Due to increasing pressure from investors, boards and compliance officers, the CFO must have a hand (or two) in every aspect of business operations. Utilizing procurement software allows you to more efficiently manage and control purchasing and ensure both employee and vendor compliance throughout the process. This means that you will free up your time for more strategic buying while also empowering your managers to make smart spending decisions. Just follow these 5 Best Practices for Requisition & Purchase Order Management:
1.) Empower Your Employees with self-service procurement
Purchase order software helps you to decentralize your buying process, which prevents time delays and over or under purchasing of materials. Software with employee self-service allows employees outside of procurement to easily fill in and submit for approval requisition templates with pre-approved vendor contract pricing. With the appropriate approval workflows and dollar thresholds in place, you can easily delegate approval of lower value items to your department managers. It’s really a win-win situation: while your department managers are empowered to make smart purchasing decisions, your procurement team can devote more time to strategic contracts and sourcing of high-value items. With decentralized purchasing, department managers and employees alike will be happy to get exactly what they need, when they need it.
2.) Increase the percentage of purchase orders associated with a purchase requisition
Chances are that if your organization has a manual purchasing system, many purchases have probably taken place without a corresponding purchase requisition or approval. Requisition and purchase order management software will help you to enforce business rules for purchasing. By initiating automated approval workflows and eliminating the rekeying of data, procurement software optimizes the percentage of purchase orders that originate with a purchase requisition. Increasing that percentage will ensure that proposed purchases are within budget and preferred vendors are being used, which will directly affect your bottom line.
3.) Budget at the departmental level to control costs
Of course, just because you have a decentralized purchasing system doesn’t mean that you’re relinquishing control over purchasing—particularly control over whether a purchase fits within your company’s budget. The beauty of purchase order software, is that employees and department managers can use the software to view the calculated budget availability when entering or approving a purchase requisition. If a requisitioned item is over budget, the solution automatically flags the purchase requisition for over budget approval routing. Once the appropriate manager receives a notification for the over-budget item, the manager can either approve or reject it. Features like this illustrate how procurement software is a great tool for informing employees and managers about their budget and keeping any attempts at rogue buying in check.
4.) Keep tabs on vendor service contracts, blanket purchase orders and purchase requisitions under contracts
Without contract management software, it can be very difficult to track purchase requisitions against contracts or to track contract expiration dates, which means that you have less control over a huge chunk of your spending. With a system for contract management, it’s a whole other story. The module allows employees to enter all information, including the contract amount and dates—whether it’s a vendor service contract, blanket purchase order or internal CapEx project. Once the contract has been approved, employees can select the contract and view the budget status when submitting a related purchase requisition. By tracking your purchase requisitions against your contracts, you’ll be able to better gauge exactly how much your company is spending.
5.) Gain visibility to all purchasing transactions and their approvals
Transparency about the amount, budget availability and approval of purchases will help your organization to maintain internal spending controls, as well as to adhere to external auditing requirements. As for your vendor contracts, procurement software helps you to fulfill both your internal and external compliance requirements by providing contract approval dates and attached documents, such as service level agreements. Having easy access to this information also assists you in timely contract completion. For instance, if you determine that your legal department hasn’t approved a contract, you can approach the department directly instead of wasting time trying to track down the document. Once you have visibility to necessary information for effective purchasing and contract management, the CFO doesn’t need as many hands to do the job effectively.