Purchasing compliance can be tricky, especially for small and medium-sized businesses. It’s more than just following rules. It’s about managing money smartly and keeping things in order.

For CFOs and accounting managers, using spreadsheets and manual methods is tough. It makes staying compliant hard and hides important financial details.

This article breaks down purchasing compliance. We show easy ways to handle it, keeping you in line with laws and clarifying your finances. Let’s make spending simpler and smarter.

What Is Purchasing Compliance?

Purchasing compliance refers to following the established policies, standard procedures, and regulations governing the procurement of goods and services for your organization for an effective procurement.

It ensures all your purchases are made in an ethical, legal, and beneficial to your organization, which includes your procurement transaction and other aspects of procurement.

As part of the procurement sector, you need to understand the aspect of purchasing compliance:

• Following policies and procurement guidelines: The procurement sector in your organization has set policies that outline the purchasing process, like approval thresholds, vendor selection criteria, and payment terms that should be followed.

• Meeting external regulations: Depending on the industry and locations, your procurement executives and procurement professionals in your team also need to comply with external regulations related to procurement.
• Maintaining ethical standards: Your procurement staff must uphold ethical standards throughout the procurement process. This means avoiding things like bribery, corruption, and kickbacks.

Why Is Purchasing Compliance Important?

Purchasing compliance is important for a lot of reasons.

Procurement leaders in your procurement department need to understand that purchasing compliance helps your business avoid legal troubles and financial losses.

As a result, it helps your business maintain a good reputation and ensure smooth operations.

Here are some key points to highlight the importance of purchasing compliance:

Procurement Risk Mitigation

• Prevents fraud and corruption: When your company complies with established policies and regulations, you create a framework that minimizes opportunities for fraudulent activities like bribery, kickbacks, and conflicts of interest.
• Minimizes legal and financial exposure: Non-compliance can lead to fines, lawsuits, and damaged supplier relationships with vendors and stakeholders. You can prevent these things from happening when you follow the proper procedures when doing your procurement activities.
• Protects sensitive information: Compliance often encompasses data privacy regulations. This ensures confidential information is handled securely throughout the procurement process.

Cost Savings And Efficiency

• Optimizes spending: A well-defined purchasing procedure encourages competitive bidding and negotiation. This leads to better supplier management and better deals to avoid unnecessary expenses.
• Reduces maverick spending: Uncontrolled, unauthorized purchases can inflate costs. Compliance ensures all spending goes through approved channels, promotes budget control, and encourages regular audits. You should be aware of certain compliance metrics- which we will discuss in the next sections.
• Streamlines operations: Clear processes minimize confusion and delays for your procurement activities, leading to efficient procurement cycles and better resource allocation.

Reputation And Sustainability

• Builds trust and credibility: When you demonstrate commitment and ethical responsibility when implementing your procurement functions, you enhance the organization’s reputation with stakeholders, vendors, and the public.
• Promotes ethical sourcing: Compliance can involve ethical labor practices and environmental considerations throughout the supply chain, contributing to a sustainable business model for your business and procurement function.
• Attracts and retains talent: Employees increasingly value ethical practices. A strong compliance program can make an organization a more attractive employer.

What Is The Purchasing Compliance Process?

The purchasing compliance process is a framework your organization should follow to ensure all your goods and services purchases adhere to established internal policies, external regulations, and ethical standards.

Here’s a breakdown of the key stages of a purchasing compliance process:

Need Identification And Requisition

This stage identifies the need for a specific good or service and initiates the request through a formal requisition document. The requisition should specify the required item, quantity, estimated cost, and justification for purchase.

Sourcing And Bidding

Suitable vendors are identified based on the requisition procurement effort, considering factors like quality, price, and ethical practices. Competitive bids are solicited from qualified vendors, adhering to internal policies and legal requirements.

Vendor Selection And Evaluation

Procurement managers evaluate bid proposals based on predetermined criteria like price, technical specifications, past performance, and compliance with ethical standards. The most advantageous vendor is chosen based on the evaluation, considering both quantitative and qualitative factors.

