information is available across systems. This provides centralized purchasing management, empowering quick and informed decision-making. Integrated data systems offer a comprehensive view of financial operations while cutting down on redundant processes and potential entry errors.

Automate: Automating common or repetitive procurement processes is a vital means to streamline operations and reduce time spent on manual data entry. In fact, nearly three-quarters of companies are actively working toward enhancing and developing their data, insight, and analytics capabilities. Automation simplifies tasks like purchase order creation, order approval, three-way matching, and reconciliation, freeing up valuable resources for more important tasks. Automation also simplifies metric tracking by collecting data from multiple finance and procurement data sources, making it easier to spot trends and identify improvement opportunities quickly. 

Measure: Measuring performance is essential to continued procurement improvements. Vendor scoring tracks supplier performance by rating vendors based on criteria like quality, delivery time, and price. Procurement performance metrics such as spend analysis, invoice processing accuracy, and turnaround time help identify trends in cost management. Monitoring these key performance indicators allows for more accurate forecasting, better cost control, and greater resource optimization.

3 Best practices for better procurement management

Refining the methods used to manage procurement within your organization doesn’t have to be complex. Three techniques help companies of all sizes improve their purchasing and tracking practices for better overall results.

1. Use spend analysis to optimize cost

Spend analysis is a process that identifies procurement savings opportunities. Finance analysts review data from invoices, contracts, receipts, purchase orders, and other sources and use those insights to optimize spend allocation and negotiations. This helps track supplier performance, uncover savings opportunities, and optimize spending. It provides a clear overview of resource utilization and informs strategic sourcing decisions, reducing costs and improving operational efficiency.

2. Digitize and automate wherever possible

Digitizing and automating procurement processes can save valuable time, reduce administrative costs, and boost efficiency. Automating workflows with digital invoices helps organizations keep track of all their purchases in one place and easily review purchase history. It also prevents manual errors and enables faster approvals, making it easier for organizations to meet compliance requirements. 

Automated workflows, alongside digital ordering and invoicing, allow companies to take advantage of automated order processing and payment methods, resulting in fewer supplier delays. This ultimately helps companies maintain better control over their resources and budgets by having more accurate forecasts about future spending needs.

3. Build a vendor lifecycle management program

A vendor lifecycle management program can help organizations monitor their suppliers’ performance by collecting and analyzing data on past purchases, such as delivery times and order costs. This information can then be used to identify vendors delivering good value and quality service and award them more business. Conversely, vendors that are underperforming can be identified and replaced if necessary.

The process of onboarding new vendors is also much easier when using lifecycle management. It centralizes all relevant details associated with each supplier, enabling faster processing of orders once the vendor is approved. Similarly, offboarding old vendors is simplified with automated processes for removing access privileges and archiving related records.

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Why should you automate procurement management?

Procuring goods and services is one of the most impactful financial activities in your organization, with procurement costs representing up to 50 percent of a company’s revenue, depending on the industry. 

With so much money at stake, understanding your procurement spending is essential for reducing bottom-line costs and improving budget efficiency. But conducting these practices across dozens or hundreds of vendors — potentially generating thousands of monthly invoices — is a tall order. 

Procurement automation helps companies achieve all these objectives without cumbersome manual processes. With automation, companies enjoy many money-saving advantages.

What to look for in a procurement management software solution

If your organization is considering improving its business operations with automated procurement software, a thorough evaluation process will be necessary. Your current procurement management system, monthly invoice volume, tech stack, and typical procurement activities all factor into which potential suppliers could work for you. 

Any platform you choose should offer features like:

The above features will help your organization maximize the flexibility to create and administer purchasing workflows, improve purchasing efficiency, and share financial information organization-wide. Best-in-class options like Order.co offer even more ways to streamline and automate your procurement function.

The added advantages of managing procurement with Order.co

The Order.co procure-to-pay platform goes beyond invoice processing and vendor management functions. It allows clients to streamline their entire purchasing process into a curated experience. Once purchases are complete, our consolidation tools allow you to process fewer invoices per supplier or even reduce supplier payment to a single event every month. 

Order.co drastically increases the efficiency of procurement practice by accomplishing three simple steps:

  1. Creating a unified marketplace: Purchasing inefficiencies can creep in from the moment a purchase request is made. By creating a single, curated catalog of products, Order.co empowers your stakeholders to service their needs through a pre-approved list of products and suppliers. Instead of spending time looking for pricing and interacting with unknown providers, your employees will have a simple method to research, select, and complete their supply and materials orders. 
  2. Streamlining the procurement process: Order.co helps users manage the procurement process from start to finish, from choosing the best products and creating a purchase requisition to approving, fulfilling, and paying for purchases. The platform gives stakeholders total visibility into the process and ensures a speedy, accurate process.
  3. Consolidating ordering and invoicing: A large organization with multiple locations generates potentially dozens of purchase orders per day. This creates headaches for procurement and AP teams processing and coding a constant flow of similar invoices. With Order.co, you remove the redundancy from your procurement and accounting process. The platform also allows you to consolidate all invoices from across your supplier network into one invoice for faster processing.
  4. Integrating invoice payments: Order.co offers even greater flexibility in processing your purchase orders and payments. The system allows users to directly pay vendors with whom you have advantageous terms or use Order.co as your vendor of record and pay for all purchases across every supplier through a single invoice. With any payment option you choose, Order.co’s automated process creates perfect coding and line-level visibility for granular reporting capabilities.

These advanced product features help clients of every size — from small businesses to major brands such as WeWork — effectively manage their procurement processes and get spending under control while greatly improving efficiency. 

If the right procurement management platform could make a difference in your budget optimization and operational efficiency, we invite you to request a demo of Order.co. 

