Procurement or requisitioning has always been a hassle for companies, especially for the financial departments. Apart from factors such as maverick spend which would lead to expenditures that a company had not anticipated or did not have an absolute necessity to incur, there are several more aspects that only create complications. For instance, the overburden of mounting invoices from various vendors which would just make the task of any accountant or entrepreneur a never ending and toilsome exercise.
P2P which is an acronym for ‘purchase to pay’ has become a well formed concept of which many businesses are trying to take full advantage. A P2P system offers a completely closed loop procurement process or strategy. Purchase to pay does not restrict its utilities to the purchasing or requisitioning departments but involves the decision making management executives, financial department and also the vendors or suppliers. Over the last ten years, businesses have put various ERP (Enterprise Resource Planning) tools and applications in place to streamline the entire procurement cycle.
Besides streamlining requisitioning, P2P has several other benefits and the financial advantages are often the greatest contributing factor when examining the option of converting to closed loop procurement software. With Purchase to Pay software in place, businesses can have every department requisitioning items from a preset portal; the items requisitioned can be sourced from the available online catalogs of vendors and then a purchase order is raised which is subsequently checked and approved by the management. The management reserves the right to approve any requisitions subject to the company policies and budgets. Furthermore, the invoices, delivery and stock maintenance can all be carried out using the P2P system. In effect, a company gets a closed loop procurement strategy in place that manages to ensure that every department is well supplied with required items, stocks are properly recorded in the centralized system, expenditures do not get out of control and all invoices converge onto one which then makes the finance department’s job an easy one.
Having a closed loop procurement strategy is no longer an option for businesses that intend to save money on unnecessary requisitions and it is perhaps the only way to ensure that the entire requisitioning modus operandi across departments function in a seamless manner. Purchase to pay software has several other benefits including real time record maintenance of stocks, shifting of items from warehouses and also manages to act as an automated bookkeeper and accountant. P2P is integral and essential to have a closed loop procurement system.
There are a wide variety of different aspects that are involved in the business world, one being supply chain risk management. Considering that there are many individuals involved in an industry ranging from employees to stakeholders, becoming aware of the risks that can affect logistical chains can be quite advantageous. With the appropriate knowledge and systems in place, companies will be able to limit or even eliminate disruptions in the future due to natural disasters associated with supply chain risk management.
The importance of the supply chain is what makes it imperative to be aware of the risks that can affect a corporation at any time due to natural disasters, social unrest, or even war. The supply chain essentially provides the company with their earned profits and it provides customers with the products that they pay for. Without a strong and sophisticated supply chain, corporations would inevitably fail and/or become bankrupt. It goes without saying that since money is an essential component to any business plan, ensuring that there is an abundance of it can be quite beneficial. Therefore, preventing a business from being affected from supply chain disruptions will bring forth more profits.
As previously mentioned there are an ample amount of natural disasters that can affect the supply chain of a company. As a relevant example, a laptop manufacturer needs to gather crude oil to create the plastic that is used to manufacture the keyboard that eventually creates the laptop for the consumer. If a natural disaster such as a tsunami affects the source of the crude oil, the entire supply chain would be disrupted and the company would be unable to provide their consumers with the products that they desire. Regardless of whether you are the owner of a larger scaled corporation or if you own an independent small business, being susceptible to flooding, earthquakes, war, and even economic failures is one aspect all should consider.
With the implementation of purchasing software companies are provided with the opportunity to eliminate the worry associated with supply chain risk management and natural disasters. Considering that the vast majority of manual techniques will be disrupted if a supply chain is interrupted or broken, purchasing software allows companies to make all manual processes automated. With the implementation of purchasing streamlining and the ability to utilize procurement software, more corporations are beginning to evade the detriments brought forth from economic unrest with the use of purchasing software. Essentially all of the information, invoices, and numbers that you would generally have on physical paper will be implemented into a digital format that will be less susceptible to damage. When disruptions occur, it only takes a few clicks to implement back-up processes that have previously been put in place. Purchasing software can become a necessary component to mitigate risk associated with supply chain disruptions.
Times have changed and businesses no longer operate in the same manner as they used to even a decade ago. There is an increased intent among senior management executives to avoid maverick spend. Maverick spend had been an inevitable aspect of purchasing across various industry verticals. With changing economical scenarios, it is only wise to have a procurement strategy in place that cuts out maverick spend.