This step must be done before proceeding to the creation of supplier contracts.

Contract Negotiation And Approval

A detailed contract is negotiated with the chosen vendor, outlining terms, conditions, pricing, delivery schedules, and payment terms. The contract is reviewed and approved by relevant stakeholders, ensuring alignment with policies and adherence to legal requirements.

Purchase Order Issuance And Tracking

A purchase order (PO) is issued once the contract is approved, formally authorizing the vendor to fulfill the order. The PO details the agreed-upon terms and is a reference document for tracking and payment purposes.

Goods Or Service Delivery And Inspection

The vendor delivers the goods or services as agreed upon in the contract. Upon delivery, a thorough inspection is conducted to ensure the items meet the specified quality and quantity requirements. Quality control procedures ensure your organization gets the best goods and services.

Invoice Verification And Payment

In this stage, the vendor submits an invoice corresponding to the delivered goods or services. The invoice is carefully verified against the PO and delivery acceptance to ensure accuracy before payment is processed.

Documentation And Recordkeeping

All documents related to the purchase, including requisitions, bids, contracts, POs, invoices, and delivery confirmations, are properly archived for future reference and audit purposes.

Rememeber that compliance throughout the whole process is important to not put your company at risk.  This includes conflict of interest avoidance, data privacy protection, anti-corruption measures, and ethical sourcing practices.

What Are The 7 Procurement Compliance Metrics To Measure?

Here are the 7 procurement compliance metrics you need to measure to be aware of your procurement performance:

Compliance Rate

Compliance rate measures the percentage of contracts and bids that fully adhere to all procurement regulations and laws.

A high compliance rate indicates a strong adherence to policies and reduced risk to exposure.

Time To Compliance

Time to compliance tracks the average time it takes to resolve compliance issues or bring processes into compliance.

Having shorter times to compliance means there is an efficient problem-solving and a proactive approach to compliance.

Audit Completion Rate

The audit completion rate measures the percentage of scheduled audits completed on time and within scope.

A high completion rate demonstrates a commitment to internal control and risk management.

Vendor Non-Compliance Rate

Vendor Non-Compliance Rate tracks the percentage of vendors who fail to meet contractual or regulatory compliance requirements.

Identifying and addressing vendor non-compliance early helps your organization mitigate risks and protect your organization.

Cybersecurity Metrics

Cybersecurity metrics assess the effectiveness of cybersecurity measures within your procurement processes, such as data encryption, password protection, and access controls.

Having strong cybersecurity metrics is crucial for protecting sensitive data and preventing breaches.

Training Completion Rate

Training completion rate measures the percentage of employees who have completed the required compliance training programs.

A high completion rate ensures that all your employees understand the roles in maintaining compliance.

Policy Review Frequency

Policy review frequency tracks how often procurement policies and procedures are reviewed and updated. Regular reviews ensure your policies align with current regulations and best practices.

When you track and analyze these metrics, your organization gains valuable insight into your procurement compliance performance.

As a result, it becomes easier to identify areas for improvement and implement measures to strengthen your compliance programs.

What Are The Benefits Of An  Effective Procurement Compliance?

Having an effective procurement complaicne program can bring a lot of benefits to your organization.

Some key advantages include:

