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One area that is often overlooked is procurement. Procurement can be a complex process, but you can optimise it for your business with the right tools and strategies in place. Here's how you can do just that.

Research And Understand Procurement Terms

The first step to optimising your business's procurement process is researching and understanding the different terms associated with it. This will help you identify the right tools and strategies for your company. For example, if you're not familiar with the term procurement spend analysis, you won't be able to manage your company's spending properly.

You should also learn to differentiate some simpler terms and comparisons like invoice vs. purchase order. Invoices are what you receive from vendors after making a purchase. On the other hand, a purchase order is an agreement between your company and a vendor that outlines the terms of a sale. By understanding these terms, you'll be able to manage your company's procurement process more effectively.

Create A Procurement Policy

Once you understand the basics of procurement, you can create a procurement policy for your company. This policy should outline how your company will approach and handle procuring goods and services. Some factors to consider when creating your procurement policy include:

By having a procurement policy in place, you can ensure that your company is getting the best possible products and services at the best possible price.

Evaluate Your Vendors

It's important to periodically evaluate your vendors to ensure that they still meet your company's needs. When evaluating your vendors, some considerations include:

By evaluating your vendors, you can ensure that your company gets the best possible products and services at the best possible price.

Train And Educate Your Workforce

Your employees play a vital role in the procurement process. They are the ones who will be using the products and services that your company purchases, so it's essential that they are properly trained and educated on how to use them. By ensuring that your employees are knowledgeable about the products and services they will be using, you can help to optimise your company's procurement process.

Up Your Negotiation Game

To optimise your company's procurement process, you need to ensure that you are getting the best possible prices for the products and services you are procuring. This means you need to brush up on your negotiation skills when you're entering new procurement negotiations. There are a few key things to keep in mind when you're negotiating with suppliers:

Optimising the procurement process can be challenging and time-consuming, but it's worthwhile to ensure that your company is getting the best possible deals on the products and services it needs. By following the tips above, you can be sure that you're getting the best value for your money.

 

Even in small businesses where there are no full-fledged procurement departments, implementing spend management is still very important. To effectively implement this, you will need to collate, maintain, categorise, and evaluate spend data. The goal is often to regulate compliance and improve efficiency. Are you saddled with the responsibility of implementing spend management? Here are five effective ways you can do it:

Perform a Detailed Spend Analysis

To implement spend management effectively, the first thing you need to do is perform a comprehensive spend analysis. Through this, you will have a better understanding of what you are spending and where to make changes. The analysis will help you identify key suppliers and savings opportunities you can target. You will also be able to minimise risk and expense that come with non-compliant or underperforming vendors.

Streamline Payment Methods

A standard procurement department can easily track and manage all purchasing activity. In the absence of this, staying on top of all employee spend can be very challenging. A simple solution will be to streamline payment methods. Finding a way to feed all spend data automatically into one company bill will make things a lot easier, and it will also improve accuracy.

Define the Approval Process

In addition to streamlining payment methods, you need to define and clarify the approval process with everyone involved in procurement in your organisation. Every employee that can spend on behalf of the company must know who to approach for approval, and there must never be any form of conflict. When everyone understands the approval process and respects it, procurement will be less frustrating. Mistakes will be minimised, and no one will have to cut corners.

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Use E-Procurement Software

There are several spend management and e-procurement software that can help you implement the process. Some of these platforms can be integrated as an all-in-one solution or as individual platforms that will make your work easier and more accurate. With this software, you can effectively capture tail spend data and get the information in a comprehensive form in your dashboard. From the data you receive, it will be easier to make decisions and implement changes.

Invest In Education and Training

If you have a procurement department in your organisation, investing in education and training for every member will be beneficial in many ways. Even if you don’t have a standard procurement department, you can train everyone involved in procurement. This is even more important if you have integrated an e-procurement software. When every person on the team is well-trained and on the same page, implementing spend management becomes easier.

