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:
- What procurement management is
- The role of procurement management in saving money and time
- 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:
- Resource planning
- Supplier sourcing and evaluation
- Purchase requisition approval
- Purchase order processing
- Order reconciliation
- Vendor payment processing
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:
- Give stakeholders a standardized process for making requests
- Establish an approval process and guidelines to evaluate price, terms, and risk
- Build an efficient process for tracking, reconciling, and paying for goods
- Harvest data from the previous steps for use in future planning
By establishing this process, you realize many benefits and surprising cost savings in the short term.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
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:
- Strategic sourcing: Committing to vendor management in your procurement process helps you to identify the best potential suppliers by price and terms and consolidate them into a preferred vendor list. Sticking with a small list of pre-vetted, trusted partners reduces research time and allows you to fully leverage your existing partnerships and pricing.
- Streamlined purchasing: A slow purchasing process reduces your ability to quickly source and receive vital goods. Formalizing your purchase requisition and approval workflow improves purchasing timelines and reduces your overall project procurement by days or even weeks.
- Reduced waste spending: Maverick spending accounts for thousands in waste spending across your organization. Closely tracking your procurement process eliminates the process gaps that allow maverick spending to thrive. By having a standardized process for getting requisitions approved and processed, every stakeholder can get their needs met without relegating tail spend to a corporate card or an expense report.
- Risk management: Though lesser-discussed in terms of cost-savings measures, successfully mitigating risk in your supplier relationships helps you avoid unforeseen costs and unplanned spend. Standardizing your procurement process, approvals, and contract reviews can help you avoid out-of-stock issues with suppliers, stabilize on-hand inventory, and improve contingency planning for shipping delays.
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.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
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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.
- Intelligent procurement management allows procurement professionals and supply chain team members to spend less time on low-value and repetitive tasks. It creates more opportunities for data-driven decision-making, high-value project management, and capacity planning. This increased time for high-impact activities results in better ROI and spend efficiency.
- Automation helps your finance and AP teams keep up with growth. Manual invoice processes are costly and prone to discrepancies and inefficiencies. Even with low exception rates, AP clerks are limited in how much processing they can perform. By replacing your manual processes with a touchless, automated system, you can batch, process, code, and issue thousands of payments simultaneously. This significantly reduces costs and helps your purchasing department realize early payment discounts.
- The benefits of automation go beyond reduced spend to help you form better supplier relationships and realize benefits over the long term. Automation streamlines the management of procurement contracts, enables vendor lifecycle analysis, and improves accountability for the quality of goods and services purchased. By managing your contracts effectively and automating your process for faster payments, you and your suppliers all win.
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:
- Full integration options: An automated procurement platform should operate as a component within your larger financial or accounting infrastructure. The procurement platform should also share data across systems to reduce issues and redundancy. Look for solutions that offer full integration capabilities with your other platforms and planning apps.
- Robust analytics tools: The wealth of data generated in your procurement process is there to be harnessed for data-driven decision-making and cost-savings analysis. Advanced reporting tools allow you to surface real-time data across your organization by location, category, product type, and GL code. Look for a solution with a full complement of reporting, analysis, and visualization tools.
- Budget controls: Automated purchasing controls make the purchase requisition process easier for your stakeholders, empowering them to serve their own needs while keeping organizational goals in mind. Dynamic budgeting controls provide protections from overspending for purchasing decisions. These can be administered by dollar value, role, location, or other key parameters. Be sure the solution you choose has a sufficient budget and approval workflows to encourage self-service without sacrificing cost control.
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:
- 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.
- 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.
- 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.
- 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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While COVID-19 offered a sobering reminder of the limits of our public healthcare systems, it also shed light on the previously “invisible” supply chain system we all rely on. Within weeks of the pandemic, shortages and delays revealed the impact and relative delicacy of the massive network enabling our daily life and work.
Despite our collective crash course on supply chain management, there remains much confusion about where the procurement function ends and supply chain management begins. But understanding the difference is the first step in improving your company’s operating efficiency, so the distinctions are important.
With that important goal in mind, today we’re taking the time to disentangle the roles of purchasing, procurement, and supply chain management within organizations.
By the end of this article you’ll know:
- The major functions of the Procurement and Supply Chain Management departments within an organization.
- How procurement and supply chain management differ, and where they overlap.
- How supply chain management and procurement can work together to produce better outcomes.