1. Minimized fraud and corruption: Following policies and regulations reduces opportunities for bribery, kickbacks, and conflicts of interest, safeguarding the organization from financial losses and legal consequences.
2. Controlled spending: Optimized procedures encourage competitive bidding, securing better deals and preventing unnecessary expenses. Avoiding non-compliance penalties further lowers costs.
3. Enhanced supply chain resilience: Compliance includes ethical sourcing and risk management, ensuring a secure supply chain, minimizing disruptions, and guaranteeing uninterrupted operations.
4. Streamlined processes: Clear policies create a smoother procurement workflow, reducing delays and confusion. This results in faster delivery, improved resource allocation, and enhanced project efficiency.
5. Accurate data and reporting: Consistent compliance ensures precise documentation, providing transparent data for informed decision-making, financial forecasting, and performance tracking.
6. Reduced maverick spending: Effective compliance mechanisms minimize unauthorized purchases, enhancing budget control and financial predictability.
7. Demonstrated ethical conduct: Commitment to a compliant procurement process builds trust with stakeholders, boosting the organization’s reputation and brand image.
8. Attracting and retaining talent: A strong compliance program appeals to employees valuing ethical practices, attracting skilled individuals aligned with the organization’s values and ensuring access to quality care.
9. Improved relationships with vendors: Transparent and ethical procurement practices build stronger relationships with vendors, fostering mutual trust and respect, potentially leading to better deals and collaboration opportunities, contributing to an improved vendor setup process.

What Are The Best Practices For Procurement Compliance?

We are by no means discussing a new problem, purchasing compliance has been an issue till the time companies have procurement departments. So what are companies doing about solving this problem?

In our experience, we have seen companies following the two common practices to achieve better purchasing compliance

Purchasing Policy Enforcement

In today’s world where we can summon a car with the push of a button, we expect our employees to read and follow purchasing policy.

Well, we have news for you, most people don’t read purchasing policies.

Purchasing is just one step in the whole process of something your employees are trying to achieve. That could be finishing up a project, a high-performing procurement teams event – In another way, creating value for your company.

So they follow the process which is more convenient to them, They don’t care whether if that is the standard process.

Procurement tries to correct this behavior by creating and enforcing a strict purchasing policy which only goes so far.

We are not saying people don’t follow policies but not all users follow purchasing policies.

What you need is a way to implement a purchasing policy which is intuitive for your employees and easy for procurement to manage.

Since the mass enforcement approach doesn’t work we came up with the user mapping technique.

Communication

Once high-performing procurement teams have a strict policy in place, the next step is to communicate the policy out to all employees.

Most companies have an internal website where employees can read the communications. The other common technique is to send an email blast via your corporate communications group.

We have a quick question for you.

Do you pay attention to corporate communications unless it impacts your salary or your job directly?

If you answer Yes, you are a good corporate citizen and we admire you for that!

If you answer No, welcome to the majority.

The way users are bombarded with emails and messages in their personal life, the same is true for your corporate life.

Even if people are paying attention, they would forget the message by the time they have to purchase something.

We are not saying that you can’t come up with some effective communication campaign but it is a lot of effort.

Escalating To Department Owners

If all else fails, procurement teams start escalating non-compliance issues to the department managers of the biggest offenders.

This approach works but not for long.

Let’s assume you are complaining about a person who is a strong member of the department. This is one of the things they do.

You went and complained to the department owner for the first time that the employee is not following policies.

You would see an immediate correction in the behavior of that person and you pat yourself on the back!

Some time passes and that user is back to their normal behavior- which is doing what they normally do.

How many times would you complain?

Our guess is not more than twice, and that is the reason escalating the noncompliance issues doesn’t work in the long term.

Using A Mapping Technique To Increase Purchasing Compliance

As the name suggests, the user mapping technique is a user-focussed approach.userThe Pareto principle also called the law of vital few, focus on 80/20 rule. The principle also applies to increase purchasing compliance.

Focus On Users

The user mapping technique is first and foremost focused on users.

What that implies is that rather than focusing on all users to increase purchasing compliance, you focus on vital few who can dramatically increase purchasing compliance. It’s that simple.

When you think about that, there are few repeat offenders who don’t follow the policy.

That could be a lack of awareness about the policy or they just don’t like the bureaucratic process of purchasing, they want to buy from whomever they want to buy.

The only exception to this when there is a conflict of interest for the buyer and supplier and the buyer is getting a kickback from all the purchases.

In that case, focusing on user/s is not going to help. You should escalate the situation as a policy violation to the HR department. Most HR policies have a section about conflict of interest.

