Like so many business workflows, the procure-to-pay (P2P) process is a minefield of potential errors, avoidable costs and delays. However, less than 50% of procurement workflows are currently being automated.
Enter procurement process automation.
It’s not an exaggeration to say that automation in the workplace is transformative. For some businesses, it’s meant the difference between success and failure. A recent Zapier report found that 66% of small businesses now view automated processes as “essential” post-pandemic. Even more of them say that it has allowed them to compete with businesses several times their size.
What is procurement process automation?
So, what is procurement process automation? Simply put, it is the use of software to manage as much of the procure-to-pay cycle as possible.
Purchasing automation aims to reduce the time it takes to get from requisition to supplier payment. Software takes over repetitive, time-consuming tasks, reduces approval bottlenecks and creates a centralized, organized home for all of your procurement documents.
It works, too. According to KPMG, manual cost reduction efforts end up somewhere between 15 and 30 percent. Introducing automation can cut from 40 to 75 percent.
What does procurement automation mean for your team?
While a fully automated purchasing process reduces the costs that come with misplaced documents, miscommunication and fixing errors, it doesn’t mean your current procurement team becomes obsolete. In fact, it’s pretty much the opposite.
Instead of spending time on repetitive, tedious tasks, your talented procurement staff are freed up to use their skills in far more valuable ways. This includes everything from interpreting the data provided by procurement software and locating inefficiencies, to fostering stronger supplier relationships and more.
Which workflows can procurement automation improve?
Thanks to increasingly sophisticated procurement software, a good proportion of the workflows involved in the P2P process can now be automated. We won’t cover every step of P2P here, but if you’d like a refresher we’ve got a full guide on our blog.
1. Creating purchase requests (or purchase “requisitions”)
Purchase requests are the first potential bottleneck in your procurement workflow. Approval delays and errors made when filling out request forms can cause significant hiccups early on in the process.
The solution? Create digitized forms that auto-fill any standardized information. It gives employees a time-saving template, reduces the chance of errors, and creates a single format for purchase requisitions across the organization.
Once these forms are created, your procurement platform should notify approvers, either through email or company communications tools (like Slack) so approvers never miss a new request.
2. Creating purchase orders
Much like purchase requisition forms, purchase orders (POs) are documents that are best standardized and digitized. It won’t just speed things up and reduce errors, it’ll also make life easier when it comes to the later stages of your P2P process.
Auto-filled, centralized purchase orders will have your accounts payable team thanking their lucky stars. They can stop chasing people down for long-forgotten POs submitted months before goods or services are delivered, and will no longer waste time manually entering different document formats into an Excel spreadsheet.
Instead, they’ll know what to expect and have all the required documents each time they need to do a three-way match, and have a searchable database where they can find them.
3. Gather data on suppliers (and areas for improvement)
While it takes more sophisticated, machine learning-based platforms to recommend the best vendors, it’s not difficult at all to gather information about past purchases with automated data logging. Your talented procurement team can then use this data to make informed decisions (and take the “human factor” of supplier relationships into account that AI can’t).
It’s also a good idea to digitize as much of your P2P workflow as you can. This way, you’ll have a centralized source of information on all your past purchases. It becomes much easier to identify inefficiencies, unnecessary delays, and overpayments when you’ve got a birds’-eye view of the entire process.
Your finance team will also thank you. With every PO easily accessible when it comes time to budget for the next quarter or year, it’s possible to get a quick look at spending and budgets with a few clicks. Need to dig up records for an audit? You’ve already got a ready-made paper trail.
4. Receiving goods and services
Your accounts payable team won’t know whether or not goods or services were delivered as expected without a reliable receiving process. Automating this step can be as simple as having employees upload a photo of receiving documents and invoices to a procurement platform, where it will be organized and logged for your payments team to review when they’re ready.
5. The three-way match
Set up a repeatable tagging process for new purchases, and the three-way match process will be smoother than ever. That means suppliers get paid faster, build stronger relationships with your business, and are more likely to offer discounts and concessions in the future.
If a purchase requisition, PO, invoice, and records of receipt are all organized under the same umbrella in your procurement software, it’ll take your accounts payable team a fraction of the time it normally would to compare them and sign off on payments. Add to that the fact that purchase requests and POs are already standardized, so they won’t have to worry about human error nearly as much. It’ll be more obvious if something’s wrong.
With the right procurement platform, they can then approve payment from the same place and complete the P2P process.
Procurement process automation – and beyond
There’s a reason that Forrester Research is claiming that “companies with advanced automation programs will obliterate — not merely beat — the competition.” Supply chains are running more smoothly and spend management automation is helping small businesses compete with those they normally couldn’t.
According to the Harvard Business Review and Cognizant, it’s about a commitment to a completely new way of doing business:
“At its best, automation also makes jobs more human, empowering employees with new capabilities through analytics and AI and freeing up time for creativity and critical thinking.”
There’s plenty of room for that creativity and critical thinking in procurement – a core business process that could impact your bottom line more than any other. Using your procurement talent to their full potential means embracing purchasing automation wherever possible.