An effective purchase authorisation process ensures compliance with established approval policies to avoid unnecessary or inappropriate purchases. Performed online, this process 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 receipt and invoice matching, and captures an electronic history of spend activity for Procurement’s use in spend analysis.
But many organisations find themselves caught between the need for both control and efficiency. When the purchase process is unstructured or lacks controls, purchases are often made without proper authorisation, purchases are made with non-preferred suppliers, there is no management visibility of purchase commitments, purchases are often attributed to the wrong accounts or departments, and no one really knows what is being bought over time. On the other hand, if the authorisation process becomes too cumbersome in an attempt to control it, critical purchases are often delayed, the cost of the processes grows, valuable productivity is lost throughout the organisation, and frustrated employees find more ways to make purchases outside the system. At either extreme, the organisation loses.
The organisation’s overall cost of goods and services is much higher than it should be because of:
The organisation may also experience financial ‘surprises’ due to
- Unnecessary, sometimes even fraudulent, purchases
- Paying more than necessary due to a lack of control over what suppliers or agreements are used
- High cost of AP in an attempt to validate invoices with no authorising PO
- Little or no spend data for Procurement to use in sourcing or negotiating supplier agreements
The organisation may even be at risk because of:
- Poor budget management because of the lack of spend controls
- Poor cash management because of the lack of visibility of purchase commitments
- Use of unqualified suppliers that may result in poor performance or indirect liability
- Loss of good employees because of frustration getting what they need to do their job
All of these issues and more can be addressed with today’s well-developed eProcurement tools such as PROACTIS Purchase-to-Pay. A fast, efficient and effective online purchase authorisation process can be deployed quickly and confidently using PROACTIS’ intuitive software solutions and proven deployment process.
Find out how in Part 2