Putting your daily and monthly purchasing onto an electronic platform that can both regulate your purchasing and capture the data for statistic analysis can reduce your spending anywhere from 5 percent to 20 percent. The more you spend, the more business units you are managing and the more important it is to consolidate your purchase management onto an electronic platform.
Once you have committed to electronic purchasing, you must look at the important aspects of it that will make your endeavor successful. I have already talked about supplier enablement and catalog and contract management. Getting your vendors to commit to the process with you and determining what you will buy from them and at what price are critical components of managing your spending more effectively. The next piece is content and workflow management.
Content and workflow management means determining who will interact and what the transaction process will be on your electronic platform. When engaging with software companies or consultants, this will all be part of the account set–up process. Evaluating your current organizational structure and how you currently process your purchasing is where you begin.
Do you currently have a purchase management policy? Do you have certain individuals responsible for placing purchase orders, receiving them and evaluating correct pricing for payment? Do you have specific guidelines for what can be ordered, when it can be ordered and in what quantities? These are all part of a purchase policy. If you do not have a formal policy documented, this is the time to make the effort to document it. This policy will be your blueprint for moving all of your spending onto your platform.
It is also the time to determine your desired process. You may have wanted to have better controls in place, but just didn’t believe it was feasible with phone calls and emails. Electronic purchase management affords you the ability to bring all of your purchase managers together onto the same set of guidelines for purchasing, so you can both see and regulate it. Forcing all of your purchasing through an electronic management system allows you to tighten up loopholes and really demand a higher level of responsible decision–making from your purchasing agents.
When you are managing the purchase order, receipt and payment of goods and services across multiple departments or business units, you must set up your system users, departments or locations and applicable regions. This set–up should follow the logic of the optimal transaction process, or workflow, that you would like to achieve across all of your purchasing. The users are the people who will place the purchase orders on behalf of the departments or locations that they represent. The regions, or directors in some cases, are the offices or managers that oversee multiple departments or locations. This set–up should be a linear outline of how a purchase order is established, approved and submitted to a vendor.
Allowance parameters and approval processes are critical parts of this process. When you put your purchase management onto an electronic platform, you can set dollar limits, quantity maximums or minimums and an approval process to control the release of the purchase order. This is crucial to the process, because this is where you move the audit process from invoice auditing to purchase–order management. If you take the time to set up your controls on the front end of the purchase process, the order to your vendor will be more precise, more efficient and most importantly, correct.
To complete the transaction, the purchase agents and users must electronically receive the goods or services and consider any returns or credits. This allows the purchase order to be set up for payment by authorizing and validating that the commitment was fulfilled by the vendor. This is often the step that is most often missed without an electronic system. The confirmation of delivery of goods and services is what accounting departments desire most to make informed, correct payments to vendors. An electronic system will match the product and contract pricing with the process of order and receipt of goods in order to deliver invoices that have been audited and controlled from the beginning of the process to the accounting department.
The transaction process and the workflow that organizes system content are the backbone components to electronic purchase management, but they are good practices for any regular purchasing activity. Electronic management of that process simply makes it easier to design, activate, monitor and control. The end goal is the same: to purchase only what you need at the price that you have agreed to with the vendors who are your partners.
Purchase management is a critical part of any operation, but especially those with multiple departments or multiple locations. Setting up and following through with content and workflow management on an electronic purchasing system will help businesses achieve lower costs, operational efficiency and better spending analyses.
