Regardless of the size of a company or its specific industry, the activities of procurement and accounts payable impact each other. Because of this link, a company’s goal should be to maximize the efficiency of both departments. Doing so has very clear benefits, especially in regards to the procure-to-pay process.
One of the best ways to reap all of those benefits is to automate procure-to-pay activities. Purchasing automation offers efficiency and speed improvements that simply aren’t possible through any other means.
Automation directly impacts procurement staff. Once automation is introduced into this environment, it provides procurement professionals with what they need to operate at a higher level of both efficiency and productivity. What’s even more appealing about those gains is they can then help to reduce the staffing costs that go along with processing orders. Instead of spending large amounts of time on basic tasks related to the purchasing process, members of this department can focus their attention on activities that create far more value.
Key Benefits of Procure-to-Pay Automation
Once procure-to-pay processes are automated, a business will notice faster cycle times. The second notable benefit of purchasing automation is increased efficiency for purchase order processing. Because an automated system takes care of routing information in the most efficient way possible, previously wasted time caused by communication inefficiencies is eliminated.
The third benefit that’s very meaningful for businesses is that procurement employees are able to process significantly more purchase orders. That benefit stems from purchasing automation directly assisting with common tasks like purchase order generation.
Another benefit that goes along with automating procurement is a reduction in supplier lead times. The clear and consistent data sharing provided by automation ensures that suppliers have everything they need to avoid delays.
Moving Towards Purchasing Automation
Once businesses learn about all of the benefits that procurement automation has to offer, they generally want to learn more about what it takes to make this transition. When this topic comes up, it’s generally a good time to review the current strategy that’s in place for managing procurement. Looking at the current state of areas like receiving and invoicing provides an opportunity to identify key areas for improvement.
The good news about purchasing automation is not only is it very beneficial, but it’s easier to implement than many companies expect. With the right purchase order software, companies can get all the features they need. From customized work flows to purchase order generation, quality purchasing software puts all the power of automation into a straightforward interface.
A purchase order (PO) plays an integral part in the purchasing process. This document lets a seller know that a buyer is ready to place a formal order. Because this document does serve as a contract between the buyer and seller, it’s important for it to include all relevant information.
It’s critical for the price to be clearly stated on the PO. Since it’s common for buyers and sellers to negotiate price, the PO needs to show the price that was agreed upon. If a purchase order doesn’t include price information, it won’t be helpful later in the event of a dispute.
In terms of areas where buyers can gain leverage for negotiating, quantity is at the top of the list. Simply put, higher quantities make sellers more willing to negotiate on price and other terms. One of the many benefits of purchasing software is it makes it easy to ensure orders are made together in maximum quantity instead of being spread out across multiple smaller orders.
Latest Ship Date
One of the most common mistakes organizations make with purchase orders is failing to negotiate a latest ship date and then putting that date on the PO. Knowing the absolute latest an order will be sent out is the only way to know when it will be available to actually put into inventory.
Terms of Sale
In addition to pricing, a well-done purchase order should cover all other relevant terms of sale. From how payment will be handled to specifying expected quality, using a purchase order to cover these details ahead of time is the best way to avoid a future dispute.
During the rush of trying to put together a purchase order, it’s easy to overlook seemingly small details like marking requirements. However, overlooking this detail can result in products getting stuck in customs. To avoid that type of delay, ensure that all required markings are specified on the purchase order.
Purchasing Software Simplifies Purchase Order Generation
There’s a lot that goes into correctly preparing a purchase order. As a result, the process of preparing one manually can take up a lot of time. For businesses that want to ensure this task is done correctly and maximize efficiency, purchase order software is the ideal option.
With the help of software, purchasing managers and anyone else involved in procurement will have everything they need at their fingertips. Not only do customized work flows make preparing and generating accurate purchase orders a breeze, but this type of software streamlines numerous other tasks like vendor research and vendor negotiations.
In general, the sales cycle for B2B offerings is significantly longer than it is for B2C. From initial contact through pitches to negotiations, there’s a lot that has to get done in order for a deal to close. Because there are already so many potential roadblocks in place, it’s important for a company to provide as much support as possible to their salespeople.
By providing all the support that’s needed, companies can ensure that they’re not causing any inefficiencies that make things even more challenging for their salespeople. While salespeople will still have to contend with challenges like making it clear why a specific offering is superior to that of a competitor, not having internal hurdles to overcome can provide a significant boost.
To ensure that there aren’t walls between sales and management which are hindering the ability of the former to make deals, let’s take a look at three ways workflow automation can be successfully used:
Provide Smart Deals
One of the reasons that it’s typical for B2B sales to take longer is because price is something that’s almost always negotiable. From more complex packages to higher volumes, buyers want to be sure that they’re getting the best deal for their money. Since a lot of back and forth is already going to accompany this process, companies don’t want to create even more of it for their salespeople.