What is procurement?
In simple terms, the procurement process focuses on evaluating new suppliers and working with existing ones to supply raw materials, goods, and services for your business. The procurement function is largely one of relationship management. Great procurement teams foster strong partnerships with both their internal clients and their external suppliers in order to meet operational objectives.
Procurement serves as a necessary bridge between the finance team and departmental stakeholders in larger organizations, making it easier for departments to get what they need to produce goods while providing accountability and data for financial approval.
Procurement is sometimes confused with purchasing. While the two terms are used interchangeably within many organizations, there is a distinction. Where purchasing describes the act of getting and paying for materials, procurement covers a much wider range of activities, such as:
- Needs identification: Understanding company needs and initiatives, developing forecasts, and planning for resource procurement to meet deadlines.
- Supplier management: Handling the supplier lifecycle from evaluation and onboarding to renewal or termination.
- Negotiation: Using benchmarking and leveraging relationships to secure the best terms and pricing.
- Contract management: Ensuring suppliers meet contract terms and deliver goods on expected timelines.
- Receipt of goods: Receiving and reconciling invoices against the purchase requisition, purchase order, and invoices to ensure accuracy and correct delivery of goods.
- Payment: Approving, coding, and processing supplier payments in a timely manner.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
What is Supply Chain Management (SCM)?
A supply chain is the network of suppliers, service providers, logistical partners, and other organizations who work together to supply companies with raw materials, manufacture those materials into products, and deliver them to the end-user. Where procurement is the bridge between upstream suppliers and the organization, supply chain management is the bridge between the downstream network, and the promotional and logistics partners connecting the company and its customers.
It’s important to note that supply chain management is more than just shipping goods. While delivery is certainly part of supply chain management, it represents only a small portion of the overall function. Managing the manufacturing and the flow of goods to your buyers encompasses a much more complex set of processes.
Supply chain management teams are responsible for:
- Inventory management: Managing and tracking the intake of both raw materials and finished goods. Maintaining inventory levels of necessary components to meet production timelines.
- Manufacturing: The process and timeline of turning raw materials into products, and the methods of improving efficiency in their production.
- Supply chain risk management: Evaluating the stability of the supply chain network, and the ability of your suppliers to help you get goods to market on time and at expected cost.
- Quality control: improving the overall condition of products and reducing manufacturing issues and product defects.
- Delivery and return management: Getting finished products from the manufacturing site or wholesale warehouses to distribution points (retailers, etc.) through logistics providers. Handling returns of defective or unwanted products.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
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How do procurement and supply chain management differ?
Procurement and supply chain share the core objective of driving organizational success, though they achieve these in different ways. Procurement is a subset of the overall supply chain process.
Some key differences between the two are:
- Procurement is “what goes in” in terms of production. This means that procurement professionals’ main goal is to acquire materials and services for use. Supply chain management is “what comes out” of those materials. Supply chain professionals are concerned with taking those procured raw goods and services and transforming them into products.
- Procurement is a support system for production. Supply chain management serves as the agent of production and distribution of goods.
- Procurement’s objectives center on capital efficiency (finding ways to save money and improve value), whereas supply change focuses on operational efficiency (finding ways to reduce friction and distribution costs).
What does procurement and supply chain management have in common?
Procurement and supply chain management have several objectives and critical activities in common. For example, both departments:
Identify cost-saving opportunities
Procurement’s main concern is with spend optimization and identifying ways to save money and improve the company’s bottom-line performance. On the supply chain side, the focus is on increasing the quality and value of goods to improve the topline.
Procurement and supply chain both save money by maximizing spend efficiency on new projects, analyzing current projects and contracts to realize cost reduction, negotiating prices and terms to maintain the efficiency of current suppliers and vendors at renewal time. This may be achieved by practicing an effective supply chain strategy or employing procurement software for process automation.
Improve operational efficiency
On the procurement side, efficient administration of the purchasing process shortens the time to performance for purchases and reduces the research hours necessary to execute deals.
On the supply chain side, building efficient production and distribution channels allows you to get goods to market faster, with more cost-effectiveness. Improving these processes on either side saves hundreds of hours in employee wages and increases the productivity of your manufacturing function.
Build Strong Supplier relationships
Strong supplier relationships play a critical role in both procurement and supply chain. By improving your strategic sourcing practice with suppliers and distributors, you can leverage better pricing, reduce the time spent evaluating suppliers, and streamline functions like goods requisitions, order processing, and invoice payment.