If there is any doubt regarding conflict of interest, read your HR policy! – usually, you would find this in the code of conduct.

Gathering Data

Let’s start by gathering your purchasing data, preferably for the last 12 months. If 12 months is too much, you can pull 6 months data too.

If purchasing compliance is an ongoing issue, you would see that even in 6 months of data.

What Should Be The Source Of Data?

You can either pull your invoice data or purchase order data. There are pros and cons.

Invoice data might not be that granular because of how it is entered in the system. Purchase order data is more granular especially if you have an online purchasing system.

Even though purchase order data is more granular, it might not be complete as all users might not be creating a purchase order for all of their purchases.

So based on your systems and data availability, you can decide on a data source.

If you are using a system like ProcureDesk, the level of details should be the same for purchase order and invoices

What Data You Should Pull?

It depends on what key metrics you want to observe to get a handle on the current purchasing compliance.

Here are some key metrics which you might want to track

1) Purchase order compliance

Whether every purchase has an associated purchase order, or in other words – does every invoice have a purchase order.

There are of course exceptions here, for example, tax payments, regulatory payments, etc. You might have these payments being made directly from your ERP system. If they are part of your data source, just make sure you have the required data to identify those cases.

2) Vendor compliance

The goal of this metric is to track whether the current spend is going through preferred vendors or not. For example, you might have a preferred supplier for purchasing office supplies, but your purchases are all across different vendors.

3) Channel compliance

Channel compliance means whether your users are currently using your preferred channel for purchase. For example, you don’t want Blanket orders to be used for material items, but your users don’t care because it is inconvenient to them.

Another issue you want to track with channel compliance is whether the spend is on the catalog or not. You probably have a catalog for certain items, but your users are not using catalogs and preferred pricing.

Your metrics are going to drive the data fields you would require to conduct your analysis

Here are some baseline fields you should have

1. Order date
2. Order type
3. Invoice date
4. Supplier
5. Purchase order number
6. Invoice number
7. Amount
8. Channel
9. Category of spend
10. Line item
11. Line item description
12. Catalog vs non-catalog
13. Created by
14. Approved by
15. Purchase order complaint?
16. Vendor compliant?
17. Channel compliant?

Put this in an Excel file or google docs and it should look like this.

You can add more fields to it for your analysis if need be. Again it depends upon the data availability but if you are using a good purchasing system the data should be readily available.

Compliance type and compliance flag would be added in the next section

Identifying Non-Compliance

Once you have the data, it’s time to identify the transactions that don’t meet the compliance requirements. We are going to cover channel compliance, vendor compliance, purchase order compliance

Identifying Purchase Order Compliance

This is straightforward assuming you have filtered out exceptions like taxes etc.
If you haven’t done that, you should first identify all vendors which are exception vendors.

Identify all the invoice line items where a purchase order should have been present but no purchase order exists.

For those line items, mark “Purchase order compliant?” as No. For the rest of the items, you can mark “Purchase order complaint?” as “Yes”.

Identifying Vendor Compliance

This step is usually time-consuming because you need to identify transactions with preferred suppliers. There are a couple of ways to do this and it depends upon what data is available in your purchasing system.

A first approach is a category approach wherein you are identifying preferred vendors for each category. If you have that data available, you can just use a Vlookup function in Excel to identify all transactions which match the category and supplier profile.

Whatever transaction matches the category and preferred supplier combination, mark the “Vendor compliant?” field as “Yes” and the rest of the fields can be marked as “No”

Now if you have good category data, this is not an issue but our observation is that in most cases this data is not readily available.

The alternate approach is to focus on catalog or item master spend. If you have a way to identify items which are part of your item master, then you can easily mark those items as compliant, assuming that all items in your item master are from preferred vendors.

If nothing is available, then you can follow a vendor approach. This is not full proof because you might have one vendor preferred for only one category and not all the categories that the vendor can provide.