Instead, eliminating the need for drawn out internal discussions can give salespeople the flexibility to push for a sale and successfully close. With an automated approval workflow, salespeople can have the confidence to strategically discount without worrying about offering something that is going to make their manager unhappy.
Process Special Requests
Price isn’t the only element of B2B negotiations that often requires approval. There are a wide range of things that may come up which will require a salesperson to seek approval from their manager. If you want to ensure that getting special requests approved doesn’t stand in the way of a deal, an automated workflow is essential.
Dynamic Management of Inventory
One big consideration for B2B buyers is how quickly a solution can be delivered. If two offerings share many of the same features but one provider is able to deliver significantly faster than the other, the buyer is probably going to err on the side of speed. Utilizing automation in regards to inventory can help a business be as aggressive as possible with their delivery timelines.
It’s worth noting that the type of automation discussed above can benefit a business in other ways as well. For example, purchasing managers can use purchasing software to streamline their purchasing process and increase the overall efficiency of everything related to procurement.
As the role of purchasing continues to expand and grow, it’s easy to get caught up in all of the latest trends. While there is definitely value in knowing what’s new, it’s now more important than ever to have a really strong grasp on the fundamentals of effective purchasing.
The reason that fundamentals are so important is because many organizations are looking to enhance their purchasing through efforts like automation with purchasing software. Since automating different tasks can provide a major boost to what’s currently being done, it makes sense for companies to explore the different options that are available.
However, the key thing to remember is if there are currently processes in place that aren’t optimal, automation isn’t going to magically solve them. So before a company can reap the benefits of things like automation, they need to ensure that purchasing is being done in the best way possible. That’s where the three cornerstones of effective purchasing come into play:
Although we’ve all settled into 2015, there’s still quite a ways to go before we reach 2016. Since there is a lot that can happen between now and the end of the year, many procurement professionals are looking at different trends which are expected to shape the landscape of procurement this year. If you’re curious about which factors may have the biggest impact on your profession, we’ve pulled together a list of trends that you should know about:
A Focus On Organizational Alignment
More companies are realizing that organizational alignment is an important part of staying ahead of the curve. Because many companies are looking for ways to create greater synergy among departments, it’s important for procurement to get on board with this change. That can mean having more direct communication with departments like IT or marketing. While it can take some time to adjust to this change, procurement departments that embrace this idea will actually stand to gain a lot.
Shifts in Inventory Strategies
Shrinking product life cycles and supply chain simplification are just a few examples of things that are driving the need for procurement to take a more holistic approach to managing inventory. As a result of this changing tide, it will be important for procurement departments to keep their eye on ways to accomplish goals like serving multiple channels with a single pool of inventory.
Managing Performance in Real-Time
Purchasing software is having a big impact on the way that procurement processes are carried out. One example of the impact of purchasing software is that more things are being done in real-time. Another impact is that lots of data is being collected. While most companies have no shortage of data available to analyze, translating that data into actionable information can be a challenge. Procurement departments that are able to figure out how to properly harness different types of data will have a significant competitive advantage.
The Influence of Emerging and International Markets
Apple recently announced that iPhone sales in China beat the United States for the first time. Not only are established international markets like China influencing what’s happening throughout procurement departments, but emerging markets like Latin America are also having a noticeable impact. Since these changing markets are impacting everything from logistics to pricing, it’s important for procurement departments to be on the lookout for new opportunities.
Building Stronger Relationships with Suppliers
Many businesses are really emphasizing the importance of building long-term relationships with suppliers. While that doesn’t mean procurement departments should avoid negotiating, it does mean that purchasing managers should look for ways to engage in win-win negotiations. By taking the initiative to really strengthen these relationships, procurement departments will be in the best position to weather any changing circumstances that may come up down the line.
Running a successful procurement department isn’t something that generally happens overnight. In order to get this department to an optimal position, it’s important for there to be clear goals in place. In addition to setting clear goals for what the department should focus on achieving, it’s also important for everyone who works in procurement to be aware of common mistakes. By knowing what’s most likely to go wrong, every member of the team can keep an eye out for procurement mistakes and correct them if they ever come up.
Since we are in a position that allows us to speak with purchasing managers and other procurement professionals on a regular basis, we want to share the most common mistakes that have been brought up to us:
This mistake is especially common in new businesses. And even if a business is established, it can still happen if the procurement department has just gotten up and running. The most common reason that rushed buying happens is because a company or its procurement department feels like they need to get everything ordered as soon as possible. While securing what’s needed in a timely manner is important, that doesn’t mean the procurement process should be thrown into overdrive. By focusing on a striking a balance between thoroughness and promptness, procurement departments can do an optimal job.