Ways supply chain and procurement can work together better
Though procurement and supply chain operate independently, their coordination is essential to progress. They are, in essence, the two legs responsible for your organization’s forward motion.
Three ways procurement and supply chain can improve overall performance include:
- Improved cross-departmental planning: Planning and resource allocation for the manufacturing and distribution functions should be a team lift. Improving interdepartmental alignment can produce more accurate forecasts, offer a holistic view of contracts terms and their potential impacts, reduce capacity and warehousing friction, and improve the time from raw materials acquisition to delivery of goods.
- Increased data transparency: De-siloing data can greatly improve the ability of both departments to reduce lead times, identify trends, and realize opportunities for cost savings and efficiency. Integrated software can bring the supply chain management process into full view, allowing procurement to better support supply chain functions and improve performance times from beginning to end in the production cycle.
- Supplier streamlining: Though procurement many have a well-honed preferred vendor list, extending that concept to embrace an interdepartmental approach can more fully leverage optimal pricing and terms. Doing so can further reduce the time and cost of order and payment processing.
If you’re looking to bring procurement and supply chain into better alignment for your organization, schedule a demo to see how Order.co can help coordinate their efforts.
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In order to launch successful procurement initiatives, stabilize cash flow, and create savings, procurement organizations need to understand every facet of the P2P cycle from sourcing to settlement. Top procurement leaders use procurement analysis as part of a comprehensive strategy. It helps answer questions in a streamlined and automated way, which leads to better management of projects and an ample amount of cost savings.
In this article, we’ll offer a comprehensive look at procurement analytics: What it is and how it can improve your cost savings and time efficiency. We’ll also cover best practices you can incorporate into your procurement practice to see positive impacts right away.
Download the free ebook: The Procurement Strategy Playbook
What is procurement analysis?
Procurement analysis enables you to see what you're spending and where throughout your procurement department or business. It enables you to better control your costs and predict what to expect in the near future. It examines the data created in your procure-to-pay process and helps you extract and refine it to understand your spending.
Well-visualized procurement data can show you:
- What the company is spending for goods
- How those compare to market benchmark numbers
- Where to get the best deal on future purchases
- How to manage cash flow and improve your numbers over time
Procurement analysis brings a quantitative approach to procurement that draws on past performance and data analysis and integrates current market data to inform your future decision-making. The analysis is a bit more technical than a crystal ball, but when done correctly, it works like magic.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
How spend analytics improves business outcomes
Procurement analysis isn’t just nice-to-have or a practice reserved for large corporations, because spending on outside vendors often accounts for 40-80% of a company’s total cost. That’s a significant expense, and one that must be closely monitored to avoid waste spending.
Building a robust procurement analytics process can significantly reduce waste and improve your near-term and long-term business decisions, no matter your size or stage.
- Improve your spend management
- Increase profitability
- Establish performance metrics
- Evaluate supplier performance
- Identify cash leaks and savings opportunities in real-time
7 best practices for saving on purchasing costs
If your company is experiencing the frustration of budget overruns and untrackable purchasing practices, it’s possible to increase your spend optimization and improve your bottom line quickly.
The 7 best practices used by procurement teams regardless of size and stage are:
1. Formalize your procurement spend process
The first step to saving money is to establish a standard P2P workflow. Formalizing the procurement function helps your stakeholders understand precisely how to get from requisition to payment. This also helps you set spending rules, create accountability in every step of the process, and forms the foundation of effective contract management.
For example, establishing a process was one of the first steps to savings for NY Kids Club. Using Order.co, they moved away from a cumbersome, email-based purchase order process and got a handle on spending across the company’s 19 locations. Automating the process helped them eliminate wasteful spending that sapped their cash flow.
2. Increase your procurement data visibility
To realize savings in your procurement spend, you need a granular understanding of where your money is going. Using a modernized, automated procurement analytics platform gives you complete visibility into your spending beyond simple “revenue minus expenses” accounting when you close the books. Complete data transparency allows you to analyze various data sets in every meaningful way: category, department, product type, supply base, tax nexus, geography, and more.
Once your spend data is extracted and refined, a P2P platform can gather it into helpful dashboards to better help you visualize how the data is working This allows you to surface actionable insights and improve your procurement strategy more easily.