For vendor based approach, create a pivot table in Excel and then start identifying each vendor as compliant or not. Once that is done, it is easy to just look up the flag by leveraging the vendor data.

Identifying Channel Compliance

Channel compliance needs data from all the purchase methods to ensure that your analysis is complete.

So first identify all the purchase methods used by your company. Most common methods are

a ) Purchase orders
b) Credit cards – Corporate or personal credit cards
c) Purchase cards or also called P-cards
D) Invoices

This field should be available in your data feed or you can add that as an additional column.

The next step is to identify whether the users are following the appropriate channel. For example, you have a punchout for office supplies catalog but people are purchasing it using their credit cards.

Mark the “Channel compliant?” field Yes or no accordingly.

Compliance And User Analysis

Once you have the transactions marked as compliant or non-compliant, the next step is to identify how big the issue is. What do we mean by that?

Though we have identified different types of compliance, the priority for each organization could vary depending on the maturity of the organization.

Let’s take an example – Assume that you have just implemented a new purchasing system but the adoption is low, maybe users are still not creating a purchase order for all purchases.

Now, in this case, your priority should be focussing on purchase order compliance because if the purchase order compliance number goes up, it will automatically drive up vendor compliance. The key assumption here is that you have inbuilt catalogs and your system can route your users to preferred suppliers.

Focus On One Metric At A Time

The quantification is equally important, how big is the problem both in terms of volume and spend.

For example, you have 1000’s of transactions which are noncompliant but they only amount to a small amount of Spend. Just looking at the volume might not give you an accurate picture of the issue.

Your analysis should look this by now

Transactions compliance by Volume

Spend Compliance

Once you have identified the compliance issue you want to address, the next step is to identify the users who are the root cause of this issue.

Again do the same analysis for users, volume and dollar amount.

This will allow you to identify quick wins. Then prioritize your users and start approaching users.

We recommend doing this in batches, take for example 3 users at a time and have individual meetings with them. Measure the compliance improvements and then move to the next cohort of users.

Before you start approaching users, baseline the compliance rate and your goal for compliance in different buckets.

This is important for two reasons

If you don’t have a target then how would you know whether your approach is working or not.

We believe in the power of small wins, so let’s say you are currently at 50% purchasing compliance rate and you want to increase it to 90%. You might not get there in one month but if you start noticing positive movement towards that goal, it will keep you motivated to keep moving towards that goal.

Approaching Users

So now you have your target users identified, the next step is to of course pick up the phone and call them.

Not yet!

You need to first understand a couple of things before you approach users

Have you approached them in the past?

Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results – Albert Einstein

If we have approached the users in the past, there is no point in reaching out again without first understanding why it didn’t work in the past.

Let’s take an example – there is a user who doesn’t create purchase orders and keep on processing non-PO Invoice. You explained to them the process and how this is going to simplify the transaction for everyone.

The user did start creating the purchase order but then they stopped and went back to their old ways.

It is important to understand why that happened, maybe the user finds it difficult to create purchase orders or they lost the instructions and didn’t bother to check that again.

Empathy with your users is the key to increasing purchasing compliance.

Try to put yourself in their shoes, and play this from their day to day activities perspective. Then think about what else can be done to make their life easy

What has worked in similar situations?

Are there common patterns among users? That is a good question to ask because if there is, it is an easy fix. You can just use what has worked in similar situations.

Identifying patterns becomes easy if you are familiar with the process and your user behavior. Rather than saying why our users don’t understand simple instructions, ask why the pattern keep on repeating again and again.

Is this is a process issue?

The other important consideration is whether this is a process issue. For example, you expect your users to always create purchase orders but they are purchasing services and sometimes they don’t know what the exact cost would be until the work is finished.

So they wait for the invoice to show up and then submit the invoice for payment. Because for them, it is convenient to do so.

So consideration should be given to carefully review the process and see what can be done to improve it to so that it is well suited for your organization.

