Scaling your procurement function is more than just a necessity. It’s an opportunity for CFOs and controllers like you to redefine your organization’s financial efficiency and competitiveness.

As the heartbeat of financial operations, the procurement department plays a pivotal role in shaping your organization’s success.

This blog post is designed to help you prepare to embark on your journey to strategic expansion, offering invaluable insights and practical advice on how to scale your procurement teams while enhancing overall financial performance.

Let’s explore the strategies and steps that can make scaling up your procurement department a smoother journey.

How To Start Scaling Up Your Procurement Organization

In this final section, we will provide a roadmap you can follow to start scaling up your procurement organization.

Understand Your Categories

We are sure that you are not hearing for the first time that you need to understand your categories for effective spending management.

But where to get started?

The key to understanding is effective spend analysis.

We have covered this topic in detail, so if you are not familiar with spend analysis, read the complete spend analysis guide.

Here is a high-level summary:

• Gather complete data from all different sources of spend—for example Purchase orders, Invoices, credit cards, etc.
• Categorize the data into different spending categories. There are different industry standards for classification. But for this exercise, we recommend using broader categories—for example, Information technology, Marketing, Facilities, Raw materials, etc.

The goal is not to get a detailed spending analysis at this time but to understand how much spending is in each category.

Once you have the basic category classification, You should be able to answer the following questions.

• How much spend is in each category?
• What is the potential for each category – in terms of cost savings?
• Do you have the resources to support the organization?

Identify Skillset Gap And Plan To Bridge It

Once you have your category map, you should be able to identify skills you would need to support those categories. Perform a skill gap analysis and see where the procurement team stands regarding key procurement skills.

You should strongly assess the need for domain expertise along with other soft skills.

If your stakeholders expect the procurement team to have strong domain expertise, then you should look at either acquiring those skills through training or new hires.

Not every category would require domain expertise—for example, marketing and information technology.

But if you purchase, for example, specialized IT hardware, then you need someone with the domain expertise.

Train Vs. Hire And Train Or Bring In Experienced Talent?

So, after you have identified the skills gap, how do you go about bridging that gap?

There are primarily two ways this gap can be bridged

• Hire new talent
• Train existing talent

There are pros and cons of both, so let’s look at each one of them

There is no one right answer here because the decision-making should always be in the context of your decision.

Setting Up A Budget And Getting Executive Buy-In

The next step is setting up the budget to scale up the procurement organization.

The budget should include the following.

• Fully loaded cost of additional headcount.
• Additional training cost
• Cost for procurement technology to enable the team.
• Any additional cost to acquire domain expertise – for example, category expertise.

You need to include all these costs because building a procurement organization is an investment.

When presenting the case to finance, the investment in the procurement team should be considered with the same yardstick as any other investment, i.e., returns on investment.

A company might use different methods to calculate the return on investment, so talk to your finance team to understand the preferred method.

The returns are the savings delivered by the procurement organization and the benefits of increased purchasing compliance.

We recommend presenting a business case for at least 3 years because that is the minimum you would need to see the sustained impact of the procurement team.

Setting Up A Procurement/Purchasing Policy

If you already have a purchasing policy, great. If not, that should be the first step in scaling up the procurement organization.

You can read more about how to set up a purchasing policy

Here is a brief of what should be covered at a very basic level

• What is the purchasing process employees must follow to procure products and services?
• What channels should be used for procuring the product or services? For example, purchase order vs card, etc.
• What should be the approval levels, and who should approve the purchase? For example, a manager can approve up to $10,000 and above that, but it has to be approved by the department director.
• Who has the authority to sign contracts on behalf of the company?
• How should supplier invoices be submitted to accounts payable for payment, and what information should be submitted along with the invoice?

It also would be helpful to track the current cycle time for the purchasing process so that it is easier to track the progress you are making in improving the cycle time.

Procurement Technology Investments

Procurement technology can help you scale up the procurement team without investing much in headcount.

Here are the specific areas where you should be investing from a procurement technology perspective

Operational Procurement Process

Operational procurement includes the end to end purchasing.

This process includes all the steps from when a user enters a requisition to purchase something to when the purchase order is shipped to the vendor.

