Perfecting procurement: How to streamline spend management from requisition to payment

Why do procurement teams love PO systems?

Software companies originally designed Purchase Order (PO) systems to help businesses like yours handle their orders for inventory, goods, and services. They’re typically part of larger Enterprise Resource Planning (ERP) systems and sometimes part of complete Procure To Pay (P2P) solutions, and when effective, they can have a huge impact. From maintaining healthy supplier relationships and controlling costs to ensuring compliance and supporting data-driven decisions, a good procurement system can help support efficiency and control.

Typical PO system benefits include:

• Proactive approval of costs and good governance: Budget owner and finance team approvals for items and services pre-purchase, giving you 100% control of where company spend is going. (NB: This process is generally done via a three-way match)
• Robust agreements for better relationships and services: Quick and efficient PO processing that encourages good supplier relationships, fewer payment delays, and removes the risk of expensive misunderstandings or missing items.
• Improved visibility: Transparent PO systems improve organisational visibility and let teams see and manage their planned spending more efficiently, leading to more better informed decision-making.

The challenges of typical PO software

‘Traditional’ PO software services that make up part of larger ERP solutions can help you make pre-approved purchases from onboarded suppliers at scale.

The problem? They’re often a) very expensive and b) not completely connected with the other ways your business spends.

The challenges of typical PO software

Tackling a) first, and research shows that an ERP licence for just one user can cost anything from $75 per month to a whopping $7000.

Clearly, many businesses will find user costs prohibitive due to expensive licensing, making it impossible for them to let their employees submit purchase requests without creating out-of-control costs.

And b) looking at how businesses often rely on multiple payment methods to work with various providers, subscriptions, and more.

Take Oscar-winning, international rendering solution provider Chaos Group, for example., and how its vendors expect to be paid.

“Some suppliers expect to be paid in cash, and some via invoice. As our company grows, the complexity and time required to carry out all the tasks we need related to different purchases takes up a lot of time,” explains Ivan Slavchev, System Administrator at Chaos Group.

Companies like Chaos Group need the option to procure, onboard, and pay in multiple ways to do business. And they need these options to be connected to keep tight control and clear visibility over overall company spend.

Let’s imagine an international software company called Company A. They would most likely purchase goods and services from multiple suppliers. Here’s how they spend...

Services

• Company A has a subscription for SEO software for its marketing team that leverages invoices to pay per month
• Company A also has a subscription for CRM software for its sales team that it pays monthly
• Company A also pays a provider for web hosting services via an annual contract

Goods

• Company A is constantly growing and hiring new employees every month. They purchase new MacBooks for all new employees
• Company A also buys new Dell monitors for existing and new employees

Employee expenses

• Company A has a commuting allowance policy and reimburses employees for taxi rides and subway tickets
• Company A also gives out several corporate cards (with in- built controls) and connected software, allowing their sales teams to expense accommodation, meals, merch and more, and automating receipt data capture chasing

That’s multiple methods of procurement or payment, and each one is vital.

Company A, therefore, needs a solution that can offer each of these options — all in one place. Without this, they will have a disconnected overview of spend and cash flow and risk making uninformed decisions with inaccurate, out-of-date information.

Beyond a disconnected view, further challenges include:

1. Inefficient manual processes: Manual processes for purchase requests, approvals, POs, and invoices can be slow and error-prone. Automating these steps is crucial for a smoother P2P process.
2. Unauthorised spending: Maverick employee spend that falls outside a procurement process (or robust spend management solution) can lead to uncontrolled costs, compliance issues, analysis difficulties, and duplicate payments.
3. Non-compliance with procurement policies: Failure to adhere to procurement policies, such as vendor agreements and set budgets, can lead to unauthorised spending and non-compliance.
4. Lack of supplier collaboration: Poor communication and collaboration with suppliers can result in delays, quality issues, and strained relationships.
5. Lengthy and complex approval cycles: Delays in purchase request approvals can slow down the procurement process and lead to missed opportunities or rushed decisions.
6. Invoice discrepancies: Mismatches between POs, goods receipts and supplier invoices can lead to disputes, missing goods, and delayed payments.
7. Fraud and security risks: Weak internal controls and a lack of fraud detection mechanisms can expose an organisation to fraud and security risks.
8. Inefficient use of technology: Poorly integrated or misused P2P software can lead to inefficiencies and underutilisation of features.
9. Lack of standardisation: Inconsistent processes and data make it challenging to manage and optimise the P2P process across different departments or business units.

How to get complete spend control and visibility with spend management and PO software — all in one

Well-connected spend management and P2P solutions provide control and visibility over all current and planned (via procurement) company spending. The most comprehensive solutions should support you in managing procurement and payment in multiple ways to suit all your business requirements, including expense management, corporate cards, POs, invoice payment, and accounting integrations.

The benefits of a complete solution are enormous, and some of the biggest ones include:

Improved financial control:
Get a holistic view of spend and take full control of expenses with card controls, approval workflows across card spend and PO, and more

Cost savings:
Pinpoint cost-saving opportunities using things like custom fields and categories. Take Company A, they gave corporate cards to their sales managers and set project categories to select at the point of receipt submission. They also categorise invoices to the proper class & GL code, which is ‘Sales Event X Y Z’, so they can check if they spent what they expected or not.