Endnote

Spend management is important to keep your business or organization profitable. Fortunately, you can improve the process by performing a comprehensive spend analysis, streamlining payment methods, and using a management software. For effective results, it is important that you do it right. Implementing the effective methods discussed above will help you achieve your objectives.

Yet according to PwC, this form of fraud is the second-most commonly reported economic crime in the world, ranking above bribery, corruption and even cybercrime. The question is – who should lead counter-fraud efforts? This week Finance Monthly hears from Laurent Colombant, Continuous Controls and Fraud Manager at SAS, to explore the ins and outs of procurement fraud.

Worryingly, businesses seem unclear on the answer. Our latest research report, Unmasking the Enemy Within, found there was no clear leader or common approach to procurement fraud prevention across businesses. Indeed, almost a quarter (23%) of business leaders have no clear owner assigned to the task or can’t say who is responsible.

Finance in the firing line

What’s not in question, however, is who’s held responsible for the damages that fraud inflicts. While CFOs might not be involved in day-to-day anti-fraud operations, they are frequently first in the firing line when procurement fraud is uncovered. In 2014, for example, Sino-Forest Corp CFO David Horsley was fined C$700,000 by regulators for failing to prevent fraud under his watch. Furthermore, he was permanently banned from being a public company officer or corporate director, and was ordered to pay $5.6 million to the company’s investors following a class action settlement.

While they are unlikely to coordinate fraud efforts single-handedly, 31% of companies place ultimate responsibility for fraud in the CFO’s hands - more than any other role. That’s hardly surprising, given that fraud has a direct impact on the bottom line, with over half of businesses (55%) reporting losses of up to €400,000 per year.

While we are not arguing that the finance department should be the command and control centre for anti-fraud efforts, it’s clear that the CFO has a crucial role to play in tackling procurement fraud. They are the ones who guide purchase decisions, who oversee risk management or audits and, ultimately, have the final say in what anti-fraud capabilities a company is equipped with.

Even so, it’s unfair to expect the finance department to shoulder the entire burden themselves. Just as IT security in the organisation is everyone’s responsibility, so too must accountability and responsibility for fraud be embedded throughout the workplace.

Invest for success - modernising the detection process

Yet there is much that the finance department can do to help uncover incidents of fraud – not least conducting regular audits. Around half businesses (46%) claim to hold regular internal audits, but many of these exclude procurement fraud from their remit. More worrying still, more than one in 10 (11%) organisations admit to either doing nothing to audit for procurement fraud or are unable to say what they do. A further fifth (22%) fail to audit for procurement fraud at all.

That one in three companies aren’t actively searching for procurement fraud, or don’t know what processes cover it, suggests a blind spot that potential fraudsters could easily exploit.

Finance needs to look at areas where existing auditing process are letting them down. When we look at how organisations deal with procurement fraud, 29% validate procurement applications manually while a further 30% rely on staff to inform them of any wrongdoing. Both carry a high risk of human error, potentially minimising or masking the true scale of the problem.

Ultimately, the buck stops with the CFO, which is why they should consider a new approach to auditing based on continuous and automated detection. This is only possible with a strong foundation of advanced analytics that assists investigators in pinpointing the needles in the haystack. A company’s ability to identify and prevent fraud rests, to a very great extent, on the good judgment of the CFO in selecting the right systems to prevent fraud from happening in the first place and deterring anyone with ill intentions.

Continuous, data-driven detection represents the best way to fight procurement fraud and identify errors, enabling companies to pre-empt signs of fraudulent activity rather than discover it after it’s taken place. This limits costs, saves time as well as reputation and prevents losses.

Yet only a small minority of organisations are using advanced analytics (14%) and AI (nine%) technologies in their anti-fraud efforts. The most common obstacle to adoption is the perceived cost of the technologies, but this could well be short-term thinking on the part of the CFO. While there is an upfront cost implicit in any implementation, an effective fraud detection tool will quickly make its money back in the losses it prevents and the monies it helps recoup.

The finance department should not be afraid to make the case for investment in the latest advanced analytics and AI solutions. Procurement fraud is too serious and too costly to make short-term capex savings in favour of the long-term ROI offered by analytics-enabled security. After all, the buck stops with them.