For some time now, companies used to place orders and go about any procurement cycle without much intervention of company management and without any adherence to specific financial details. It was common for anyone to contact a vendor and requisition the supplies. There were hardly any pre-assessments of any requisition or purchasing. In most cases, it was the junior or mid level staff who would go about carrying out any procurement. Consequentially, businesses used to end up spending a lot more than what it ideally should have. This difference of what has been spent and what should have been spent was and still is widely termed as maverick spend.
With changing times, companies realized the benefits of having a centralized purchasing department who would oversee every procurement, company budget, contracts, best practices, obvious requisites and then decide on the exact nature and quantum of any procurement. Furthermore, companies needed to have a single point of purchasing, raising a purchase order, bringing together various invoices into one and also have stringent approval procedures at various levels to ensure adherence to company policies.
Latest procurement trends suggest that businesses today prefer using purchasing software that brings together all vendors, supplies, procurement orders and invoices into one platform. This allows company executives to closely monitor all procurement requisitioned, tally the present stock in the warehouse, bring interdepartmental consensus and eventually approve if the purchasing items and the prices adhere to the budget and company policies that have been laid out right from the onset.
Cutting out maverick spend is not only economically beneficial for companies but using purchasing software also ensures that the right vendors have been appointed for any procurement and the seamless juxtaposition of all invoices allow companies the leverage that no paper-based system can offer. While there are those companies that rely heavily on ordering large quantities of supplies on a regular basis that seem to be the obvious fit for looking at how to cut out maverick spend, the benefits are equally lucrative for any business.
In today’s business world it is exceedingly important for business owners and operators to take steps towards procurement fraud prevention. Procurement fraud costs businesses millions of dollars every year, losses that can likely be avoided if certain measures are taken to assist in procurement fraud prevention. Whether a business is small, medium or large, procurement fraud may occur. The following information is designed to explain how you can take measures to prevent procurement fraud by taking steps to segregate duties, by having regular audits and by using purchasing controls to your advantage.
One way that managers and business owners can promote procurement fraud prevention is by segregating duties. In other words, in any business transaction, more than one individual should play a role. For example, the person who starts the purchase order process should not be the same person who will approve the payment. In addition, the person who takes the payment should not be the same person who handles bookkeeping matters.
Some smaller businesses fail to segregate duties for their employees, either because they are too short staffed to do so or because they are simply too short sighted to do so. Procurement fraud can start off on a very small scale, but the costs truly add up and if individuals see that they are getting away with it they may continue to do so for years and on a much larger scale.
Conduct Regular Audits
Segregating duties is an important first step, but it is not enough for thorough procurement fraud prevention. Conducting regular audits of all of the business’s purchasing practices is vital to preventing procurement fraud. Estimates by PricewaterhouseCoopers suggest that regular audits are responsible for the detection of almost 20 percent of all reported cases of fraud. Best practices for audits involve having some that occur on a regular schedule, and others that are ‘surprise’ audits so that those who may be engaged in procurement fraud will be caught off guard.
If your business is too small to be able to afford its own internal department tasked with doing audits, you can still conduct audits by hiring an outside consultant to come in to audit your business. Such an individual will typically examine contracts, financial documents and internal work processes. Any accounts that do not reconcile may be a red flag that indicates that procurement fraud may be occurring.
Install Purchasing Controls
Another excellent way that companies can engage in procurement fraud prevention is by having clear policies that delegate who is able to make purchases for the business and to have monetary thresholds for such purchases. It is also a good idea to keep a list of approved vendors and to encourage those employees who have purchasing power to keep their transactions between them and the list of approved vendors at all times. Corporate credit cards are another great idea, and there is software you can invest in that will help you to keep track of all expenses so you can see how money is being spent.
Green Sourcing has steadily become the buzzword in the corporate world. With increasing demands of having sustainable procurement owing to its implications in economic, social and environmental perspectives, more and more businesses are realizing the benefits of having a sustainable supply chain.
Procurement trends of 2015 and the first half of 2016 clearly indicate a paradigm shift towards green sourcing. Ideologically, green sourcing as a concept focuses on holistic development and benefits for all parties involved in the procurement process. Although there are some variations where businesses aim at their private profits and revenue growth , still the advantages of a sustainable supply chain can certainly be realized at various interdepartmental levels as well as across suppliers, vendors and companies.