3. Build strategic supplier relationships for sourcing goods
Vendor partnerships are beneficial for everyone, and they can help you realize significant cost reductions. By establishing relationships with preferred suppliers for high-volume and recurring purchases, you open the door to volume discounts and more flexibility in your purchasing.
Relying on strategic vendor partnerships also saves time by eliminating redundant work, reducing due diligence, and eliminating much of the negotiation and onboarding associated with bringing on a new vendor. When you have a solid supplier management process paired with a well-curated list of preferred vendors, you can take advantage of the best deals and do so with considerably less friction.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
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4. Stabilize your inventory and sourcing practices
Inefficient sourcing and inventory management can cost you money in various ways. For example, delivery delays and inventory shortfalls can stretch out production timelines. Rush orders can invite expediting fees, quality issues, and invoicing mistakes.
By reducing these friction points, you can save many hours previously spent putting out fires, all while stabilizing your cash flow. Using a centralized P2P system like Order.co, you gain visibility into inventory levels, expected consumption, average shipping timelines, and project management estimates so you can have what you need on hand and deliver on schedule.
5. Identify cash leaks with spend analysis
Once you have a formal process in place, it becomes easier to identify spending leaks in the workflow. Using a documented, repeatable process, you can begin to eliminate some of the most common money-wasting culprits, such as:
Non-preferred vendor use - When spending happens, it often occurs using whatever supplier the purchaser believes will work best or give them the best price. The problem with this is stakeholders have no visibility into negotiated partnerships that can save the company money.
Maverick spending - Even if you establish a preferred list of vendors and budget parameters, it’s useless unless your stakeholders can access them. Without information, they will typically “buy” first and ask questions later. By centralizing your procurement process, you eliminate the occurrence of one-off purchases, corporate card-based purchasing, and unplanned spending by giving everyone access to the game plan and guardrails for their purchases.
Over-ordering or duplication - If multiple locations or departments are ordering goods in a decentralized way, chances are you’re losing leverage on negotiating volume pricing. By centralizing the order and payment process, you can use advanced analytics to better understand the total cost of ordering across locations, improve your category management, and use strategic sourcing to save money.
What are cash leaks doing to your bottom line? Our free ebook will show you how to close those gaps for good.
6. Use AP automation to eliminate mistakes and busywork
Manual administration of your Purchase to Pay (P2P) process creates room for errors such as missed/late payments, over/underpayments, information mismatching, and erroneous data entry. These types of issues can generate late fees, stop orders, slow down closing activities, or create other costly outcomes.
By integrating supplier invoicing, reconciliation, and payment into an automated system, you remove this potential and create a process that is easier to use and track. It also dramatically reduces the Finance team’s time investment in repetitive processes and frees up your AP staff to take on more meaningful projects.
7. Get Order.co: Streamline your sourcing and payment process
To implement all these money-saving practices, you need a robust platform that brings your process, payments, and data under one roof. Using Order.co for as your P2P system, you can create a purchasing workflow that eliminates cash leaks and rogue spending, connects you with the best suppliers and pricing, allows speedy approvals, and simplifies your payment process with automated reconciliation and invoice batching.
If you’re ready to realize cost savings and boost revenue with powerful workflows and advanced analytics, schedule a demo to see the Order.co P2P platform in action.
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Maximum efficiency and line-level visibility are the gold standard for finance and operations teams. Operations teams are always looking to be more efficient. Finance teams need all the visibility they can get.
But, do companies always have efficiency and visibility? Unfortunately, no.
Is it possible to have more efficiency and visibility—on both your finance and operations teams? Yes.
The sad truth is, most businesses lack an organized approach to managing finance and operations. Finance teams don’t know what is being purchased, operations teams don’t know when products are being delivered or who is ordering what products. The top reason for mismanagement of finance and operations? The missing link between the two. Both departments must join forces to be as efficient as possible and help your company grow.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
What happens when finance and operations teams aren’t aligned
Let’s paint the picture of what can go wrong when your finance and operations teams are not working together.
Your business is bound to experience frequent hiccups if your two teams don’t have a centralized way to operate. Some of the things that can impact your performance negatively are:
Siloed ordering and purchase information
70% of business leaders feel the data they use to analyze finances and make forecasts is not accurate.
The finding shouldn’t come as a surprise for many finance and operations professionals. Your purchase and ordering information will remain in silos if your operations and finance are not sharing insights. This takes a tremendous amount of time, money, and other employee resources.
