Think of any famous pair and, then, imagine that one of them was simply plucked from the pages of history. Would Fred Astaire be as successful without Ginger Rogers, Serena without Venus or Garfunkel without Simon? Some people just pack more of a punch when they come in twos—and the same could be said for eProcurement and vendor contract management. When you just have purchase order software, you run the risk of missing out on the opportunities that you negotiated for in the first place. On the other hand, when you have the two functions combined, they become an indomitable force for better spend management.
Centralized Electronic Repository for Documents
eProcurement software with vendor contract management is more effective for controlling spending because you can easily access and manage contracts that apply to purchasing commitments. You don’t want to let your contracts languish in a folder or file cabinet; instead, you want your contracts to be an active partner with your purchasing system. Software that includes a vendor contract capability allows contracts to be stored and accessed from a centralized electronic repository—a great boon to both buyers and CFOs. While buyers can assign requisitions to vendor contracts, CFOs can view contracts, contract budgets, and all associated costs.
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Tracking Purchases Against Contracts and Contract Budgets
An integrated accounts payable automation solution also packs more of a punch because the solution not only manages all your requisitions and purchase orders but it also tracks them against a vendor contract. As a result, your organization can be even more precise about the amount and dates of money spent under a vendor contract. For instance, if your organization has negotiated a contract with a construction company for building improvements, that contract can be entered into your procurement system. Subsequently, employees can assign a requisition to the contract before submitting it for approval. When the approver logs into the organization’s purchasing software, he or she can see the pending requisition and all other purchase commitments and their statuses. To further guarantee that the purchase request is within the scope of the contract budget, the approver can check the status of the budget before giving approval. In this way, contract management works hand in hand with a requisition and purchase order system to reinforce CFOs’ control over the entire procure to pay process.
Audit Trail of Contract Approvals
A greater grasp of your spending under vendor contracts will help your organization to meet Sarbanes-Oxley auditing requirements. In an increasingly regulatory environment, it has become even more crucial to provide auditors with quick access to documents and information about approvals of transactions. When your vendor contracts are integrated into your procurement system, you don’t have to worry about tracking them down for auditors or verifying that they received approval at the appropriate level. Instead, you can simply point to your stored vendor contracts and purchase commitments and their approval times and dates. On the level of internal compliance, eProcurement software with contract management reinforces proper procedures for contract creation and encourages employees to purchase items with contract pricing.
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Ultimately, procurement and contract management form a powerful alliance to enforce contract compliance and achieve the best value from vendors. Email alerts about contract renewal dates help stakeholders manage and renegotiate contracts before it’s too late. To ensure that the terms of the current contract are being met, CFOs can either take a quick glance at contract details or they can run specific reports, such as reports on price variances or time to delivery of materials. With access to this information, CFOs are better equipped to assess which vendors are delivering the value promised and which ones are not. Accurate, real-time data helps organizations communicate expectations and receive the best value from vendors.