How To Approach Users

We probably can dedicate a whole blog post to this, but let’s cover what we can here

Approaching users about purchasing compliance violation is a tricky topic, you don’t want to come across as authoritative but at the same time want to ensure that they understand that they need to follow the process.

Let’s start with some basics

Never threaten user for policy violation

In our experience, when it comes to the adoption of policies, it never works if you threaten users of policy violation.

Never threaten user with consequences of not following the policy, that will not go anywhere.

It is very tempting to let employees know what the policy is and why everyone needs to follow the policy.

Empathy always work

We might sound like a broken record now but you need to have empathy for your users. But we think it is worth mentioning one more time.

Before you go and suggest changes, put yourself in your user’s shoes and try to understand what challenges they might be facing.

A very common problem we see is with casual users, these users probably place an order once every month and sometimes they forget what the process is or who are you preferred vendors for a certain category.

Purchasing products or services is not an everyday activity for most of the employees and that could be the reason for non-compliance.

Let’s take another scenario, you have just implemented a new purchasing system and along with that, you have changed your purchasing process.

But a certain power user keeps on following the old process. You think that you have trained users so they should know the new process.

It is possible they have forgotten the new process. It is also possible that the new process is cumbersome.

Empathy with your users helps you see problems more clearly and offer a solution.

Start With The Intent Of The Policy

When you set up a meeting with your users to talk about purchasing compliance, start with the intent of the purchasing policy before you get into non-compliance.

Things To Cover

Start with explaining why the policy was established and what were you trying to achieve.

You all are in one team, so making sure people understand the intent helps to break down the department barriers.

What is the benefit for the organization and what is the benefit for employees? For example, creating a purchase order streamline the whole downstream process and ensure that suppliers get paid on time. Isn’t that beneficial for all?

Offer A Solution

If you know the problem beforehand then offer a solution at the same meeting. You can do the homework by looking at a couple of non-compliant transactions.

By looking at the transactions you can easily identify the reason for non-compliance and that allows you to offer a solution to your user base.

By having a solution ready you can save time during the follow-up meetings. It also allows you to get immediate feedback from the user whether the proposed solution would work.

Setup a follow-up cadence

In our experience the issue with purchasing compliance is not always that users don’t follow policies, they just forget what you told them 🙂 or they find the process too cumbersome.

So go with the assumption that the users might forget what you just told them or they would need additional follow up and support.

Set up a follow-up cadence with each of the users in the cohort. Setup weekly, and bi-weekly cadence.

You might think that it is too much follow up but you can always cancel the follow-up meetings if it turns out that your users don’t need any further assistance.

Rinse And Repeat

The final step in the user mapping technique is to rinse and repeat. As we mentioned above, you need to have a target goal and you should have a cohort of users. Once you are done with one cohort, you can move on to the next cohort of users.

Since you are prioritizing users based on volume and spend, you would see a jump in purchasing compliance numbers by working with your top users. After that, it is going to be an incremental increase.

You can decide when to stop based on your goals. You might want to reach 100% compliance and that is all right, go for it if you have the time and resources to work with users.

What Is The Goal Of Purchasing Compliance?

Here are some key objectives for streamlining the Procure to Pay policy

If you look at the above study, there are a few different types of purchasing compliance that companies are trying to address. Let’s look at the top issues related to purchasing compliance.

Reduce Maverick Spend

Maverick spend control is a challenge for many organizations. There are many reasons for Maverick spend, which can be attributed to a combination of the following areas

a) De-centralized the entire procurement process:

This is a common reason for maverick spending because the local purchasing process leads to different stakeholders doing business with their preferred suppliers. When you don’t have a procurement system, this becomes a big challenge because there is no easy way to route the buyers to the preferred suppliers other than manually enforcing the compliance which is a challenge.

b) Lack of a coherent policy

If your organization has multiple business units as a result of the acquisition of different companies over time, it is not uncommon to see a different version of the purchasing policy.