A recent Deloitte survey of global chief procurement officers stated that 78% of procurement leaders saw cost reduction as their top business strategy. A survey by Scout RFP shows that 77% of financial respondents from companies with more than 1,000 employees said that procurement makes finance and the enterprise more effective, a clear sign that procurement and finance are a match made in heaven.

How can finance and procurement work alongside each other to drive greater business impact for the enterprise as a whole? By investing in the proper technology, teams can easily integrate sourcing into more areas of the business and at the same time increase spend under management. Technology, in turn, must add value to the overall process.

 Invest in the proper tools

When companies invest in tools that provide greater transparency and allow collaboration between people they can bridge the gap between finance and procurement teams. A solution that integrates real-time sourcing more closely with financial planning can provide better visibility into strategic projects and spend under management. In turn, finance and procurement teams can source smarter, plan better, and align business objectives. This way, businesses strategically plan for the future without ‘looking in the rear view mirror’.

Proper sourcing solutions provide complete visibility into funding for projects, execution terms, and data points on cost streams.

Proper sourcing solutions provide complete visibility into funding for projects, execution terms, and data points on cost streams. Not only will this prevent future financial surprises, but will create a clear F&A roadmap, benefiting the company’s overall cash position. When the enterprise has complete visibility into the procurement process — including the stakeholders and suppliers — it can lead to more competitive turnaround times and allow teams to deliver more benefits to the business, without losing sight of projects and timelines. Full visibility for executives allows them to understand where finance and procurement are spending — and creating greater business impact — and report alongside the overall company goals.

More importantly, teams feel more valued and part of the larger enterprise goals when business partners see the business impact generated from procurement and sourcing efforts. Collaboration is the key component that elevates the visibility needed for procurement and finance teams to drive results for the enterprise as a whole. Through collaboration, teams can communicate their goals clearly, understand benefits, conquer challenges, and truly partner with suppliers, making this a winning strategy for all parties involved.

Scale the business with more savings

Anaplan, a pioneer in Connected Planning, utilised these key e-sourcing features to scale their business. Traditionally, Anaplan’s procurement team was known as the firefighting team — constantly putting out fires to satisfy 700 employees in a dozen offices around the globe. The continuous stream of requests put the company’s ability to scale at risk and blocked legal, finance, and compliance teams from accessing critical projects they needed to evaluate. There was no visibility into the projects and a lack of collaboration across the board. With dozens of contracts in the queue at a time, the procurement team was dangerously close to losing context on key decisions.

Levi Strauss & Co. is another example of a company combining the powers of procurement and finance. Since implementing a sourcing platform, the finance and procurement teams have been able to not only see where they are saving but how they can categorise the savings to communicate better results to the business partners.

The company knew it needed to invest in the proper technology to increase the procurement team’s efficiency to support their growth and make it easy to communicate sourcing’s impact on the rest of the company. Within just one year of implementing an e-sourcing platform, Anaplan grew to more than 1,000 employees, generated more than $240 million in revenue, and has 20 offices in 13 countries supporting more than 1,000 customers. Procurement and sourcing are now connected with all functions of the organisation, including finance, risk, and planning. Anaplan now supports contracts for more than 50% of their global spend because they are able to collaboratively source for the future thanks to these new capabilities.

Levi Strauss & Co. is another example of a company combining the powers of procurement and finance. Since implementing a sourcing platform, the finance and procurement teams have been able to not only see where they are saving but how they can categorise the savings to communicate better results to the business partners.

When companies utilise comprehensive sourcing tools, they can empower procurement and finance teams to drive company performance, source smarter, plan better, and align business objectives, ultimately leading to greater business impact and financial success.

GEP, a leading global provider of procurement and supply chain consulting, managed services and software to Fortune 500 and Global 2000 enterprises worldwide, has released its annual report on business and economic trends and how they impact sourcing and procurement organizations: GEP Procurement Outlook 2017—Global Supertrends and Their Implications.