Thinking about automation from day 1 provides you with two main benefits

• Your users have a better purchasing experience, which helps you increase engagement with your stakeholders.
• You don’t have to invest in headcount to support the purchasing policy.
• It would be easier to report on past purchases and pull data to conduct a spending analysis.

Sourcing Process Automation

When scaling your procurement organization, you might start with a manual process to get supplier quotes.

You could also run the RFPs manually, whereby suppliers submit the response to your proposal request via email. You can then consolidate the responses and present results to your stakeholders.

However, as you scale the procurement operation, you will see that the number of RFPs is increasing, and sometimes, you also might have to run eAuctions for commodity items.

That is where sourcing process automation can help you scale up the operations without adding additional headcount to the team.

Also since the whole process is automated, it is easy to collaborate with stakeholders and maintain an audit trail for your sourcing process.

Sourcing process automation is something you need, but not right on day one. However, it would be best to consider investing in these tools as soon as you start seeing an increase in the number of RFPs conducted by the sourcing team.

Contract Management

There are two main use cases where contract management can help you get better results from your procurement operations.

a) Increased savings and compliance

The procurement team’s job is not over as soon as your team has negotiated a great contract. You have to operationalize the contract and ensure the negotiated savings are realized.

If your employees are not purchasing from negotiated contracts, you have a savings leakage problem and compliance issues.

The best way to avoid these problems is to integrate a contract management tool with your procurement process so that the purchasing transactions can be tied to the contract.

The system drives compliance with the price and documents the realized savings.

b) Avoid unwanted contract renewals

How often have you been in a scenario where a contract auto-renewed and you didn’t get ample time to send the termination notice to the supplier?

It might be happening more than what you might recall.

There are many reasons for that.

If it is because of a lack of resources to look at the contracts, then before you invest in a contract management tool, it makes sense to invest in hiring the team first.

However, a very likely scenario is that you have a team, but they are busy working on chasing new opportunities, and no one is paying attention to renewals.

That is where good contract automation can help you track all renewals and alert users when a contract is up for renewal, and it is within the notice period.

One avoided contract can easily return your investment on such a tool.

What Are The Objectives For Scaling Up Your Procurement Department?

We looked at some of the challenges with the scaling up procurement organizations, now let’s look at how to get started with scaling up your procurement department.

The first step in scaling up the organization is to define a clear set of objectives for scaling up. You should clearly define what you want to achieve, why you want to achieve that in and what time frame.

Having said that here are some of the common objectives for scaling up the procurement organization

Better Stakeholder Engagement

This is one of the most important objectives of any procurement transformation journey.

Procurement stakeholder engagement is key to procurement involvement in the organization.

What do we mean by procurement stakeholder engagement?

Procurement stakeholder engagement is defined as the process where procurement engages with different department owners/stakeholders to help them enable the purchase of products and services required to run the business effectively.

Let’s break it down

Procurement stakeholders, in this case, are your internal departments whom you support in various sourcing activities. We are only referring to internal stakeholders and not external stakeholders like suppliers.

What do we mean by enabling your stakeholders?

By enabling stakeholders, you are helping them achieve their department goals, which, of course, are aligned with the organization’s goals.

Notice we said their department goals.

One thing to note is that the department goals are not always directly aligned with procurement goals. Procurement is generally measured by savings delivered, not many departments are setting up their goals like cost savings!

Almost most of them would have a goal, for example, to improve customer experience or increase the NPS score. They would have identified certain initiatives that would help them get there.

So enabling stakeholders means helping them achieve the goal of improving customer experience by supporting the sourcing decisions for various initiatives.

So now depending upon the budget assigned to the department, there might or might not be any procurement cost savings.

So, when setting engagement as an objective, you also have to think about the skillsets you would need to acquire or hire to support the team objectives better.

Increase Spend Under Management

Spending under management is defined as the total spending the procurement department can influence in an organization.

In other words, it is the pie of the total spend that is negotiated by the procurement team.

As you manage more spending, you deliver better cost-saving, and hence increasing spending under management is important for many organizations.

In our experience, procurement teams looking to increase spend under management are already delivering savings in other business areas.

In other words, the management understands the value delivered by Procurement and is now looking for ways to extend the value to other departments within the organization.

How do you increase spend under management?