Time savings and efficiency:
Increase productivity by automating a lot of the processes involved with your expense reporting, POs, and invoice management to reduce manual tasks and save your team hours and even days.

Employee engagement:
Improve productivity by giving time back to employees both inside and outside the finance team. Instead of spending hours on submitting receipts, non-finance people can focus on their actual roles. And finance team colleagues can save days spent chasing receipts and reconciling to focus on financial strategy instead.

Real-time visibility:
Gain real-time visibility over your financial data to track spending as it occurs and make actionable, cost-saving decisions fast.

Accuracy and reduced errors:
Reduce the risk of data entry and processing errors with automation. And get more accurate financial records (and even improve VAT or other tax-related savings).

Enhanced compliance:
Enforce compliance with in-built spending policies and regulations across your card spending, like freezes, blocks, and limits. Plus, build in manual and automated approval workflows for invoices and PO requisition.

Supplier collaboration and management:
Ensure data integrity by preventing duplicates and fraud with updated supplier information. Plus, sync with your ERP or accounting system for accuracy, custom entry, and off-platform reporting.

Streamlined approvals:
Automate approval workflows for POs, expenses, and invoices to help streamline processes, reduce delays and improve accountability.

Data analytics and reporting:
Get robust reporting and analytics tools to generate insights into spending patterns, identify trends, and support data-driven decision-making.

Scalability:
Scale how you manage business spending as you grow with customisable workflows, approvals, and automation.

Enhanced security:
Rest assured with security features that protect sensitive financial data, including encryption and access control. You should expect your spend management solution to include the following and more: PCI DSS and ISO 27001 certified, SOC 2 Type 2 and GDPR compliant, and leverage industry-standard AES 256 encryption.

Integration with accounting software:
Seamlessly integrate your corporate card and non-PO invoice expenses with your chosen accounting software or ERP to reduce the need for manual data entry, simplify reconciliation, and ensure financial data consistency.

Mobile accessibility:
Leverage user-friendly tools (including mobile apps) that make corporate cards and expense management easy for everyone, even on the go.

Audit trail:
Get a complete audit trail, which is valuable for internal and external audits, ensuring compliance and accountability.

Complete the checklist ✓

Use the handy takeaway checklist to assess if your solutions are helping you be as efficient as possible. Or take it to your next RFI or RFP to help you investigate the best solution for your business.

Accounts Payable and PO questions — Yes or No:

• Is a good PO process important to spend control in your business?
• Does your company pay suppliers on time every time?
• Can your finance team stay agile with automated approval processes across PO and invoices?
• Can your non-finance colleagues follow P2P processes easily, and are your designated approvers reviewing requisitions correctly?
• Does your team use the most appropriate procurement flows?
• Is your current PO solution customisable, and does it let you select who can make PO requests to set up efficient, well-governed workflows?
• Can you customise your three-way match with splits inside one category, for example, marketing (services) and marketing textbooks (goods)?
• Can you set default custom fields and values by item to sync your invoices perfectly with your ERP or accounting software?
• Does your solution let you include discrepancy approvals with your PO process? (Letting you pre-approve a request and push through if everything matches. BUT also flagging if the next two documents don’t match your initial PO so you can run a secondary approval)
• Are you able to operate the ‘four eyes principle’ and involve two or more people in the process automatically via your workflows to help prevent fraud?
• Can you operate AP flexibly? For example, allowing anything under 5k to go through the system via invoice management but leveraging PO (and in-built approvals workflows) for anything over 5k
• Can your spend management solution use OCR to match PO numbers automatically?
• Can you build in agreed categories using dropdowns and custom fields for all spending, allowing your budget holders or spenders to categorise their expenses? (And can you create these following the accruals concept to ensure your data flows seamlessly into your ERP or accounting software?)
• Can you check variance analysis in just seconds?
• Can your company avoid emergency/added approvals?
• Can you capture and process invoice data globally with minimal effort?
• Can you make fast, low-cost payments to suppliers globally?

Next steps

If you answered NO more than three times on the questions above, you could be working much more efficiently, quickly, and with fewer mistakes.

When it comes to procuring the best finance solutions for your business, who could do a better job than your finance and procurement teams? That’s probably you, and you’re probably halfway through your hunt for the perfect solution already. Stop now. Fill in the list above, pinpoint the gaps in your current set-up, and start looking for a solution (like Payhawk) that will save you time and money, boost compliance, and improve overall spend visibility and control.

Nick Millard, VP of Finance at GDS Group describes his teams experience with Payhawk as follows:

Since we've implemented Payhawk, the benefits have been enormous... Before Payhawk it used to be one person's full-time job to chase receipts, code up credit card statements to the P&L and manage the costs and credit cards. But now we can be proactive, track costs, and get visibility of expenses as they happen. That has freed us up to look into future spend rather than always reporting on historic spend.

Want to explore how Payhawk does PO? Visit our complete PO and procurment page or book a personalised demo to see it in action.