Lack of a centralized purchasing policy leads to different processes followed by different business units, leading to an increase in maverick spend.

The interesting part is that each business unit can look at other business units spending and call that maverick spending because each business unit can have its own preferred supplier.

c) Lack of standard controls

If you don’t have standard controls, that can lead to maverick spending. A simple example is ensuring that purchase orders are created for all purchases.

Though this is a simple process, it could be challenging when you lack basic controls to ensure that the purchase order policy is followed.

Doing it manually can take a lot of time, but even with the manual approach, there is no way to ensure that your employees, once informed, will keep on following the policy.

Policy Violation

Interestingly, 54% of the companies are trying to address this challenge. We believe that the problem is not the violation of the purchasing policy but how different stakeholders interpret the purchasing policy.

Policy violation includes but is not limited to the following cases.

• Not following the defined bid policy. In most cases, that means selecting a vendor without running a formal evaluation process like a Request For Proposal (RFP).
• Spend not being authorized at the defined authorization level within the organization.
• Spend without a purchase order.
• A missing contract where a contract is required.
• Purchasing products and services for personal use and pretending they are for company use.

We are sure you can come up with a few more, but in our experience, these are the most common examples of policy violation.

Channel Non-Compliance

Channel compliance is a major issue for companies and a major reason for not achieving your purchasing compliance goals.

As the purchasing team, you are defining different channels for purchase, and most channels need a purchase order.

So, purchase order compliance becomes a challenge.

Best-of-the-breed companies can achieve purchasing compliance of up to 98%.

Achieving this kind of performance needs automation and consistent evaluation of the process.

It needs continuous communication with stakeholders to bridge their understanding of the procurement/purchasing process.

As you can see from the above metrics, you can achieve up to 80% perfect order rate if the other upstream steps are followed.

Having purchasing compliance upstream (Purchase orders and receipts) leads to a better match with invoice and streamlines the end-to-end procure-to-pay process.

FAQs

7 Challenges Of Procurement Compliance

1. Complex regulations: Keeping up with changing laws and internal policies can be a maze.
2. Vendor management: Choosing ethical and compliant partners takes time and effort.
3. Manual processes: Paperwork slows things down and increases error risks.
4. Lack of awareness: Employees might not understand compliance rules.
5. Pressure and deadlines: Rushing purchases can lead to shortcuts and non-compliance.
6. Data security: Protecting sensitive information throughout the process is crucial.
7. Budget constraints: Investing in compliance tools and training can be costly.

Why Is PO Compliance Important?

POs ensure everyone’s on the same page – right product, price, and terms. It avoids costly mistakes, protects your budget, and keeps vendors happy.

What Is The Compliance Rate In Purchasing?

It depends on the organization, but the ideal is as close to 100% as possible. Every non-compliance instance carries risks.

What’s the #1 Thing That Will Kill Procurement Compliance?

The #1 enemy of procurement compliance isn’t a single thing, but rather a sneaky trio: ignorance, apathy, and pressure.

• Ignorance: When employees aren’t aware of or fully understand the rules, shortcuts and unintentional missteps become tempting.
• Apathy: If compliance feels like a chore or hassle, people are less likely to prioritize it.
• Pressure: Rushing to meet deadlines or secure deals can lead to cutting corners and overlooking compliance steps.

 How To Ensure Compliance In Procurement

• Clear policies and training: Make sure everyone knows the rules.
• Automated tools: Streamline processes and reduce errors.
• Regular audits and reviews: Identify and fix weaknesses early.
• Open communication: Encourage employees to ask questions and report concerns.

The Bottomline

Overall- purchasing compliance is an important step in your procurement process which can offer you time and energy savings while safeguarding your business.

By incorporating best practices, you equip your team with the knowledge needed to navigate procurement complexities efficiently.

This not only saves time and energy but also fortifies your company against potential threats.

So the next time you and your team think about not following the rules (or even cutting corners), we highly suggest you think again before it’s too  late!