June 24, 2024
Strategies to Streamline the Finance and Purchasing Process
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No one wants to waste energy thinking about money that’s already been spent. Too much back-and-forth goes into the manual approval process, leading to a complex guessing game of expenditures. Yet, there’s been a 10.6% increase in procurement workloads for companies globally.
Simple delays in purchasing can increase costs, scramble processes, create bottlenecks, and disrupt the supply chain. Delays in purchasing can lead to increased costs, disrupted processes, and bottlenecks. As companies aim to streamline their financial operations, enhancing the purchasing process becomes an obvious solution.
Maintaining a competitive edge starts with organizing your upstream. Enhancing internal controls and locking down the supply chain will streamline the processes and wrangle rogue spend.
Here, we examine what it takes to fortify the purchasing process, key challenges that hinder it, and solutions that illuminate the future.
Top Challenges for Today’s Finance and Purchasing
Today’s purchasing activities face significant challenges due to technological advancements, economic pressures, etc. Some of the top challenges finance teams encounter include:
Shifting the Mindset
There is an ongoing need to rearrange the process and shift the purchasing mindset. In the current system, employees typically ask for approval retroactively. They need something to get the job done, and so they buy it, then they handle the paperwork.
Another faux pas is passing company cards around the office. For example, the sales team has done well for the day, so the manager gives them a company credit card (with a high limit) to go out to lunch. While this offers convenience to the employees, it’s not a very secure way to spend money.
Chasing Approvals
Who approves what? It’s a disconnected process that, more often than not, falls in the laps of finance (since they have the final say on transactions). If a team is buying software, they may need IT to review the purchase. If it’s an event, the operations team may have to get involved.
If finance teams are taking forever to figure out your request, it’s not getting swiftly approved. Leaving this workflow at the feet of finance assures a clunky process that takes double the time.
Thus the importance of automation. In fact, 82% of CFOs report that their investments in digital are accelerating, exceeding investments in other areas such as talent, supply chain, business services, or fixed assets.
Relationship Management
A slow process stymies satisfaction and is counterintuitive to fostering positive business relationships. Developing strong, collaborative relationships with top suppliers is essential for innovation, risk management, and cost-saving opportunities. The faster you pay people, the better contract terms you’ll receive. It’s usually a directly proportional relationship.
Creating supplier diversity has also been a challenge for modern purchasing. With supply chains slowing (or sometimes halting altogether), diversifying your portfolio bridges the gap. It enhances resilience and innovation in the supply chain.
An international survey revealed that over 71% of companies feel having at least 50 suppliers will effectively ensure their supply chains are running smoothly and aid them in managing supplier relationships. However, managing these strategies requires intelligent tools and refined automation.
Additional Challenges Modern Purchasing Faces
- Regulatory compliance and navigating a complex landscape of global trade laws
- Proactively identifying and mitigating risks in the supply chain
- Embracing new technology like AI and machine learning
- Cybersecurity and the risks of digital attacks on financial systems
- Skills shortage and a growing need for expert professionals
Key Strategies to Accelerate Finance and Purchasing
To accelerate procurement and enhance its efficiency, companies can adopt several robust strategies. These tactics help to leverage technology, optimize processes, and strengthen relationships with suppliers and stakeholders. Here are a few objectives to consider:
Stay Proactive
The purchasing process should be reversed, and funding needs to happen upfront. Staff should submit a request before the purchase, get it approved by all appropriate parties, and then receive the payment method to accompany it. The current procedure of “buy first and ask questions later” is ineffective and leads to bottlenecks.
If the conversation happens upfront, that gives finance teams a strategy to simplify and expedite the approval process. This drives operational efficiency and leads to more informed decision-making.
Leverage Automation
Automation has been a game-changer when it comes to expediting the purchasing process. Organizations significantly reduce cycle times and minimize human error by automating repetitive, manual tasks (like purchase order creation, invoice processing, and approvals).
Integrating purchasing solutions with existing systems (like ERP and accounting software) ensures seamless data flow and real-time updates, making the purchasing process more efficient and transparent.
The good news is that companies are catching on. 80% of respondents in the 2024 Global State of Procurement Report say they would consider integrating AI into their processes within the next two years.
Simplify the Request Process
What’s the best way to get employees to formulate a request prior to approval? Make it super easy for them. Advanced solutions like PayEm help streamline employee intake requests by customizing the process as much as possible.
Rather than having finance do the manual work of coding requests with GL codes and cost centers, the technology does it for you. Customized request forms capture all the necessary data for a team's specific requests, from conference funding to equipment purchases.
By simplifying the request, you can also optimize the solution. Requests can start at one point and end up as a fresh PO developed in an ERP, the creation of a virtual card, or a new license from IT. The entire process is very customizable.
Additional Strategies for Modern Purchasing
- Streamlined communications through a shared dashboard with total visibility in a PR
- Issuance of corporate and virtual cards depending on specific needs
- Offering multi-entity and global support (taxes, conversions, etc). through automation
- Servitization and shifting to other procurement management models
- Adopting IoT devices for real-time tracking of goods and assets
Final Thoughts
The finance and purchasing functions are rapidly evolving. With traditional inefficiencies in the purchasing process, there is a need for a strategic overhaul. Delays in purchasing increase costs, disrupt processes, and create bottlenecks.
By leveraging advanced solutions, automating manual tasks, and fostering proactive communication, companies can streamline the purchasing process, reduce unnecessary spending, and enhance vendor relationships.
The strategies mentioned above help ensure robust financial management, optimize costs, and transform the purchasing process into a strategic powerhouse, driving innovation and resilience for years to come.