With uncertainty rising, business and procurement leaders in every sector are facing a new crop of potential challenges. This report—the latest in a popular series issued annually by GEP—provides guidance and insight by examining high-impact global trends, including geopolitical instability, global trade and economic fluxes, and the continuing impact of digital technologies and automation.

The eport presents key "supertrends" and their implications for procurement professionals, teams and leadership. It also includes overviews of nine key sourcing and purchasing categories.

The GEP Procurement Outlook 2017 report is available to sourcing, purchasing and procurement professionals on a complimentary basis.

(Source: GEP)

Philip Letts, CEO of global procurement platform blur Group says now is the time for CFOs and CPOs to unite.

Technology is changing accounting and financial management forever. That much we know already.

But in an era of economic and political uncertainty, when CEOs repeatedly cite cost reduction as their number one priority, is now the time for CFOs to push on and embrace technological change in a far wider sense?

Right now CFOs should be telling their teams that a key reason for their existence, processing accounting transactions, is gone. But the seismic change will not stop there. Technology is already impacting on another vital aspect of how organisations manage their finance - procurement.

Recent reports from the likes of EY, PWC and Deloitte have revealed the scale of procurement waste, which globally now stands at £1.56trillion a year. Yet spend optimisation, particularly across indirect spend, remains an Achilles heel for many CFOs, despite the recognised savings that can be achieved.

Today, some 20% of organisational spend is typically unmanaged, made up of the tail spend of numerous low-value transactions, often uncontracted and through many suppliers (up to 80% of the entire indirect spend supply base).

Ultimately, cost reduction is a key part of any business case for the use of technology. And responsibility for achieving cost efficiencies rests with the CFO. So they need to be ‘ahead of the curve’ when it comes to process improvements and system changes, including automation.

Just as CFOs need to guide their finance teams as they rapidly consider their future roles as technology takes over more of their ‘everyday’ tasks, so CFOs should be considering the role of their procurement teams.

Online global marketplaces, self-service portals, mobile apps and artificial intelligence providing transparent processes, access to suppliers across the globe and detailed insight on the price and demand across the full range of business services and goods, and indeed on suppliers themselves, is already starting to transform what for too long has been seen as the poor relation within financial departments.

According to Deloitte’s most recent global procurement report published in December 2016, the use of cloud-based platforms and mobile technology by procurement functions has doubled in just 12 months.

In accountancy, technology means less time spent on financial close, allowing more time to be a strategic asset to the business. The same shift is true for procurement functions, where the most progressive have already moved from fulfilment of contracts to spend optimisation including right-sourcing and fractional outsourcing.

 

Adopting technology for procurement covers a range of activity that sits under a CFO’s remit:

 

Just as most organisations have taken the key step of investing in software as a service (SaaS) models for their financial accountancy needs, simplifying processes with little or no customisation, so the same trend is happening in procurement.

And just as in accountancy, those that stick with legacy on-premise systems are also realising that having customised, non-standard systems and processes is costly and unsustainable if they expect to remain competitive.

Adopting and using technology successfully first requires a clear strategic approach, which is why CFOs should be the drivers to make procurement a more strategic and effective function using the right technology in the right way.

CFOs share many of the same preoccupations as CPOs, with cost control, risk management, technological advancements and talent development the top CPO priorities identified by Deloitte. Digital technology is receiving more investment, but often lacks the strategic context to maximise the potential benefits for the business (just 40 per cent have a clear digital strategy), which is why the CFO’s involvement is crucial.

The closer the working relationship between a CFO and CPO, the easier it will be to fully understand and maximise the opportunities across key aspects of a business - the efficiency of internal systems, how well suppliers are managed, compliance, evaluating the range of technology and sourcing options across direct and indirect spend.

In an era of on-going cost reduction, done strategically and driven by the CFO, a focus on procurement can start to drive stronger and longer-lasting cost reduction across wider aspects of the organisation. Where once we talked about procurement and supply chains, now is the time for spend management and spend optimisation strategies to come to the fore, and for CFOs and C-suites to consider the opportunities they bring.

 

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