Not Being Flexible with Plans
It’s definitely good for procurement departments to have plans in place. Not only can this keep things moving along, but it’s also a great way to avoid common obstacles. While there are clear benefits to planning, that doesn’t mean members of a procurement department should be tied to a plan forever. Since conditions can change, it’s important to review plans on a regular basis. By making reviews part of a team’s culture, the department won’t have to worry about getting stuck in any negative patterns.
Failing to Negotiate
Although we’ve already talked about negotiating on the blog, it’s a topic that’s worth bringing up again. Even though most procurement departments are conditioned to look for deals, far too many completely overlook the possibility of negotiating. Simply put, as long as it’s done in a reasonable manner, there’s no reason that purchasing managers shouldn’t negotiate.
Making Major Decisions in Isolation
One of the roles of a procurement department is to keep things moving along smoothly for the entire company. While it doesn’t make sense to seek input for every purchase, there are times when the department should loop others into the conversation prior to making a final decision. By opening up the lines of communication, a procurement department can avoid the wasted time and resources that go along with making an incorrect decision that then needs to be corrected.
We’ve recently written about the fact that many purchasing managers don’t negotiate at all when they speak with suppliers. We have also gone over some of the strategies that purchasing managers can use to successfully negotiate with suppliers. While this has allowed us to cover many of the best practice for procurement negotiations, there’s still another topic that we want to touch on.
Although many procurement departments don’t negotiate, there are those that make negotiations a standard component of how they run. However, just because a procurement department has a standard process for negotiating doesn’t mean that they’re doing things in an optimal way. Forbes recently covered a common mistake that’s made by procurement departments in the logistics space and other industries.
Not Knowing When to Give a Little
The negotiation mistake that the Forbes article addressed was procurement departments getting too aggressive with their terms and conditions. Specifically, this is an issue that has started to become quite widespread over the last few years. The problem with this trend is instead of using the industry standards that have been in place for a long time, companies are making the decision to come up with their own rules and contract terms. By doing this, they end up putting an unreasonable amount of risk on their service providers and carriers.
So, what happens when procurement departments put themselves in this position? Although they may be operating under the belief that they’re in control, the reality is that taking an overly aggressively stance can negatively impact the leverage that a purchasing manager has during the course of negotiations. Once a supplier realizes that they’re dealing with a department that has unreasonable demands, they’re going to be far less motivated to make the deal work than if they only had to meet in the middle on more reasonable terms.
How to Remedy This Problem
Since this trend has become a noticeable issue, many companies are looking for ways to remedy it. The good news is there are several steps that can be taken to get negotiations on the right track. The first is to hire and train the right candidates. By ensuring that purchasing managers understand the optimal approach to negotiating and have the skills to carry out this process, aggressive tendencies can be eliminated.
The other step that companies should take is ensuring they cultivate a culture that’s focused on a long-term vision. While it is true that really squeezing the terms of a deal can seem like a win, any gain is only temporary. If a company wants to build a mutually beneficial relationship that will help it thrive over the long-term, this is a mission that needs to be shared with everyone in the company.
Let Bellwether Purchasing Software help your company improve supplier neogtiations with our flexible and comprehensive purchasing software. Contact us today to see why Bellwether Purchase Software is the software to choose.
While there’s no denying the fact that technology is now everywhere, that doesn’t mean it always lives up to its promises. Most businesses have gone through the process of getting excited about a specific piece of technology, only to have it fall short of the claims it makes. Because this can cause a business to invest time and resources into a solution that ultimately ends up not working out, plenty of businesses have a healthy dose of skepticism about adopting any new types of technology.
Although this outlook on things is completely understandable, it’s important for businesses to maintain the right perspective about technology. Despite some bumps along the way, that simple reality is that modern business is driven by advances in technology. Since technology is the best way for businesses to save time and money, businesses that constantly adopt the right solutions are able to gain a significant advantage over their competitors.
If you want to ensure that your business stays at the forefront of its industry instead of being at risk of falling behind, it’s important to be open to utilizing technology solutions with a track record of saving time and money. One solution that falls squarely into this category is to have your purchasing department automate. Even though it wasn’t that long ago when businesses had no choice but to manually process purchasing orders, that’s no longer the case.
And given the fact that manual processing has significant costs and resource requirements associated with it, this is something that businesses should automate as soon as possible. If your business understands the savings benefits associated with this form of processing but is concerned that implementing this type of system is going to be a major undertaking, you’ll be happy to know that Bellwether Purchasing Software offers a simple but powerful solution.
The Ideal Automation Solution for Small Business and Mid Market Purchasing Managers
The reason that Bellwether Purchasing Software has such a good track record is because it was specifically designed with small business and mid market purchasing managers in mind. Since it was built to make it possible to easily automate purchasing processes and eliminate paper, it has all the necessary features without any unneeded bloat.
