The Pitfalls of Purchasing

Most organisations have robust, efficient systems and processes around their revenue generation or their direct spend on raw materials and stock, but few have the same degree of focus around their indirect spend. Employees are often allowed a large degree of freedom to buy what they require, with the main reason being to avoid introducing any controls that result in a delay to the provision of goods or services.

This typically produces a set of significant problems for Finance, with many manual processes and procedures in place, purchases made without authorisation, a subsequent lack of visibility of commitments until an invoice arrives, possible coding errors, and budgets often overlooked until well after the event. This maverick spend can be damaging enough but can be worsened through malicious and fraudulent behaviour which can run unchecked through these gaps.

The Procurement team similarly suffers; they will have negotiated pricing, and perhaps agreed tiered volume contracts with key suppliers, but witness a lack of spend against those contracts as employees continue to buy from unapproved sources at higher prices.

Guided, Approved Buying

Deploying a proven Purchase-to-Pay (P2P) application ensures compliance with established approval policies to avoid unnecessary or inappropriate purchases while making it easier than ever for your organisation to quickly get the goods and services it needs from approved suppliers that deliver the best value.

The web-based platform is faster and more transparent for employees, provides managers with greater budget control, increases ‘cost pipeline’ visibility for financial management, speeds PO release to suppliers, enables automated invoice matching and payment authorisation, and captures an electronic history of spend activity for Procurement’s use in spend analysis.

Implementing these controls will reduce the cost of purchased goods and services by increasing your level of overall ‘spend under management’ while reducing risk and eliminating fraud.

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