Priorities in the procurement function constantly evolve. Over the past two decades procurement has slowly transformed from a back-office function to a strategic, value-creating business unit. And now – in the wake of the COVID-19 pandemic, procurement leaders are needed more than ever to identify savings, create efficiencies, and make a bottom-line impact.
In a Gartner survey around procurement’s value contribution, respondents were asked to list their top three priorities for the procurement function. The top priorities include:
- Developing stronger, more collaborative relationships with the supply base
- Delivering cost savings
- Improving cash and working capital conditions
- Reducing supplier lead times
Digitization is required to quickly and successfully achieve these goals of procurement transformation. Here are four areas to digitize first:
1. Digitize your connection to suppliers.
In an era where enterprise supply chains are large, complex and global, supplier relationship management is critical – especially in a global pandemic where an issue with a second- or third-tier supplier can have a major impact on the bottom line. Implementing technology that enables easy, two-way communication between your organization and your suppliers is the only way to ensure fast and timely communication if an issue arises, or if all parties are forced to go remote.
For mid-market organizations with smaller supply bases, digitization improves day-to-day performance, efficiency and collaboration. When procurement and finance can collaborate freely and digitally with vendors, spend visibility improves, productivity increases and errors decrease. The joint efficiency gains strengthen key supplier relationships and can often lead to additional savings on goods and services.
2. Digitize catalogs and purchase requisitioning.
The way we shop and buy goods in our personal lives is almost completely digitized. Now, it’s time for business to catch up. Employees need an easy and modern way to search for and purchase the goods and services they need to keep the business running – especially as many organizations continue to operate remotely. With a centralized and digital catalog extension that houses only pre-approved suppliers, employees can find the goods they need at pre-negotiated rates.
On the simplest level, leveraging a modern marketplace and taking advantage of negotiated supplier savings increases employee adoption while reducing costs and maverick spend. On a deeper level, automating the purchase requisition process gives finance and procurement teams more control over what the organization is spending, with what suppliers, and the cost and budget implications of business purchases.
3. Digitize invoices.
Manual- and paper-based vendor invoices can create unnecessary issues like overpayments, duplicates, savings leakage and payment errors. This shouldn’t be the case. Digitizing the invoice process gives procurement more control over who they’re paying, how much, and when – leading to improved cash flow and working capital conditions, shorter cycle times and improved spend visibility.
There are three keys to digital invoice management: electronic invoice capture, which enables organizations to automatically capture and process incoming invoices electronically, 3-way match, which ensures you only pay for what you ordered and receive, and accounts payable integration, which automatically sends an “ok-to-pay” trigger to AP when invoices are approved. Together, these features dramatically improve productivity, efficiency and financial control.
4. Digitize payments.
Who has time to write out and deposit paper checks, or go into the office to check the mail? No one in this environment. Manual payment methods are outdated and inefficient – not to mention costly. With a digitized payment process, procurement teams reap the benefits of an improved workflow and realized payment rebates. On top of that, digital payments reduce supplier lead times, fraud and costs, and vendors will thank you when they immediately see a payment hit their account.
As procurement’s priorities continue to shift in light of the COVID pandemic, digitization becomes even more critical – especially when it comes to your suppliers, catalogs and purchase requisitioning, invoices and payments. The results will be stronger more collaborative relationships with your suppliers, cost savings, improved cash flow and more.
For more information on the benefits of digital procurement, check our latest on-demand webinar with Nvoicepay.