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Automating Your Purchase Requisition Workflow
Things to Consider When Automating the Purchase Requisition Workflow Process
“When you start with a clean and clear transaction, you end with a clean and clear transaction. If you provide the structure for the transaction, which is the Purchase Requisition, an automated system should identify what’s wrong if there is an exception – and make maverick spending visible.”
Defining the Business Problem
What percentage of your company’s spend is under management?
For many companies surveyed, that percentage is under what should optimally be 100%.
Indirect spend is a major challenge
When asked what challenge their procurement organization was having with the non-contracted/non-sourced spend category, 71% of organizations said that they lacked visibility and control. 50% said that maverick spending was another major issue. Ultimately, the goal is to get control over the entire spend.
Uncontrolled purchases cost money
Controlling maverick spending is currently the most ubiquitous challenge facing procurement in relation to indirect spend management. 41% of those surveyed say managing maverick spend by individual managers or business unit was their largest challenge, according to Spend Matters.
Defining the Technology Challenge
ERP Purchasing modules are typically built for direct purchasing and not for managing indirect spend because of the following factors:
- They are complex and meant to be operated by professional buyers. They support a centralized purchasing function and are driven by the order to cash cycle
- Workflows are not “dynamic” to meet the many to many routing required by growing organizations. Operational purchasing is driven by chaos and growth.
- Many companies have multiple ERPs or multiple versions of an ERP. Cross-ERP spend management is not an option.
- Cost is an overriding factor in broad based deployment. ERP client licenses can be expensive
Elements Needed to Ensure a Successful Implementation
Identify the elements or processes that each department needs in order to consider the transaction a success. For example,
- the purchasing department has written purchasing policies that dictate the level of authorization needed for an approved purchase.
- the Health and Safety department needs to be on the approval list for items that involve their department.
- AP’s requirement is that there is a valid PO and a valid Receipt for the item that is being invoiced
Ensure that controls are built in that won’t require monitoring
Controls that are monitored automatically will greatly reduce the chance of human error. A good example of this is authorization signatures.
If a person needs to identify signatures, they would need a sample of each signer’s signature and a list of their authorization amount. These samples and lists would need to change any time a person starts with the organization, gets promoted, or leaves the company.
Determine what reporting you want to have
Each department can benefit from reporting on the back end. For example:
- A controller that is monitoring their division spending needs to be able to filter out all other activity and retain the ability to drill down into any transaction that is in question.
- A maintenance manager may need to get reports based on a specific vendor to determine what is being ordered and brought into their plant.
- The AP manager could benefit by using reports to drive metrics on the performance of their team – not to mention the tedious reporting that is necessary to post any month-end or year-end accruals. If you know the requirements for what needs to be accrued, you can ensure that the accrual process is fast, efficient and accurate.
And most of all, ensure that you have what you need to provide the highest percentage of straight through processing when the invoice arrives.
If you think of it this way, any invoice that arrives in advance of, or without supporting documentation, is an invoice that will need to be manually processed. Because even with the support of automation, someone will have to have ‘eyes’ on that invoice within its lifecycle.
If you take a look in advance and make sure the necessary documentation is available, the invoice will have the chance to be sent straight through – without time-consuming human intervention.
Schedule a demo of Palette Purchase Requisition Automation here.