No procurement team? No problem. Procurement checklists to get more spend under management.

Procurement plays a pivotal role in cost management, risk mitigation, and financial performance. But until recently, many organizations struggled to define their processes and find the right tools to manage procurement. Let’s take a look at the basic elements of procurement, and how different organizations and systems approach this vital function.

What is procurement?

In its simplest terms, procurement is the process of acquiring goods or services. But procurement traditionally hasn’t been a simple function and most legacy procurement software is anything but simple. That’s partly because it must encompass a broad range of activities to obtain necessary resources, whether they are tangible like raw materials and equipment, intangible like consulting or software, or based in multi-functional complex projects like construction or infrastructure development.

What are the steps in procurement?

For many organizations, procurement is transactional and focuses on obtaining goods and services efficiently while minimizing costs. The basic steps of procurement are:

• Evaluate and choose suitable vendors.
• Negotiate pricing and contract terms.
• Generate a purchase order for the selected items.
• Receive and inspect the delivered products or services.
• Perform a three-way matching of the purchase order, receipt, and invoice.
• Approve the invoice and execute payment.

However, organizations with more complex procurement needs often take a more holistic, long-term approach. The steps in a more complex procurement function could include:

• Supplier relationship management: Establish a framework to manage the ongoing supplier relations, performance, and improvements.
• Risk assessments: Identify potential risks, including compliance leaks and supply-chain disruptions.
• Quality assurance: Define quality standards to ensure goods and services meet requirements.
• Ethical and sustainable procurement: Incorporate ethical and sustainable practices into procurement to support social responsibility and environmental goals.
• Compliance monitoring: Perform regular audits to ensure compliance with internal policies and regulatory requirements.
• Cost management: Implement cost-control measures to reduce expenses.
• Inventory management: Optimize inventory to minimize carrying costs while ensuring enough supply for operations.
• Performance metrics: Define KPIs to measure the success of your procurement efforts.
• Document management: Maintain a record of all transactions, contracts, and correspondence for audit and compliance purposes.
• Technology integration: Integrate with other tools to automate and streamline processes and enhance visibility.
• Supplier communication: Establish transparent communication channels with suppliers to address issues easily and build strong partnerships.

These steps optimize the control needed to achieve procurement’s goals, but require a heavy investment in both a full procurement team and comprehensive procurement software.

What is the best procurement software?

Because of this wide range in complexity, procurement software has long faced a dilemma: it needs to solve for procurement that involves multi-step processes without alienating those with simpler procurement needs.

Unfortunately, the end result often falls short when it comes to usability. Legacy procurement software has a reputation for being clunky, difficult to navigate, and generally disliked by almost everyone who has to use it. This creates gaps in visibility and compliance.

A recent ICD report, The Value of Guided Procurement Applications, talks about a new generation of procurement software that builds in the controls needed for effective procurement while focusing on the basic steps.

“New procurement software restores transparency and, therefore, control over spending without weighing down the process. It does this for multiple stakeholders that may be required in various spend scenarios,” the report states.

How does procurement relate to accounts payable?

The IDC report also points to the recent innovation of including the full cycle of employee spending by combining procurement workflows with accounts payable automation. This close relationship between AP and procurement helps boost cost savings. By providing real-time spending data and payment information, procurement can find ways to reduce expenses and strengthen supplier relationships, such as negotiating early payment discounts.

These workflows build in the control and collaborative aspects of more complex programs without the steep learning curve, high cost, and lengthy implementation of programs designed to cover the aspects of procurement that don’t apply to many industries and use cases.

See how Airbase’s Guided Procurement module can improve spend under management. Check out a self-guided tour!