Increasing spend under management is an important objective, but how do you go about increasing spend under management?

The universal answer is – “It depends” on the following factors

• If increasing spend under management needs more resources because the current resources cannot handle the workload, then that is an easy problem to solve. In that case, the answer is – higher more resources.
• If you are struggling with stakeholder engagement, increasing spend under management requires selling the procurement value within the organization.
• If you need deep category expertise to engage with stakeholders, you should look at acquiring that expertise or hiring someone who already has that expertise.

Increase In Purchasing Compliance

In certain cases, procurement is already engaged with stakeholders, helping them negotiate costs down but still unable to reach the savings goals.

It is not uncommon to have decentralized procurement departments, or even if the procurement department is decentralized, different locations keep on purchasing from their own set of problems.

In that case, you have a purchasing compliance issue.

So, while you are looking at scaling up the procurement organization, you should also look at increasing the purchasing compliance

What is purchasing compliance?

Purchasing compliance can be defined as compliance with pre-defined procurement policies or procedures.

• Compliance could be purchasing products/services from the preferred vendors.
• Purchasing compliance includes purchasing products/services through preferred purchasing channels—for example, purchase order vs P-card.
• Purchasing compliance means getting the purchase authorized at the right management level before making the purchase.

Here is a summary of potential objectives for scaling up your procurement department

Getting Executive Buy-In

Scaling up procurement needs investments, whether that is an investment in resources, technology, etc.

So, while scaling up a procurement organization is a noble goal, the resource investment needs to be justified like any other investment.

Especially when the investment is all Opex except some of the technology investment could be capitalized, the investment in resources impacts the EBITDA both from SG&A expenses and impact through reduced cost.

Getting Buy-In For Investment In Resources

The first step is, of course, to quantify the investments in some form of ROI calculation and then get the executive buy-in from finance or your reporting manager for the investment.

Most of the procurement professionals report to finance, so that means getting approval from the Chief Financial Officer.

If the mandate is coming from the CFO office to scale up the organization, then, of course, the selling part becomes easier.

Here are some suggestions on how you should present the business case for approval

Better Experience For Employees

If you are hiring more resources to support your organization, you should already have a quantified view of how it will improve your employees’ experience.

For example – You currently have a department-based approach for resource allocation, i.e., a procurement resource could be supporting one or more than one department simultaneously.

If your current resources are overloaded with work, that might be causing a slow response time for queries from your stakeholders.

Suppose your current resources are a generalist (handle all spend categories), and your stakeholders need a specialist (category managers who are experts in one or more categories). In that case, that is an opportunity for improving customer experience.

If you currently use a manual purchasing process and plan to automate using a purchase order tool, that will improve the experience for stakeholders.

These are some examples of how investment in resources can lead to a better experience for the company’s employees or, in other words, procurement stakeholders.

Bottom-line Impact

Procurement cost savings are the main KPI for procurement, and of course, it is the most quantifiable KPI that can be used to build the case for scaling up the procurement team.

Most finance professionals are interested in cost savings and not cost avoidance. We have already covered different types of procurement cost savings but at a very high level.

Cost-saving is the reduction in the cost of an allocated budget line item. For example, you have a budget of $1M for raw materials, and you were able to reduce the material cost by 10%. So, $100,000 in cost savings.

Cost avoidance, on the other hand, is the avoidance of cost. For example, negotiating out of a price increase from a vendor.

As you can see cost savings vary from industry to industry and also depend upon the maturity of the procurement organization.

Since you are scaling up the procurement organization, it is safe to assume that you are probably not achieving the same % of procurement savings as best-in-class companies.

So, what savings % should you use to build the case for increased cost savings?

Industry-standard cost savings benchmark is close to 8% of spend under management. For example, if you manage $50M in spend, then as per industry best practice, that is $4M in annual savings.

You can go with the benchmark, but we recommend a more conservative approach for the following reasons.

• It takes time to hire resources and build strong engagement with stakeholders. So it would be best if you planned for cost savings to increase over some time. We recommend that you use 3-4 years to get to the 8% number.
• Start with a conservative number. We recommend 2-3% cost savings for the spend under managed.
• You can present an increase in spend under management over time, increasing the savings delivered. You could probably show a quarter-over-quarter increase in savings delivered.