Green Sourcing emphasizes the need to have standard practices of procurement that not only use avenues that are environment friendly but methods of procurement that transcend macroeconomics and corporate social responsibility. Green Sourcing through a sustainable supply chain has a plethora of benefits for the organizations as well as vendors. Every product in procurement needs a company’s business goals, company policies and the decision making body to be in complete sync to be able to make the best choices of procurement. This is exactly where Green Sourcing changes the entire dynamics of procurement.
Sustainability is of paramount significance in economics. With environmental benefits and convenience of using green sourcing for procurement, businesses have realized the potential rewards for all parties involved. There is still some time before green sourcing becomes a standard practice for businesses all across the globe. Presently, as per a recent study, 92% businesses identify procurement and its requirement to have a sustainable supply chain as one of the most significant aspects in a company’s modus operandi. Businesses are yet to completely switch over to green sourcing but there is a bright light at the end of the tunnel. Experts observing the situation are optimistic that we are set at the brink of depending entirely on green sourcing for all procurement requirements of a company.
Green sourcing not only promotes having a sustainable supply chain from the perspective of companies ordering the goods and products, but also for suppliers or vendors who themselves have a corporate social responsibility and a need to have optimum impacts on their business by driving revenue growth through sustainable procurement.
The fact that Purchasing Software can change the modus operandi of any SMB is fairly understandable and has been evidential. There are several associated benefits of Purchasing Software other than the obvious utilities. Of course, the primary objectives of using Purchasing Software would always be the convenience an SMB would have in selecting items to be purchased, raising a purchase order, manage items that are to be requisitioned, approved and received from the respective vendors and the likes but there are automated resources in the Purchasing Software that can be of immense help during an inventory audit of an SMB.
Depending on the exact nature of your business, you may have different frequencies of inventory audits but you would have one for sure. The only way that an SMB can maintain a record of items purchased, stored, moved and every detail of the status of objects in offices, warehouses and every official department and location of the SMB is to carry out an inventory audit.
What Purchasing Software does is keep detailed records of all items purchased, stored, moved and even those that the SMB has run out of and is in need of requisition. The system updates itself automatically when an item is purchased from a vendor, received and moved into the inventory. The system does not restrict itself into just the name of the items but also the exact date of purchase, receipt or delivery and also if the items have been moved from one warehouse to another or one department to another. Purchasing Software can offer all the information that an SMB would require during an inventory audit.
There may be many instances when there would be movement of items or some updates that may not be automatically recorded by the Purchasing Software because it was not involved in the operation. For example, an item is moved from one warehouse to another which does not require the involvement of the Purchasing Software. In such cases, an SMB can have the details updated into the system manually by adding, removing or simply making notes of the movement or status of items. What that does is when an inventory audit is carried out every small detail about all the items would be right there to be thoroughly checked.
Purchasing Software has much more to offer than its obvious benefits and being of assistance to an SMB during an inventory audit is just one of those.
In the business world, procurement is the obtaining of goods from various suppliers for the benefit of the company. Many businesses hire someone who is experienced in procurement management and who understands the procuring process in order to obtain goods for the business in a cost-effective way. People who specialize in procurement management will also have to develop ways of getting high quality goods which will improve the company’s revenue and reputation. If you’re starting a career in procurement management, you’ll need to learn how to automate, integrate and evaluate your procurement process and you can use procurement software to do this.
The first key in successful procurement management is to automate and the best way to do this is to use procurement software. When you automate the procuring process with procurement software, certain things are achieved. The procurement software allows you to automatically create new orders and have these orders instantly fax the requests to your suppliers without hassle and extra paperwork. The procurement software also lets you to send e-mail reminders to vendors concerning the orders you purchased for your company. The software allows you to keep track of the items you received and an account of financial records from the past few months.
The second key in procurement management is integration of various types of technology-based systems into the procurement process and one good way to do this is to attend local business seminars which focus on integrated systems and how you can maximize the effects of this technology. If you’re not very skilled in procurement integration, you may choose to hire a specialist who has years of experience in this field and who can integrate the latest procurement trends in cost-effective way.