No clarity on budget or spending
A budget is imperative to company growth. However, you can only stay within your budget if you are able to track all your expenses. However, that seldom happens when your departments are disjointed.
As a result, you can never be too sure where your money is going, and what you are spending. Therefore, lacking complete visibility into your spending is unacceptable, and is counterproductive to growth.
No way to plan for future growth
Planning for the future is crucial to surviving these difficult times. Resiliency is key. Many businesses are yet to come out from the impact of COVID, so any plan must be highly pragmatic.
However, you will need real-time data and insights to plan for your future growth. Unfortunately, that can come as a barrier if your finance and operations aren’t collaborating.
Most importantly, you won’t be able to access real-time data readily, which is a challenge for 21% of finance executives.
But there is still hope and you can take steps to get your two teams on the same page.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
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What happens when your finance and operations teams are aligned
Now, let’s focus on the flip side of things. Many businesses have been able to bring their finance and operations closer for a plethora of benefits.
However, it takes a bit of effort to ensure your two teams have a centralized way of operation. You should start by encouraging a change in your work culture.
The task would be to foster a more collaborative environment where employees feel motivated to work together. They should understand that the business can achieve its objectives only when the whole of it performs as a single unit. Empower your teams with the right tools to centralize your operations. For example, a B2B marketplace like Order.co can allow your finance and operations teams to stay on the same page. Some benefits of keeping your finance and operations teams aligned are:
Centralized and seamless purchasing
Order.co offers a user-friendly interface for finance and operations to…that’s right… order everything your business needs. They can use the same platform to source goods and services from multiple vendors. It also gives them a centralized way to manage suppliers and keep track of spending.
Let’s take the example of the Physical Rehabilitation Network (PRN). PRN’s product purchases were decentralized, and they relied on a very manual process for collecting and placing orders for each of their 140 locations.
Then came Order.co.
Order.co allows PRN to order everything—every purchase—from a single place. Each of their locations found it very easy to use the software and place orders directly. PRN has a centralized way to track each order and know what purchasing is going on in every location. In addition, the company was able to save time and eliminate its manual purchasing process.
Fast and efficient order approvals
Approvals are necessary for every business in order to keep their purchasing under control. Not only are they necessary, but they should be quick and hassle-free. Instead, businesses waste endless hours trying to find who approved what, and why.
Sadly, that adds to the hours that you waste every year due to manual, inefficient processes. For most businesses, that can take up to 15 unproductive weeks per year. Admin and tedious paperwork are efficiency’s worst enemy.
Your finance and operations teams need an easier way to manage approvals.
Take the example of CorePower Yoga. CorePower Yoga was struggling to manage approvals for purchases across more than 140 locations. Worst of all, they had no way to track or automate their manual purchasing processes. They had to dedicate an employee who collected orders from all locations and placed them with vendors.
Order.co now allows CorePower Yoga to empower every location to order approved products. By placing restrictions on purchasing through approval workflows, Order.co also allows CorePower Yoga to save $50K in unapproved spending every month.
Granular, line-level visibility
Businesses need granular visibility into their spending for not only efficient expense management, but for future growth projections. Without proper visibility into your company’s purchases, it is impossible to budget and plan for any growth whatsoever. With line-level visibility, companies are able to see every single purchase made in a given month and how much was spent—thus making budgeting easier. Order.co enables businesses to consolidate invoices to have that exact line-level visibility companies need if they want to stay on top of every purchase and plan for future growth. It combines all invoices from your vendor purchases each month into a single monthly invoice. As a result, you can track and analyze every dime your company spends.
Accurate Budgets & forecasting
Let’s face it. Sometimes, employees on finance and operations teams may get a little distracted; they may accidentally put too many zeros after a purchase; they may forget (or lose) an invoice every now and then.
It happens.
However, finance and operations teams can eliminate human errors. Imagine: no more worrying about the quality of your financial data. It becomes free of mistakes. Invoices are perfectly coded automatically in Order.co, so you can import the data directly to your accounting system. This gives you constant, up-to-date information to make more informed financial decisions.
With that, you also have full visibility into each of your expenses.
Based on how your expenses match up with your budgets, you can generate vital insights about not only your finance and operations teams, but your company’s future growth as well.
Plan for future growth like a pro. With more accurate spend data, your future projections for growth are more likely to materialize.