Reduced Compliance Risk

Compliance risk may or may not be a driver for a company based on the size of the company.

For example, if you are a public company (traded on the stock exchange), you have to meet certain regulatory requirements.

As per the SOX (Sarbanes Oxley) act of 2002, companies need to have financial controls in place to ensure the company’s financial viability.

Section 404 specifically talks about vendor and cost controls. It is, of course, a priority for the CFO to ensure proper controls are in place and they are being tested for their effectiveness,

If you need more help on how Section 404 controls and how procurement automation can help achieve that, read Procurement compliance for CFO’s and Controllers.

Now, what if you are not a public company?

Procurement compliance is the basic financial hygiene a company must have. It is not just about reporting that you have controls but strong compliance helps you get better visibility into your spend and make better decisions.

Basic purchasing controls for compliance are

• Purchase compliance – all purchases are authorized before they are sent to the supplier.
• Vendors are properly vetted and there is no conflict of interest.
• Invoices are matched against the purchase orders to ensure the accuracy of the invoice.

Top-Down Message Or Bottom-Up Approach

The other consideration in getting buy-in is to get buy-in from others in the company.

For example, if you are a Software company, other executives include the head of engineering, marketing, dev-ops, etc.

Getting approval from finance is more for investment into resources; however, to increase the value of procurement in the organization, you have to have buy-in from the stakeholders.

Do you increase engagement with the individual team members or work directly with the leadership to garner support?

We recommend you do both, and here is why

If you already have good engagement with certain team members in a group, then you can build on it and have them help you to increase the influence of procurement.

That is a good model in the long term because the adoption organically grows without a strong push from the top.

That is not always the case, so you need to make sure that you have to buy-in from the top and then can help you drive the message.

North Star Metrics For Procurement Department

When measuring the procurement team’s performance, procurement cost savings are still a dominant KPI ( Key Performance Indicator). However, procurement cost savings are an outcome of various steps a team takes before it gets to those savings numbers.

With that in mind, for scaling up your procurement organization, you should define some leading indicators that help you gauge the progress you are making on your journey to scaling up your organization.

As per a recent CPO survey, the above are the top KPIs for measuring procurement performance. As you can see, Opex and Capex savings are on the top of the list, but let’s look at some of the other metrics that drive the savings numbers.

Engagement

Engagement brings more spend under management, more spend under management gets you more savings. That is the simple formula.

We have written extensively about procurement stakeholder management, so if you have not read that, we highly encourage you to do that.

So, how do you track the engagement?

We suggest that you can group engagement by department or key stakeholders. For example, the department can measure engagement – IT, Finance, etc.

Or it could be based on an individual stakeholder basis. We recommend going with the department because one department might have more than one stakeholder, and tracking engagement at that level is tedious.

The engagement with stakeholders can be categorized into the following buckets:

• No Engagement: this is straightforward. Procurement does not influence the spending, and there is no engagement. In that case, the department is managing its sourcing.
• Reactive: Procurement is involved last minute after the stakeholder has already vetted the solution. Procurement is then called to reduce the cost. Sometimes, to check the box that Procurement has been engaged.
• Pro-active – Procurement is involved at the start of the RFP process, ideally when a need is identified, and Procurement suggestions are considered.
• Trusted partner – Your stakeholders seek your advice on reducing the cost, and you are working as a team to validate new ideas and vendors.

You can assign a score to each one to get a balanced scorecard. For example

No Engagement – 1

Reactive – 3

Pro-active – 5

Trusted partner – 7

You can then add the score from multiple departments and take an average score across all departments.

From there on, you should set up realistic goals for increasing stakeholder engagement.

Spend Under Management

Spend under management is the total spend managed by procurement out of the total addressable spend.

In other words, Spending under management is a measure of procurement influence over the company’s spending.

The higher the spend under management number, the better it is.

As per Ardent partners’ research, the average spend under management is 62.1%, and best-in-class companies have to Spend under management as high as 90%.

The first step is establishing a baseline for spend under management and the second step is to define the goals for increasing spend under management over time.

The baseline formula is straightforward.

Spend under management = Total spend managed by your team/ total cash out of the door.