Finally, you should evaluate your procurement management strategies to determine if they’re working effectively to help you acquire the goods you need for the company’s success. An important thing is that you evaluate your vendors. Successful vendors will understand your company’s needs and desire to meet them. Your potential vendors will also have a thorough knowledge of the industry you represent and your target customers. For example, if you own a plus-size boutique, you would choose suppliers who are experts in this style of clothing.
In conclusion, procurement management is essential to the success of a company and if you hire the right specialists, things will go smoothly between you and your suppliers.
Since the Sarbanes-Oxley Act provides many stipulations for a company and has large consequences for failure to comply, there is a greater demand for software to help ensure compliance with the SOX act. Some companies have had such difficulty with Sarbox that they have gone so far as to return to the private sector to avoid the hassle. This is where software can help a company traverse this piece of legislation.
The largest problem with the SOX act appears to be in revenue recognition. This refers to the way a company recognizes their revenue on their balance sheets. The SEC is forcing many companies to go back and restate their results to account for revenues differently. This can be a large hassle for a company and cause many problems with shareholders.
The software that has come available to help deal with the stringent SOX requirements helps companies to recognize revenue appropriately in a way that complies with SOX. These software programs are specifically designed with the SOX compliance rules so that reporting is done just as the law requires.
Complying with SOX can be a time consuming and expensive process which is why software programs to help have become so popular. SOX compliance software is designed to provide solutions for Governance, Risk and Compliance (GRC) problems.
Sarbox requires security measures as well. Fully compliant purchasing software programs can help with things like user authentication, password management, accesses, validation, exception reporting, logging, monitoring, alerts, application development, change management,and security audits. These are all required to know that a public company’s system is secure and monitored. By having all of these requirements on an IT department, the company is open to a great deal of risk. A software program to take care of these security measures for you is going to make it much easier to comply with SOX.
Compliance software can also do a great deal of risk analysis that is very beneficial in knowing your system and its security levels. This is a requirement by the SOX act and is accomplished much easier with a software program in place.
Since Sarbanes-Oxley is so demanding and the punishments for non-compliance are incredibly steep, it is important that all publicly traded companies are prepared and secure to ensure compliance with the Sarbanes-Oxley Act. Bellwether Software is SOX Compliant.
Be sure to download our whitepaper on SOX Compliance.
The Sarbanes-Oxley Act, also known as Sarbox and SOX, came about in 2002. This is a federal law that was enacted in to revise and set new standards for publically traded companies. In light of large corporate scandals like Enron, WorldCom and Tyco, the Sarbox bill was created to protect shareholders who were losing large amounts of money due to these scandals.
The SOX act has eleven different stipulations that range from board responsibilities to criminal punishments. The Securities and Exchange Commission (SEC) is the overseer of the enforcement of the SOX act.
The Sarbanes-Oxley Act outlines eleven requirements for publically trading companies to abide by with regard to financial reporting processes. These are called titles.
Title I is the Public Company Account Oversight Board (PCAOB) which is board that was developed to oversee accounting companies that provide audits to ensure appropriate reporting.
Title II is the auditor independence requirement. This says that auditors of a company must be external and in no way related to the company being audited.
Title III is the corporate responsibility statute. This mandate says that corporate officers and executives are personally responsible for accurate financial reporting. This means that executives can be personally held liable for irresponsible reporting.
Title IV is the enhanced financial disclosures requirement. This limits and outlines what reporting is required for various financial transactions. This eliminates the ability for companies to hide behind shell companies, stock transactions, off-balance-sheet transactions, etc.
Title V is the analyst conflicts of interest. This makes it mandatory of security analysts to disclose any possible conflicts of interest so that investors can have transparency.
Title VI is the commission resources authority. This gives the SEC authority to oversee the SOX act and allows securities analysts to be barred from practice should they disobey SOX.
Title VII is the studies and reports requirements. This allows the SEC and Comptroller General to conduct studies of various companies and report their findings openly.
Title VIII is to corporate and criminal fraud accountability and title IX is the white collar crime penalty enhancement. Both outline the criminal punishments available should a company break the SOX act.
Title X is the corporate tax returns requirement that forces the CEO to sign off on the tax returns of the company.
Title XI is the corporate fraud accountability that targets fraud and record tampering in a corporation as well as punishment for doing so.
On Thursday we will take a look at how having a Purchasing Software in place can help you stay compliant.