Getting your finance and operations teams in Order
A business can reach new heights when its finance and operations collaborate. You can develop complete visibility into your purchases, orders, and payments. In addition, you can centralize your operations and improve vendor relationships by making timely payments. Moreover, you can process invoices faster and issue approvals with one click. The list of perks also includes cash savings, more productivity, and improvement in your bottom line.
Get your finance, operations, and entire company’s growth in order. Book a demo today to learn how Order.co can make that possible.
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Are your finance and operations teams still working in silos?
Most likely, yes.
So, what does that mean for your business?
For starters, you can be among the 49% of CFOs who don’t have timely and accurate data to drive real-time, informed decisions. Additionally, you may even feature on the list of 73% of finance professionals who complain about the lack of in-depth data.
The truth is sad, out there, and hurting your bottom line.
Moreover, it will continue to impact your business growth as long as your finance and operations work as individual teams. Unfortunately, that is what most organizations are going through, even in this age of technological advance. The flip side of the coin is, however, quite appealing and profitable. Your business can operate as a whole unit when your finance and operations managers put their heads together.
What are the results?
You get real-time, accurate, and comprehensive data to fuel strategic decisions; you can generate vital insights and make accurate forecasts; the two teams can take your company to a whole new level.
Both finance and operations teams are crucial to a business. Therefore, it only makes sense that they can deliver better results by collaborating and sharing knowledge.
Let’s explore the role and impact of both teams, and how getting them to work seamlessly together can make for higher levels of both efficiency and company growth.
Download the free ebook: The Procurement Strategy Playbook
What does a typical finance team do?
Most of us think the job of the finance team is to maintain accounts and create financial reports. It also ensures tax compliance and helps the business stay within its budget.
Undoubtedly, those are the traditional responsibilities of a finance team. However, today, the duties of the finance department are not so trivial. In today’s world, a finance team guides all of the internal and external financial decisions of a company. It provides the number and insights required to stay competitive in the market.
So, what are some examples of the responsibilities of a modern finance team?
Conducting financial planning & analysis to facilitate strategic planning.
Financial planning & analysis is crucial to making realistic forecasts. It enables the business to predict how it will perform financially in the coming days.
The process pits forecasted results with actual ones to identify areas of improvement. It also allows the business to stay agile and deal with disruptions, like losing customers to a competitor.
Managing risks to avoid unpleasant surprises.
Most businesses today rely on debt to operate. As per Deloitte, the corporate debt of nonfinancial businesses grew by 5.5% annually on average between 2010 and 2019. In 2020, that percentage shot up to 9.1%. Debt is not always a bad thing. However, it brings a range of risks to the table. Therefore, finance teams try to identify and evaluate the risks applicable to a business. It looks at several factors like interest rates, legal nuances, and more to predict quantifiable impact.
This data empowers the organization to be in a better position to mitigate risks.
Managing and budgeting capital for optimum ROI.
The finance department is in charge of ensuring your business never runs out of money. Therefore, financial professionals manage working capital and make necessary forecasts. In addition, the team participates in capital budgeting to support business growth. It identifies the best projects and assesses the risks of investing available capital to derive maximum ROI.
Therefore, the finance team is (or, at least, should be) at the core of each and every company’s business decisions.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
What does a typical operations team do?
Would you think of conquering Mount Everest without a guide?
Even trained mountaineers will not dare to climb Everest without a guide. You will surely need someone who is aware of the local conditions to chalk out the best route. Additionally, you will rely on their assistance to arrange suppliers or predict bad weather.
Your operation team performs the same task for your business. It ensures your company keeps running efficiently and effectively to meet all business objectives. However, the exact processes and responsibilities may vary across organizations and industries.
So, what is the main focus for operations teams?
Help the business run smoothly and profitably
An operations team stays on top of all internal details that ensure the profitability of a company. It tries to provide all the right conditions for the business to deliver the right products.
As a result, operations teams are closely tied to customer satisfaction. Take the case of a restaurant for example. The operations team will be in charge of looking after the inventory and raw materials. However, the process is more complex than many can imagine. You not only need to ensure enough raw materials but also their quality and freshness. Additionally, your operations will consider the cost of the materials, labor, and associated processes. It will also work with vendors and suppliers to create long-term relationships.
