Procurement teams in organizations are expected to do more with less. Due to the complexity of the procurement process, any inefficiencies can lead to errors, missed opportunities and low productivity. 

Procurement automation can help businesses eliminate manual and inefficient workflows, freeing time for employees to focus on high-value work and strategic tasks. Routine procurement tasks such as contract processing, invoice processing, payment processing and supplier selection can be automated.

Learn how to implement procurement automation in your existing corporate infrastructure, discover best practices and more.

What is procurement automation?

Procurement automation refers to using technology to manage manual tasks and activities within the procurement process. Automating procurement processes allows the team to:

  • Capture incoming requests
  • Route them to the defined approver
  • Get their signatures and other information
  • Automatically update databases with visibility for the procurement team.

For instance, manual tasks and lengthy approval workflows cause delays and paperwork burdens. With procurement automation, these tasks can be streamlined for purchase requisitions. 

With an automated system:

  • Employees can submit electronic requisition forms that automatically route to the appropriate approvers based on predefined rules and budget thresholds.
  • Managers receive notifications and can review and approve requests online, eliminating the need for physical signatures and paperwork.
  • Real-time visibility allows employees and the procurement team to track the status of requisitions, resulting in faster approvals.

Various businesses are adopting procurement automation to save costs and improve ROI. 

How automation is changing the procurement industry

According to a 2022 Hackett Group Study, procurement teams that use technology more effectively can manage 27% more spend and generate 2.4x ROI from cost savings.

Urban Company saved up to 100 hours by automating their procurement operations

Urban Company is an Indian gig marketplace in India, Australia, Saudi Arabia and Singapore. Managing SaaS contracts with more than 3 million worldwide consumers was burdensome for them. 

With over 1,000 employees and 40,000 partners, Urban Company needed help to optimize its SaaS procurement. As a result, they used SaaS procurement management software to streamline their software procurement process.

The procurement management software helped them streamline the price negotiation, contract renewal and approval process. With this, they saved up to 100 hours and 15x savings in ROI.

Accenture empowered procurement with prediction and automation

Accenture applied AI and analytics to its operations, streamlining the procurement process. An AI model recommended the best account from 5,000+ general ledger accounts, while predictive analytics and automation prepared buyers to be more accurate with their purchases. This significantly improved downstream account payable accuracy. 

How procurement automation can benefit your organization

Several organizations use procurement automation software for faster-assisted buying, quicker workflow approvals and better contract management. However, there are many ways in which procurement automation can help your organization, such as:

1. High-cost savings

Automated procurement provides the ability to reach multiple suppliers, calculate supply needs and manage contracts. As a result, one of the immediate benefits of procurement automation is lowered costs.

2. Reduced non-catalog spending

When all your catalogs are in one place, it is easier for stakeholders within the business to buy the required tools or software. This ensures they buy only from an approved supplier.

3. Better visibility

Procurement teams can easily access supplier and cost information with a few clicks. This helps them keep track of the status of contracts and orders.

4. Minimum human errors 

Automated procurement means minimum human errors, which ensures the procurement process complies with all the regulations.

5. Increased efficiency and resources

Procurement automation ensures that most manual tasks are error-free, such as data entry, creating purchase orders or invoice processing. 

5 Procurement processes that you can automate to maximize efficiency

Implementing end-to-end procurement automation is the most efficient way to reduce resource usage and save time. Here are five procurement processes you can automate to optimize efficiency: 

1. Purchase order processing

Manual purchase ordering and approvals mean inefficient workflow because of a lack of visibility as teams work in siloed systems.

Automating purchase order processing can streamline the process of creating, approving and issuing purchase orders. It reduces redundancy and errors while improving the overall accuracy and speed of the process.

What happens when we automate purchase order processing?

An automated request undergoes departmental reviews by the department head, legal, security and finance teams. In this way, it can ensure compliance and accuracy. Each department representative responds to the request within the procurement management platform, and teams can then use a new tool or software.

2. Purchase requisitions

Procurement requisitions are requests from employees or departments to buy goods or services. After internal review and approval, they are used to create purchase orders that are sent to suppliers. 

Automating procurement requisition processes can help streamline procurement, control spending, prevent fraud and provide essential documentation for financial audits. Providing a template or form that captures all of this data upfront can help reduce errors and delays.

3. Invoice processing

Buyers worry about handling many invoices, while sellers are concerned about timely payments and invoice accuracy. Automating invoice processing reduces the time and effort required and improves accuracy. 