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Controlling expenses is a crucial part of improving cash efficiency. But you can only control the expenses you know about.

Without strong budgetary control and visibility, spending happens in the background— unchecked.

Today we’ll look at the causes and impacts of maverick spend. You’ll learn:

With the help of this article, your organization will be prepared to take better control of finances and promote a culture where saving and on-contract spending are the default. 

What is maverick spend?

Maverick spend is spending outside your preferred supplier list and company spend policy.

If your company is like most, your percentage of maverick spend is high. To understand how much rogue spending may cost your company, we extrapolated costs based on the type and size of the hundreds of businesses we work with at Order.co. We forecasted how much the average business loses on maverick spend per year and uncovered methods to cut this amount. 

How much does maverick spend cost your business?

According to our proprietary data, mid-sized companies (100-999 employees) spend $402,500 per year on suppliers. If 80% is maverick spend, an average mid-sized company consumes $322,000 annually on untracked spending. 

That’s a sizeable cash leak in the purchasing process. Over three years, nearly a million dollars have been lost or misused.

When it comes to the real-world consequences of maverick spend, organizations report that the most significant effect is the loss of savings they would have received from well-negotiated contracts. Some organizations report up to a 16% loss of negotiated savings.

[Source]

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
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5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)

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On top of the outright costs, maverick spending risks breaching contracts with suppliers since employees are purchasing through other vendors. This can weaken supplier relationships, complicate contract management, and slow order fulfillment.

Finance also can’t properly close the books if they can’t match spend to purchase, creating another procedural bottleneck. What’s more, when your procurement team spends hours reviewing transactions and suppliers, they lose time in which they could focus on more strategic activities.

Calculate your maverick spend costs with spend analysis

If you don’t already have a spend management platform, conduct a spend analysis to identify where maverick spend occurs and how it impacts your bottom line.

For example, say you spend $1 million on “professional services” each year, and $100K of this amount was maverick spend. Based on the statistic above, you lost 16% of negotiated savings, or $16,000, due to spending with non-preferred vendors.

Spend categoryCost per yearMaverick spendTotal savings lost
Professional services$1,000,000$100,000$16,000

Take this same approach with all spend categories to calculate the total savings lost by maverick spend, including over a two- to three-year period.

Hint: An easier way to calculate maverick spend is to use a spend management platform. This method collects your spend data in one location to check for different categories and vendors easily.

5 Tips to eliminate maverick spend

The two most common causes of maverick spend are poor company spending culture and inefficient technology. The best way to eliminate maverick spend is to address those two causes to improve operational efficiency. 

Remove improper spending through education and the right processes and tools:

 1. Create a documented spending policy

Staff are content to follow company policy regarding spending, provided they know what the policy requires. Management must give buyers a clear path to compliance. The procurement department can ensure this by codifying corporate procurement policy. 

With a well-defined and adequately documented process, everyone has the tools they need for following purchasing procedures.

2. Educate teams about the problem of maverick spend

Controlling maverick spend should be a company-wide effort. Educate management about maverick spend and the costs of non-compliance listed above and ensure they educate their departments in turn.

Communicate both the negative consequences of maverick spend and the positive outcomes of eliminating it. Provide the “why” behind the company purchasing policy. Create procurement onboarding training for new hires. Explain how the procure-to-pay (P2P process) works.

Another beneficial practice is holding annual procurement process training for employees who regularly interact with suppliers and vendors. 

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
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3. Ensure purchases go through one purchasing system

Seventy-five percent of organizations report a lack of self-service or guided buying tools as one of the leading causes of maverick spend. Centralize your purchasing with a single, intuitive purchasing system that discourages employees from spending outside formal contracts.

A centralized purchasing system like Order.co is user-friendly and consolidates spending. It funnels employees into using one purchasing catalog and one cart. Team members simply log in to their respective department account, go through the purchasing process (guided by the tool), and make all purchase requests and orders in one location.

Not only can you set budgets and enforce approvals within this system, but you also have 100% spend visibility within the platform. This means you can view spending by user to ensure employees aren’t spending outside of contracts. Then, automatically consolidate spending into one invoice at the end of the month. 

4. Change company culture around compliance

According to a study by The Hackett Group, 69% of organizations report employee “non-compliant mentality” as another top cause of maverick spend. At its core, this problem is a company culture issue.

Employees might not intentionally skirt compliance—for example, they are sometimes convinced they’ve found a better supplier. But it still means company dollars are spent outside the formal purchasing policy. 

Unfortunately, this non-compliant purchasing behavior is not always apparent. Due to siloed purchasing practices and departmental spending, many CFOs don't have the spend visibility they need. 

By changing the culture around spending and creating automation and budget limits before employees make a purchase, you encourage employee compliance and back up policies with better visibility. 

5. Identify vendors that meet needs and save money

Sixty-three percent of organizations said that decreased realization of sourcing savings (i.e. missed savings from negotiated contracts) is one of the most significant consequences of maverick spend. But employees often purchase outside of negotiated contracts because they believe they found a better option or prefer a different vendor.

Therein lies the rub: You want to make purchases that meet employee needs and provide the best cost savings. A spend management tool analyzes the products you need by vendor and finds the best deals every time.

A procurement software tool like Order.co analyzes different vendors, partly based on your past purchasing history. It identifies vendors that will give your company the highest cost savings, even for product substitutions.

Curbing maverick spend with Order.co

Maverick spend is like any other non-conforming process. It results in decreased savings and increased risks. Organizations prioritizing reducing maverick spend achieve 91% employee compliance (on-contract spending).

With Order.co, organizations gain control and visibility in their procurement function by:

Request a demo of Order.co and see, in real-time, how our platform eliminates maverick spend. For more information on improving operational efficiency, download our free handbook.

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