Some of the responsibilities of operations teams include:
- Managing and facilitating the optimum use of resources
- Ensuring products and services meet customer needs
- Helping C-suite in planning KPIs
- Assessing customer feedback to suggest improvements
- Optimizing supply chain to boost productivity
- Managing and minimizing costs and risks
The final goal of any operations team is to encourage all stakeholders to champion an organization’s value. It also plays a big role in quality management and strengthening the reputation of the company.
Therefore, the operations team is as vital as the finance team to any business or entrepreneur.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
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How can finance and operations teams work together?
A business can walk several ways to allow its finance and operations teams to work together. The process begins with a cultural change where everyone works to achieve business objectives.
We have seen how the responsibilities of finance and operations overlap for better results. However, organizations rely on different methods to facilitate collaboration. The simplest way to tie their processes together is to acknowledge two key truths:
Technology can come in handy to bring your finance and operations teams closer.
For example, spend management software can help your operations team to stay on top of monthly purchases and payments. In the same way, it can allow your finance staff to improve visibility over business expenses.
All team members can access accurate and real-time data from a single interface. As a result, you can also become proficient in expense management and spend management.
In addition, you can discover ample opportunities to cut costs and maximize value. AKA: grow your bottom line.
Automation can streamline the processes of both teams and lead to more profitability.
Your employees spend countless hours on manual and repetitive tasks. This applies to almost all departments—including finance and operations.
For example, your finance team has to go through endless invoices every day, week, and month. The process not only dents your productivity, but also adds to your costs and time. Fortunately, automation can be a key solution to streamline processes and eliminate manual work. Best of all, 1/3rd of tasks in 2/3rds of existing jobs have the potential to be automated. Therefore, it can help your teams save time and focus more on collaboration. It can also facilitate smooth operations and the expansion of your locations.
Take the case of High Level Health, for example. The company had to go through 400 pages of invoices and waste countless hours finding, verifying, and paying each and every invoice. However, High Level Health—in their expansion—utilized invoice consolidation and streamlined their vendor payment process using Order.co. They've since been able to achieve 100% invoice consolidation and save $4,400 in monthly costs.
Getting your finance and operations teams on the same page
Businesses can increase profitability, cut costs, and improve the bottom line when finance and operations work together. That’s a given. However, no matter how “simple” it may seem, some organizations still find it challenging to bring the two teams closer.
To those companies who find themselves struggling to unify their finance and operations teams and cultivate growth, here are a few tips:
Encourage more communication between your teams.
The first step of the process is to get the two teams to communicate more. You have to stay impartial and become the advocate for members of the two teams. You should aim to develop an environment like DevOps where developers and operations work together—only for finance and operations. Call it “FinOps”, or something like that. Be creative.
This way, both teams can share insights easier, faster, and collaborate to achieve your business objectives.
Standardize your business tools for optimum interoperability.
“Optimum Interoperability” seems like a big word. Technically, it’s two big words. Really, what it actually means is “the best way for your teams to communicate and work together”. Your teams may use a range of tools to work productively. That may work in some instances, but after a while, it may not always be the most efficient. In the modern world, you should always aim to standardize your business tools. Look for ways to integrate your apps using APIs or already integrated platforms.
Let's face it: Finance and operations teams are indispensable for businesses. Both teams impact the performance of the organization and growth. Therefore, it is imperative for both teams to work efficiently to achieve success. Moreover, the two teams should work together in close cooperation for making informed decisions.
Make growing easier on your business.
Book a demo today to find out how Order.co can help your finance and operations unify for unprecedented company growth.
Get started
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The lean operating model was conceptualized sometime around the fifteenth century, at the Arsenal of Venice. Venetian shipbuilders created an assembly line to standardize production and, in doing so, were able to build naval vessels faster and cheaper. As the centuries passed, the Venetians continuously sought to improve their operations and experimented with new ways of working. The quality of their vessels improved with each adaptation, and the shipbuilders made it into the history books.
Fast forward 500 years. Every business wants to emulate the core principles of a lean operating model: high customer value, with minimal or no waste. And they can, if they’re able to plug cash leaks and free up resources for continuous innovation.
A procurement plan can help you build a lean operating model so you can prevent cash leaks that come from wasteful spend.
At the organizational level, a procurement plan outlines what an organization plans to spend in a given time frame. It identifies specific needs, a budget for obtaining supplies, and approved vendors from whom to procure those supplies. A procurement plan requires you to think strategically about spend, but it shouldn’t be difficult to create. A spreadsheet works well enough.