Procure-to-pay automation (P2P) can also help improve the efficiency of the P2P processes by automating tasks like payment processing and invoice processing.

4. Spend analysis

Procurement automation provides real-time visibility into spending habits and trends. This understanding can inform resource allocation decisions and improve efficiency. 

5. Contract management

Manually managing contracts is expensive and chaotic. Poorly-organized contracts hinder effective monitoring of contract compliance. 

Automating contract management through a centralized repository streamlines the process of creating, negotiating, approving and merging contracts, reducing the risk of errors.

6. Supplier management

Failure to manage supplier relationships leads to issues like communication breakdown and poor performance. Procurement automation helps by automating supplier onboarding, monitoring and contract management, resulting in reduced costs and better decision-making.

Integrating multiple apps and systems and standardizing procurement processes enable companies to improve visibility and minimize spreadsheet sprawl.

10 best practices for procurement automation

Here are some best practices to implement procurement automation:

1. Assess your existing procurement procedures

A holistic assessment of your processes offers an in-depth report of your bottlenecks and the effectiveness of the current process. Procurement teams must assess the existing systems by centralizing relevant data related to contracts, pricing, signatures or other information.

2. Define your automation goals

Set clear goals for what you want to achieve with procurement automation. It could be streamlining the procurement process, reducing costs and improving the bottom line for enterprises or freeing employees from repetitive and time-consuming tasks to focus on more business-critical operations. 

Procurement automation also allows for real-time communication with suppliers and centralized data, serving as a single source of truth for all stakeholders. Prioritize your goals well before starting the process of automation.

3. Collaborate with other departments

Procurement automation is a team effort. Organizations need to maintain cordial interdepartmental relations and integrate all systems to create a unified automation process for procurement. It needs input from all departments involved in the process.

4. Identify areas for automation implementation

After analyzing overall procurement automation, examine which tasks should be automated first. 

While some tasks will require human intervention, such as filling in vendor information, contact details or company information, managers need to identify tasks that can be automated. For example, you should never automate pricing approvals. 

On the other hand, tasks such as invoice processing, supplier management and purchase order creation can be easily automated.

5. Evaluate shadow IT spending

Mid and large-sized organizations must evaluate their IT budgets more closely. When teams such as legal, content or data subscribe to services outside the approved tech stack, overspending can occur.

Procurement and IT teams can better understand the company’s requirements by using a centralized repository and meeting them within the IT budget. This allows them to identify and evaluate shadow IT spending and ensure compliance with procurement policies.

6. Focus on Key Performance Indicators (KPI)

Tracking KPIs such as number of suppliers, cost saving, cycle time and supplier performance can help manage consistent improvement in the procurement automation process.

7. Perform comparative price analysis

By understanding the actual cost of a product, you can compare it against industry standards. Regularly conducting price benchmark analysis enables you to achieve the best ROI and identify opportunities for cost savings.

8. Building long-term partnerships with suppliers

Long-term partnerships can reduce your procurement costs over time. For instance, with SaaS procurement software, you can skip the hassle of negotiating with suppliers, improve collaboration and mitigate risks of errors.

9. Leverage data analytics

Data analytics offer valuable insights into your procurement process and help you make efficient and informed decisions. Factors such as procurement efficiency, procure-to-pay cycle time, spending reduction, supplier performance and cost of goods sold can help you identify patterns, trends and opportunities for growth.

10. Regularly training your staff

After identifying key processes to be automated, evaluate the tools and technologies for automation. Conduct regular training for your staff to use the tools and technologies, monitor their progress and encourage them to follow best practices.

11. Continuously monitor and improve

Procurement automation is not a one-time event but an ongoing continuous improvement process. Regularly monitor the performance of your automation solution and make necessary adjustments to ensure that it meets the needs of your organization.

How to optimize procurement automation for SaaS 

With 78% of small companies investing in SaaS, the adoption rate growth of SaaS is remarkable. It becomes increasingly crucial for companies to manage their SaaS spend effectively. However, optimizing costs and ensuring value from SaaS investments can be challenging due to its novelty compared to traditional software procurement processes.

Spendflo offers a strategic solution for your SaaS procurement automation needs

Procurement automation with Spendflo can save you costs and ample time to focus on high-value tasks at work. With the best practices discussed, you can build a robust alliance between your teams by creating a unified procurement system to manage your SaaS spend and maximize your savings by up to 30%.

Wondering how you do that? Contact us to get a free savings analysis

Ajay Ramamoorthy
Karthikeyan Manivannan
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