This week, Shaz Khan tackles the resistance of many companies to adopt new procurement solutions. Here are his highlights to why you can get by without procurement, but you won’t be better off for it.
Can we get by without procurement software?
The answer is yes.
I think if you look at it the question becomes, can we run our business and get by without running any financial software? And that answer is yes. You can run your entire business, maybe, on Excel.
Will you run a very good business using old, antiquated tools?
Will you eventually get caught up in manual data entry and forget things that negatively impact your business? The answer is yes.
The same is true with procurement systems, also. You can be a 100-year-old company that has never had a corporate procurement system, that has done everything on paper, but never gained from efficiencies. You’ll see tons of mistakes, tons of manpower that really could have been automated.
The prioritization of procurement is low. Companies typically want to tackle that last. Now, what we are seeing is companies that are getting funding. They also have to look at it from a corporate governance and controls perspective that you can’t just give credit cards to people and say, ‘Ok! We have a procurement system!’ And there are companies out there today that are doing that, and they’re not performing, from our view, very well.
You need a system to provide visibility to controllership, to your IT-ship, on-
What are people buying?
When are you expecting your invoice?
How much cash are you going to have in the bank after you pay them?
Procurement Costs Less
You will see traditional business processes that require manpower are more expensive. It’s not necessarily what is the cost of the individual for that year. It’s easy enough to compare cost of manual processing vs. automated processing. You have to factor in the mistakes.
What happens when the first, second, third mistake happens?
What is the cost then to the company? What is the cost for an overpaid invoice when the cash could have been sitting in the bank but wasn’t? What’s the cost of purchases coming through that nobody has any idea where it came from?
And that’s where corporate procurement systems give visibility, controls, compliance, and productivity.