Businesses that formulate a procurement plan can optimize their spend and empower employees to proactively look for cost efficiencies. Following are four ways these benefits can help curb wasteful spend.
1. Gives a holistic view of business needs so you can optimize spend
A procurement plan that outlines spend at the organizational level allows you to identify patterns and redundancies in your purchasing needs.
Budgets are often created and executed at the department or team level, which can lead to redundancies. Let’s say two employees from separate departments subscribe to the same software solution. A procurement plan would expose this redundancy and enable the organization to invest in a single team plan, reducing the overall subscription cost.
Or let’s say two departments know they will require a few hours of work from a freelance designer each week. A procurement plan makes it easy to see this overlapping need. Then, the two teams can coordinate to hire the freelancer by day instead of paying a higher hourly rate independently.
Planning a year’s spend in advance also creates opportunities to receive discounts. Many vendors will give discounts if you buy in bulk or commit to an ongoing order. Businesses should identify any recurring orders during their procurement planning and ask about these discounts.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
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2. Reinforces your purchasing policy to prevent maverick spend
Procurement plans guard against spend that is over budget, unnecessary, or fraudulent by reminding employees of the company’s purchasing policy.
Two out of three employees haven’t read their company’s expense policy, according to AllStarCard. A procurement plan gives organizations a prime opportunity to tell employees, “This is how we intend to spend this year, and all of your purchases must map back to this plan. Purchases that don’t map back to this plan stand in the way of achieving our goals of X, Y, Z. And, by the way, if you don’t adhere to our policy, we won’t approve your expense report.”
Most employees want their business to achieve its goals. Employers need to articulate what those goals are and explain how maverick spend stands in the way of achieving them. Anyone who still fails to follow the purchasing policy should face repercussions.
3. Allows you to get a head start on ordering to prevent costly delays
Spending on an as-needed basis leaves too much room for error. A procurement plan helps you build a structure for employees, so they can submit orders early—or at least on time—as a matter of routine.
Late orders can be costly. If the supplies you need don’t arrive on time, someone from the team has to run out to the store to buy them. Let’s count the waste: employee time, duplicate purchase, purchase at a markup price. If you’re a coffee shop in need of milk, that amounts to about $20, if we figure an hour of an employee’s time, and $5 for the dairy. Quite the markup for something that should have cost $3.
But what if you’re a coffee shop, and your signature espresso doesn’t arrive on time? Now you have to tell customers you can’t sell them their favorite beverage, putting your sales in jeopardy until the espresso arrives.
You know if you place an order at the last minute, it’s going to take ages to ship. Establish a procurement plan so your team can either get ahead on purchasing or set up automatic reorders.
The Complete Guide to Procurement Management KPIs
Dive deep into how your team can benefit from tracking procurement KPIs, the 15 most important KPIs to track, and a detailed worksheet to help you calculate which KPIs suit you!
4. Gives employees visibility into spending goals
Like we said before, employees want their employer to succeed. Share your procurement plan with employees to give them transparency into spend across the organization. This way, employees can help the organization save cash when unexpected expenses arise.
Take the example above, where two employees from different teams were using the same software. Had the two employees known they were subscribing to the same software, they might have coordinated to purchase a team plan.
Additionally, a procurement plan allows team managers to set their budgets against the broader organizational goals and plan for spend when it is most convenient for the organization. This doesn’t necessarily cut costs in the long term, but it helps ensure that the business has enough capital at all times to achieve its value-add goals.
In essence, this type of budget planning keeps the company’s working capital, or the difference between a company’s current assets and liabilities, high. The significance of this feat shouldn’t be overlooked. According to a report from PwC, global firms could have freed up as much as €177 billion ($214 billion) in cash in 2017 to support growth and innovation if they had improved their working capital.
Plug cash leaks in 2021 with a clear procurement plan
“2020 went exactly as planned,” said no one ever. But don’t let the past year discourage you from planning.
We have a pretty good idea of what 2021 will look like (knock on wood). Offices will be closed, at least temporarily. The majority of employees will work from home. Spend will come from as many locations as you have employees.
You can prevent spending from becoming haphazard while your employees are dispersed. You just need to think a little bit more like a Venetian and create a clear procurement plan to ensure that all spending improves your bottom line.
Get started
Schedule a demo to see how Order.co can simplify buying for your business.
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