Obviously, things like payroll, taxes, debt payments, regulatory payments, etc., should be removed from the total cash out of the door to get a true picture of total spending. This is the total addressable spend that the Procurement team can manage.

In terms of setting the goals for increasing spend under management, it depends on how strong the current engagement is and how fast you can increase engagement with stakeholders.

A 10% increase in spending management is a realistic goal to strive for.

Savings Delivered

Procurement cost savings is one of the most important metrics for the procurement department. If you want to scale the organization, then increased cost savings is one of the major drivers.

If you are unfamiliar with procurement cost savings we have covered the topic here.

Procurement cost savings are primarily classified into hard and soft cost savings.

Hard cost savings are a reduction in the existing cost, i.e., reducing an existing budget line is considered hard cost savings.

On the other hand, if you could negotiate a better cost but it doesn’t hit a budget line item then it is called soft savings or cost avoidance. For example, you could negotiate a cost increase from a vendor. So even though you could reduce an expense the company would have incurred otherwise, the savings are counted towards the budget.

The industry average for savings delivered is 6-8%

There are a few things to keep in mind while setting up the goals for savings delivered,

If there is procurement engagement, you might already be delivering some savings, for example, 5% of the spend under management.

However, don’t use that as a baseline to set up the goal for savings delivered. These are two main reasons:

• If you are getting some quick wins, the savings delivered on them are usually high. For example, getting a 10-15% cost reduction on low-ticket items like office supplies is not difficult.
• Savings delivered vary by category and total spend for that category. For example, delivering 10% savings on $100,000 is feasible, whereas delivering 10% savings on $10M spent might not be feasible.

Similarly, delivering cost savings on commodity items is relatively easy, but delivering YOY cost savings on raw materials might not be feasible.

So, what is the right way to set up a savings goal?

Analyze your spending at a line level to estimate potential savings. So, Instead of taking an average savings percentage, use existing spending data to understand the potential.

Employee Self-Service

The procurement team would have more to contribute to value-added activities if the employees were enabled to use a self-service model.

So, what do we mean by employee self-service?

In simple terms, it is a measure of whether your employees can follow the defined purchasing process without the need to involve procurement all the time.

We are assuming that you already have a defined purchasing policy. If you haven’t, we recommend reading how to set up a purchasing policy first.

For example, if your purchasing policy requires a three-bid and a buying process, how easy is it for employees to submit a request for a quote?

In some cases, it might be possible to have employees get their quotes, thereby enabling complete self-service.

Another common example of employee self-service is the implementation of an approval policy.

Do they need to look up a manual to understand the guidelines of the corporate spending policy?

Or is there a purchasing system that automatically routes the user to the right approval?

These are examples where enabling supplier self-service frees up time for procurement to focus on value-added activities.

Another common scenario for self-service is letting stakeholders know about preferred suppliers for the product they are about to purchase.

It is simple to achieve this by purchasing catalogs, but what about categories like services without a preferred catalog?

It would be best to consider making a list of preferred vendors and letting the purchasing system guide them through the purchasing process.

We highly encourage you to audit all the touchpoints with the different stakeholders and then use that information to enable self-service wherever possible.

What Are The Challenges With Scaling Up A Procurement Department?

Let’s look at some common challenges a procurement team faces while scaling up a procurement function.

We are assuming that you have some procurement function and are trying to scale up the team to meet the demands of the business.

If you are starting the function, please read our complete guide on how to build a procurement team first.

Lack Of Clear Goals/Objectives

When you look at scaling up a function, it is important to clearly identify clear goals you want to achieve. Needless to say your goals should be SMART (Specific, Measurable, Achievable, Realistic, Time-bound)

The simple fact is that if you don’t have clearly defined goals, then you don’t know what you are scaling up for.

It is like you are optimizing the function to run faster, but you don’t know why you are doing that.

The most common objective for procurement teams is to save the company money!

That is not a clear objective, if saving money is your only goal, you are setting the department for failure. Cost savings are a by-product of better engagement with the stakeholders.

Better stakeholder engagement comes from understanding the “Why the department exists” and how it can be better aligned with corporate goals.

If your organization’s culture is to run fast, then slowing down things with more procurement policies is not going to sit well with the organization.

