Making a Case for Procurement Automation

The majority of businesses have issues with certain aspects of the procurement process. Supplier management, buy requisitioning, invoice capture and invoice matching are just a few minor parts of the process, each of which has its own set of challenges.

The process of buying and selling is currently being streamlined and automated by technology. This decreases inefficiencies and expenses while allowing employees to focus on higher-value duties. The majority of businesses have yet to use any automation technology.

Include these ten points in your business case for automating your procurement process to demonstrate return on investment (ROI).

  1. Managing Non-Trade Spending

Spending on goods and services that will not be resold is referred to as non-trade spending. Stationery, electricity bills, and cleaning services are all examples of products and services that come under this category. 

These products/services are frequently paid for with a business credit card or petty cash in many organizations. This can result in the company missing out on bulk discounts, making unorthodox purchases, and possibly overpaying.

  1. Mail Processing Through Manual labor

Handling paper-based mail by hand can be time-consuming and, as a result, costly. Before being fully processed, a paper invoice will go via several touchpoints, including maybe the receptionist, an accounts payable clerk, and at least one approver.

E-invoicing and the removal of paper invoices can cut processing times in half. Accounts payable mail accounts for roughly 30% of an organization’s mail. When e-invoicing is adopted, the amount of paper mail received is reduced, which lowers the cost per invoice processed.

  1. Data Entry in the ERP

The data must be put into the ERP finance system once a supplier invoice has been received, forwarded to the proper approvers, and authorized. An accounts payable clerk would manually enter information from an invoice into a software system in a typical manual system. 

This manual method takes a long time and often results in data inaccuracies and duplication. OCR (Optical Character Recognition) is a technology that can automatically extract data and save it in a digital and searchable format. Data input automation eliminates human error while also saving a significant amount of time for employees, allowing accounts payable staff to reallocate their time.

  1. Employee Time Management

Procurement automation reduces the time it takes to accomplish time-consuming and manual operations. Invoice matching, for example, can be automated, allowing firms to reallocate staff members’ time to more important tasks. 

Many finance and accounts payable professionals spend several hours fixing issues in manual Procurement operations. The graph below shows how much time staff spends resolving AP process concerns each week.

  1. Management of Disputes and Inquiries

Invoice errors, duplicate invoices, late payments, and dissatisfied suppliers are all consequences of manual procurement operations. 

Apart from the apparent consequences, such as paying the same invoice twice, dealing with these difficulties might take a long time. The time spent by employees on “damage control” costs businesses thousands of dollars each year. Annual labor costs for conflict resolution inside organizations are shown in the table below.

  1. Approval Times for Invoices Have Improved

The approval of invoices can be a very difficult task in the procurement process for many firms. Approvers frequently leave invoices to linger on their desks for days, if not weeks. In many circumstances, it will take some time for the invoice to be fully cleared because it will need to be physically delivered to and personally signed off by a number of persons. 

Invoices and requisitions can be automatically directed to the relevant approver, who can approve them with a few clicks on a platform or even via email, thanks to automation. According to our experience, this saves about 75% of the time that was previously spent on invoice approval.

  1. Reductions in Temporary Staff

Many businesses choose to outsource their accounts payable function. Accounts payable outsourcing typically improves processes without the need to invest in technology in-house. Organizations who outsource their accounts payable process usually recognize that there is a better method to pay for products and services. Still, they aren’t totally resolving the problem, and the outsourcing costs can be substantial.

Human error risks remain when accounts payable is outsourced, such as double invoicing, paying the wrong amount, or sending the invoice to the wrong supplier.

  1. Discounts for Early Payment / Penalties for Late Payment

Suppliers frequently provide a discount to customers who pay their invoices on time. These reductions are frequently overlooked because of a company’s lack of insight into invoice lifecycles. In fact, half of the businesses only collect discounts on a partial basis, and 16% never do. 

Organizations that use procurement software to automate and speed up their invoice lifecycle save around 20%. The financial savings might reach millions of dollars, depending on the volume and magnitude of an organization’s invoices.

  1. KPIs

To track KPIs, more than half of the respondents still utilize spreadsheets and manual processes. As a result, even for non-financial KPIs, there has been a global trend toward automation. You don’t have to manually manage KPIs for reporting because technology allows you to identify them and continuously monitor them for change.

The finance process is often hidden from finance leaders. Many people don’t know where an invoice is at any one time or if a PO has been fulfilled, which leads to organizations responding to problems rather than being proactive.

Finance leaders will have full visibility into the whole procurement process by automating it, even allowing suppliers to log in and track the status of their own invoice payments.

  1. Reporting

Finance leaders who generate financial month, quarter, or year-end reports will benefit from technology in particular. Closing cycles can take up to 24 days for larger firms using manual processes. 

Best-in-class companies that automate the process’s laborious and repetitive operations close in 5-6 days. Data such as accruals by an entity, spend by supplier, spend by GL (General Ledger), and invoice amounts received in a month can be easily drawn by finance departments.

Benefits Of Making A Business Case For Procurement Automation

Procurement automation can save money, which is one of the compelling reasons for the decision-making committee to think about it. Aside from that, the company obtains the following key benefits:

  • On a single platform, you’ll be able to manage all of your procurement and order management activities.
  • Project-based requisitions can be accessed directly at the activity level.
  • Reduce the amount of paper used and the amount of human processing required.
  • Avoiding maverick spending
  • Improve cross-departmental collaboration and communication
  • Assign employees to non-redundant, value-added jobs that are more strategic.

It can be difficult to make a case for procurement automation for a single individual. As a result, procurement professionals should include purchasing managers, departmental users, and chief controllers of audit/finances. 

A procurement specialist can foresee a clear roadmap to procurement automation if they work together. It will have a greater impact on decision-makers if you construct a case that includes finances, operations, and strategy.

Looking to Reduce Your Annual Spend?

Procurement Partners helps customers reduce their annual spend by 10% or more with an easy-to-use portal where users can place orders and process invoices for all vendors. Procurement Partners is the leading spend management system for Post-Acute Care and Senior living and has helped companies achieve 40% time savings and 95% contract compliance through automating the procure-to-pay process.