Because our software was built with user friendliness in mind, it shouldn’t come as a surprise that it is incredibly easy to get up and running. Thanks to its availability as a secure SaaS solution, purchasing managers can fully use Bellwether Purchasing Software without needing to pull IT away from their other responsibilities.
Requisitioning, approval processes, PO generation, receiving, inventory, invoice matching and reporting are all features of our purchasing software. So if you’re ready to enjoy all the benefits of upgrading purchase order processing from a manual process to an automated one, contact us today.
A PunchOut provides a way to connect directly to vendors’ catalogs. By using a procurement software to set up PunchOuts, buyers have the ability to order directly through the web. Given all the benefits that this type of system can provide, it’s not surprising that usage of PunchOuts has seen an increase of 31% over just the last year.
While that is a notable amount of growth, many businesses still aren’t utilizing this system. When asked why, one of the most common responses is that businesses are concerned that the process of setting up this type of system is going to take too much time or require a large amount of resources. Although it is true that some setup is required, the process is simpler than most businesses expect. And given all the benefits of having PunchOuts in place, it’s an investment that businesses end up being very happy they made.
Whether you’re already on board with this concept but need some concrete points to help build your case or you’d like to know more about exactly what can be gained from PunchOuts, we want to take a look at look at the exact benefits that this practice can provide to a business:
No Maintenance Required for Purchasers
Once you get PunchOuts set up, you won’t have to worry about any ongoing maintenance. The reason is because any required catalog maintenance will be handled by the supplier. Since this isn’t something that your business will have to spend time doing, it will save you both time and money.
More Detailed Information
Not only are PunchOut catalogs really convenient, but they’re also very useful. Since being online means it’s easier for suppliers to properly maintain these types of catalogs, they provide purchasing managers with more detailed information. From current discounts to correct shipping costs, the fact that suppliers can do real-time updates is something that’s quite helpful for buyers.
Centralized and Simplified Purchasing
In addition to concerns about setting up PunchOuts, one of the other hesitations that purchasers have is that this system will get in the way of them being able to negotiate. However, thanks to the fact that negotiated prices can be hooked directly into the system, PunchOuts actually provide a way to promote purchasing consolidation, which in turn helps to maximize spend management.
Save Time and Increase Productivity
Since most purchasing managers already have a lot on their plate, there’s no reason that they should be spending their valuable time trying to navigate broken systems. By making the transition to PunchOuts, buyers will be able to save time, increase their productivity and focus their energy on the types of tasks that will have a very positive impact on the business as a whole. Bellwether Purchasing Software can help you make this transition easier. Contact us today to learn more.
Although the question of much manual purchases orders is a topic that regularly comes up in procurement, getting a clear answer to this question can be surprisingly hard to do. Since so many purchasing managers know that this process is costing their company a considerable amount of money but don’t have a concrete figure to point to, we thought it would be helpful to dive into this topic and provide some accurate calculations.
The Average Cost of Manual Purchase Orders
One of the reasons that many people don’t have a clear figure for their own company is because costs can vary quite a bit based on industry. Because it can be a challenge to nail down an exact cost, it’s helpful to have benchmarks from multiple sources and industries to use as comparison. In 2006, APCQ conducted a study which made the differences in costs between industries quite clear. The conclusion of this study was that depending on the industry, the cost of manual purchase orders can be anywhere between $35.88 and $506.52.
In 1994, the EPA pegged a conservative estimate of $94.20 per purchase order, with the caveat that this process can reach a cost of $300. Another source that has added data to the mix is the Supply Management Handbook. This guide explicitly states that not only can the administrative costs associated with a purchase order easily exceed $100, but it’s not uncommon for the total cost of manually processing a purchase order to top $200.
Last but not least is data from CAPS Research. This research found that in industrial manufacturing, every purchase order has an average cost of $59. This cost skyrockets all the way to $741 in the petroleum industry. And when everything is averaged out, the standard cost for a purchase order across industries is $217. It’s worth noting that since much of the research estimating costs was done a decade or more ago, the current costs of what was calculated back then will be noticeably higher.
PO Automation Will Save You Time and Money
Since there are very real costs associated with manually processing purchase orders, purchase order automation can help companies save a significant amount of money. While the total cost per purchase order varies by industry, purchase order automation has the ability to reduce that cost by up to 75% per invoice.
Although those significant savings are enough to get most businesses on board with PO automation, that’s just one of the benefits of Bellwether Purchasing Software can provide. Automating purchase order processing will also boost productivity, as well as ensure that your business is able to maximize its category spend. So if you’re ready for your business to start reaping all those benefits, learn more about all the features and benefits of Bellwether’s Purchasing Software, contact us today.