pitfalls

Your outdated procurement tools are a ticking time bomb waiting to go off. One wrong move can result in procurement nightmares that look like scenes straight out of a horror movie. A county supply officer bid goodbye to not only his job but also his retirement payout after inadvertently ordering a bulk of carbon paper that will last his employer two million years!

Government agencies are not immune to such fiascos. The Thatcher government placed an order for new carriages after the 1980 tube smash. However, there was a small miscommunication in the dimension. Result? The length of the combined passenger cars exceeded the platform’s length. The carriages were then cut and spliced to fit the platform.

But even today most organizations adopt an ‘if it ain’t broke, don’t fix it’ mentality when it comes to outdated procurement software. While ignorance can be blissful, this blatant disregard will only make businesses fall prey to common procurement pitfalls—and drag the process cycle, cause undetected errors, hinder process visibility, impact vendor relationships, and more.

Just the thought of catering to business needs while keeping their vendors happy can strike fear in every procurement leader’s heart. Is a manual procurement management process really as gruesome as it sounds, or is this just plain exaggeration? Here are the five worst pitfalls of manual procurement that can be easily avoided using the right technological solution.

1.Overlooking Hidden Costs

Most organizations underestimate the hidden costs that lurk in a manual procurement environment. Right from manual document preparation and routing to data entry and exception handling, a number of reasons contribute directly to the shockingly high expense.

The longer the processing cycle is, the greater the chances of being misfiled or lost. In addition to direct expenses, there are indirect costs like missed favorable payment terms and early payment discounts, lengthy processing cycle, manual indexing/filing, and more. According to a recent APQC study, manual PO processing can cost as much as $506.52 per PO.

Organizations that embrace automation are able to cut processing and process procurement documents in a matter of hours instead of days. An automated procurement process will deliver accurate data to the accounting and ERP systems swiftly without any manual effort.

Adding a procurement system to the mix will not only streamline the process but also fast-track approvals and provide a transparent picture of real-time spend to improve cash flow and make better-informed decisions.

2.Siloed

As organizations grow rapidly, limited resources are move from back-office projects and procurement is often overlooked. As time goes by, the status quo becomes standard. Archaic procurement practices and decentralized processing cause process and data silos that kill employee productivity and put a strain on vendor relationships.

This impenetrable nature of these disparate data blocks restricts the visibility of organizational spend. In a decentralized environment, procurement staff waste too much time exporting data and importing it onto other software solutions.

Centralized processing combined with distributed capture can reduce paper-related expenses, save postage costs, improve efficiency, and eliminate process delays. A cloud-based procurement system shaves significant time and speeds up processing cycles by reducing duplication efforts.

3.Daunting Documentation

Maintaining an accurate document trail is vital for proper procurement management. However, manual procurement tools make it challenging to document every aspect of the procure-to-pay cycle. Even commonly used solutions like excel sheets are not secure enough to store confidential purchasing and vendor information.

While excel sheets can handle the procurement process of relatively small teams, as an organization grows and evolves, capturing purchasing expenses in a spreadsheet with numerous tabs complicates the process even more. Using excel sheets to manage and track procurement spend can cascade errors and cause an avalanche of compliance problems.

To rein in the rising overhead in annual procurement budgets, several organizations are embracing automation. A Gartner report claims that 1 in 2 organizations across the world will implement a cloud-based procure-to-pay suite by 2025.

Automated procure-to-pay suites integrate purchase requisitions, purchase orders, goods receipts, and invoices in a single platform. Automation helps organizations streamline the procurement cycle, reduce manual effort, cut cost, save time, and improve accuracy.

4.Lack of Transparency

Manual procurement tools can save a few bucks in the investment front, but navigating through rows and rows of data on spreadsheets takes a huge hit on processing time and speed.

Without the right information, stakeholders have trouble arriving at decisions. This delay has a direct impact on the cash flow and the bottom line of an organization. Outdated procurement systems are injurious to an organization’s growth.

Automated procurement systems tie up loose ends in the procurement process with real-time data visibility, role-based permissions, self-service vendor portals, and on-the-go, omnichannel accessibility.

With greater control and visibility of the source-to-pay process, organizations can spot processing hiccups at a glance and increase efficiency at each step of the procure-to-pay process cycle from the top down.

Conclusion

In order to unlock efficiency in their procurement process, organizations need to ditch their manual procurement tools. Moving away from disconnected paper trails and excel sheets will help businesses battle the inefficiencies in the procurement process head-on.

A robust procurement system will offer businesses a clear picture of the process and prevent out-of-the-blue shocks. By adding a speck of automation to their outdated procurement process organizations can smooth down inherent process gaps, develop better vendor relationships, and prevent procurement nightmares.