Lack Of Executive Support

This is one of the common challenges for many procurement leaders. Let’s take a hypothetical scenario to describe this challenge.

Acme Inc. provides a platform for helping companies pay their suppliers faster. The company is 5 years old and has raised $X million in funding.

Since the focus is on revenue growth, each team is running as fast as they can without much compliance oversight.

Now you, “the procurement leader,” are brought in to scale the existing procurement function, which currently reports to the chief legal counsel. Procurement is currently transactional – creating purchase orders and sending PO to vendors.

So, the challenges you need to solve are

• Where should the procurement function report? – Finance, Legal or operations
• How to get buy-in from all executives to support the function. For example, the head of marketing, engineering, etc.

Cost savings are still the main Key Performance Indicator (KPI) for procurement, but for building executive support, the conversation has to move from just cost saving to being an enabler and trusted advisor to the organization.

Lack Of Skilled Resources

The procurement function has changed a lot in the last 5 years. As organizations are realizing that just cost savings in not enough – more CPOs (Chief Procurement Officers) are realizing that they have a lack of skilled talent

Deloitte recently conducted a Chief Procurement Officers Survey. Among many other things, they ask the CPOs to rate their current team skillsets on how well they are aligned to deliver procurement value for the organization.

As you can see above, 51% of CPOs think that they don’t have the right skill set in the team, or in other words, there is a skill gap.

As you look at scaling up the procurement function, it is critical that you spend time identifying the type of skillset required to scale up the function.

There is a lack of skilled talent in the market. There are many reasons for this, primarily

• The skills required in today’s world are very different from what was required a decade ago, and the existing workforce is not always able to acquire new skills as required.
• Procurement is not a sexy function, and not many educational institutes continuously produce awesome procurement talent.
• If you ask procurement professionals how they joined procurement? We can bet that most people would say that they somehow got into procurement but never intended to build a career in procurement.

This is a real challenge for procurement leaders – finding great talent. So, how do you overcome that? By selling the vision of procurement. We will clear this more in a later section on how to build your procurement team.

Scale Your Procurement Department With ProcureDesk

Our tool has features that can help you scale your procurement team. Here are just a few of them:

Purchase Requisition Management

With a purchase request, an employee can request the purchase with an estimated amount and have it approved by the manager.

Creating Purchase Request

With ProcureDesk, employees can create a purchase request with fewer clicks without entering much information.

The system recognizes the user and then uses that information to set up default values for departments, classes, charts of accounts, projects, class codes, etc.

Here is an example of how user defaults work:

Purchase Approvals

ProcureDesk automatically assigns purchase approvals. Your employees don’t need to know who needs to approve the purchase.

You can configure the purchase approvals based on the amount, department, location, budget owners, etc. You can easily configure your custom approval workflows.

Here is an example of how the system identifies the purchase approvals:

All the employee needs to do is submit the request for approval.

Once the request is submitted, the system notifies the approver of a pending request.

The approver can approve from the email without logging into the system or using the ProcureDesk mobile app for approvals.

The requester can track the status of the purchase requisitions from the purchase request dashboard.

Purchase Order Management

Once the requisition is approved, you can send the purchase order to the vendor. Purchase order management software automates this process.

You can quickly get quotes from different vendors with the supplier quote module.

Once you have completed the quote process, you can convert the quote to a purchase order and issue the purchase order to the vendor.

Automated Purchase Order Creation

You don’t have to worry about converting purchase requisitions to purchase orders with automated purchase order creation.

This saves time, especially when you don’t have a purchasing or buying team.

Here is an example of a purchase order that ProcureDesk automatically generates.

You can customize the purchase order template to include additional fields.

FREE CHECKLIST: Download our free purchase requisition checklist to help you identify the best software for your business!

OCR (Optical Character Recognition)

There is no need to extract the invoice data from the document; ProcureDesk automatically handles that.

The OCR engine extracts and matches the data with the available purchase orders.

If a purchase order is not available, it is considered a non-PO invoice.

Here is an example of how the OCR engine extracts invoice data.

Automated 3-Way Matching

After the OCR engine extracts the data, the system matches the invoice with relevant documents.

Suppose the system finds a matching purchase order. In that case, it automatically matches the invoice lines with the purchase order lines and performs the 3-way match.

