6 Real Benefits of Procurement Automation

Automation is everywhere — from transportation and home appliances to retail and education. It’s no surprise that procurement has also jumped on board with this trend. According to Business Fortune Insights, the global procurement software market is predicted to experience significant growth, increasing from $6.67 billion in 2022 to $13.80 billion by 2029.?

In our previous newsletter, we shared nine valuable tips for selecting the ideal procurement tool and briefly discussed its advantages. Yet there is much more to explore, so we want to dive deeper into the subject to help you decide whether it’s worth investing in a purchasing solution for your team. Grab a cup of coffee and let us unveil the real benefits automation can bring to today’s procurement.

Streamlined Accounts Payable

Automation makes the duties of the AP department easier when it comes to invoice processing. Thanks to OCR technology paired with intelligent document processing (IDP), manual uploading of invoices is no longer necessary. Instead, users can easily attach images or PDF files and the OCR feature will automatically analyze data, map relevant fields, check for accuracy, and generate pre-filled invoices that can be edited later. This streamlined process not only saves time but also reduces the risk of human errors.?

Moreover, with automation, invoices won’t be overlooked while they are processed in either paper or email form. After all, bills can get lost, addressed to the wrong department, trapped in spam filters, accidentally deleted, etc. Automation with a platform for real-time invoice tracking prevents such scenarios from happening.

Procurement systems also eliminate duplicate payments and maverick spending with the help of automated 2-way and 3-way matching. Plus, as a result of automated invoice capture, matching, and approval, they optimize the billing cycle. For instance, Ridgeline Discovery managed to reduce their invoice processing time by 90% in just a month by implementing Precoro. A shorter billing cycle means no more dissatisfied suppliers persistently asking about their payment status, commissions for late payment, or delayed shipments of goods.

Easier PO Management and Faster Approval Workflows

Automated PO management helps establish a structured purchasing flow that reinforces compliance and prevents missed payments.

By implementing procurement automation, organizations can create purchase orders from scratch or from PRs, use blanket POs,? and add different custom fields to them. Once POs are generated, a system routes documents to the appropriate approver(s) based on predefined rules and notifies them of pending requests, ensuring that they don't miss any deadlines. And even when the document has been approved, no manual intervention is needed for the next steps, as POs will be automatically sent to suppliers via email or a procurement portal.

Purchasing solutions also play a crucial role in reducing overspending. For instance, in Precoro, companies can decide whether users can exceed the allocated budget or not. If surpassing the budget is not allowed, employees will only be able to create purchase orders and invoices when there is sufficient budget available. If it is allowed, employees can create the document which will go through the normal approval process with an added alert for approvers about the document being outside of the budget.

Moreover, automation provides users with real-time visibility into the status of POs. This means that procurement teams can track documents from creation to receipt of goods or services and promptly identify any delays or issues that need to be addressed.

Improved Collaboration and Productivity

Procurement software can revolutionize collaboration and productivity within an organization. It serves as a centralized hub for all stakeholders to access and share data, documents, and communication. This means that everyone involved in the procurement process can stay up-to-date with the latest information and collaborate in real time, regardless of their physical location.?

In addition, purchasing software streamlines order placement and tracking for an entire company while providing executives with complete authority and control over all purchases as soon as they are placed. The necessary order and vendor information can be automatically synced with ERP or accounting software, resulting in a whopping 80% reduction in manual data entry and more consolidated workflows.?

Better Supplier Management and Relationships

Establishing and maintaining positive relationships with vendors is a critical aspect of procurement that requires significant time and effort. However, automation can help businesses streamline the process and reduce workload.

With procurement tools, companies can establish real-time communication channels with suppliers, streamline onboarding, track vendor performance, and enable easy order placement - all within a single platform. For example, Precoro simplifies the supplier onboarding process by allowing organizations to send customizable forms to vendors, modify mandatory fields, and attach documents. When the required information is in the system, the vendors can be sent for the approval process to ensure they meet the organization's requirements and standards. Once approved, suppliers are able to access a separate portal, where they can receive POs, send invoices, and engage in the RFP process.

Additionally, procurement solutions help businesses manage their supplier contracts more efficiently and stay compliant with regulatory requirements. By centralizing important documents such as W9s, SOC2 reports, tax certificates, and contracts, employees can easily access and update them as needed. Moreover, users are also able to configure email notifications when contracts are due for renewal, ensuring timely action and minimizing contract-related risks.

Higher Cost-Savings

Procurement automation has proven to be an effective way to reduce costs, as it provides a wide range of tools that enable organizations to optimize their spend management processes. On average, we estimate that automation helps to save 1.5-4% of annual spending through enhanced visibility of buying behaviors and real-time budget transparency for the finance team and respective budget holders.

But that's not all: Procurement software provides valuable insights into historical purchases and vendor turnover, which empowers organizations to negotiate better contracts. With critical data at their fingertips, businesses can save money on commonly purchased goods and services year after year.

Finally, cost savings are passively achieved due to reduced numbers of errors and risks that would otherwise damage the whole supply chain and lead to financial losses.

Informed Planning and Forecasting

Procurement systems offer valuable insights into your business's purchasing activities and real-time visibility into how and with whom money is spent. This information can be especially helpful during the month-end close, as it streamlines the reconciliation process by providing up-to-date financial information.

Moreover, by utilizing advanced analytics tools, organizations can study their data to identify patterns, trends, and anomalies, and ultimately make better-informed decisions. For instance, in Precoro users are able to monitor spending against budgets, view up-to-date inventory levels, and track document statuses and revision history. This info helps many businesses adjust their plans and forecasts more effectively, preventing stock-outs or overstocking, eliminating budget overruns, and reducing waste.

Educational Materials

For an in-depth comparison of free PO software vs. paid software, check out this resource.

To learn best practices for supplier onboarding, hit the link to our blog.

If you want to learn how to secure a prompt payment discount, click here.

To learn how to conduct spend analysis, follow the link to our blog.

If you want to find out how automation solves invoice processing challenges, click here.

For a complete guide on cloud procurement, check out this material.

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