The system would check the invoice against the purchase order and receipt for the material purchase.

For service items, the system checks the invoice against the purchase order. It then routes the invoice for review by the stakeholder.

You don’t need to follow up with employees for approval manually. The system automatically sends reminders to respective team members.

Invoice Approval Workflow

With the ProcureDesk invoice approval workflow engine, you don’t have to worry about routing invoices for review and approval.

Using the customized invoice approval workflow engine, you can create your custom workflow and automate the approval process.

Here is an example of how easily you can set up the approval workflow for invoices:

Electronic Invoices

With electronic invoices, the trading partner or supplier sends the invoice electronically using electronic invoices standards like cXML.

The supplier automatically posts the invoice electronically with an electronic invoice, and no email is involved.

The invoice is submitted faster, and that significantly reduces late payment fees.

We have implemented electronic invoices with prominent vendors like Amazon, CDA, Staples, Home Depot, to name a few.

Here is an example of an electronic invoice:

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Reporting

With inbuilt reporting, you can see all the pending invoices in the queue, that are approved and where the payment is complete.

For example, it is month-end, and you want to know what expenses you should be accruing.

Here is an example of the received not invoiced(RNI) report:

Now, let’s say you want to see all the invoices that are pending approval. There is a report on that.

Here is a sample invoice pending approval report:

FAQs

How Do You Measure Procurement Department Performance?

To measure the performance of your procurement department, you need to assess various key indicators.

Common metrics you need to measure are:

• cost savings
• supplier performance
• contract compliance
• efficiency in the procurement process.

In addition, you also need to track the cycle time for procurement activities, analyze spending data, and evaluate your supplier relationships.

To have a comprehensive evaluation, you need to consider both quantitative metrics and qualitative factors.

What Does A Procurement Department Do?

A procurement department is responsible for managing the acquisition of goods and services that your organization requires.

This involves identifying reliable suppliers, negotiating contracts, and ensuring cost-effective purchases.

The procurement team in your company plays a very vital role in maintaining the balance between the cost and supplier relationship, mitigating risks, and even ensuring your company complies with regulations.

What Are The 4 Types Of Procurement?

Here are the 4 types of procurement:

• Direct Procurement: Involves the purchase of goods and services directly related to the production of goods.
• Indirect Procurement: Involves the purchase of goods and services not directly related to the production process, such as office supplies or services.
• Services Procurement: Focuses on acquiring services directly related to the organization’s operations or support functions.
• Construction Procurement: Specific to projects involving construction, this type of procurement includes acquiring materials and services necessary for construction projects.

What Are The 4 Levels Of Procurement?

Procurement can be categorized into four levels:

• Transactional Procurement: Involves day-to-day purchasing activities, often automated and routine.
• Tactical Procurement: Focuses on short-term decisions, such as negotiating contracts and managing supplier relationships.
• Strategic Procurement: Involves long-term planning, aligning procurement goals with overall business objectives, and strategic decision-making.
• Integrated Procurement: Encompasses the entire supply chain, integrating procurement processes with other business functions for seamless operations.

What Are The Benefits Of Having A Purchasing Department?

Having a purchasing department offers several benefits, including:

• Cost Savings: Efficient negotiation and strategic purchasing can reduce costs and better supplier deals.
• Risk Management: A purchasing department helps identify and mitigate potential supplier risks to secure a better supply chain.
• Supplier Relationship Management: Building and maintaining strong relationships with suppliers ensures a reliable and consistent flow of products and services.
• Compliance: When your business complies with policies accordingly, you reduce legal risks for your organization.
• Process Efficiency: Streamlining your procurement process can enhance your overall organizational efficiency.

The Bottomline

Scaling up your procurement organization is an ongoing journey, and you should continuously evolve across the maturity curve of the procurement engagement.

We recommend you reassess your current state every 6 months to understand the following.

• What is the procurement value added? There should be a way to quantify this regarding cost savings or any other metrics you desire.
• What is the expectation of the organization from the procurement organization? Remember that this will keep changing as you increase the maturity of the procurement organization.
• What is the current gap between the expected value and the value delivered by the procurement organization?
• How to bridge the gap.

That is a rinse-and-repeat cycle you would have to follow to scale up your procurement organization continuously,