Unknown to most business owners, procurement is an important watershed that determines the potential of their businesses. Be it small businesses, agencies, or government bodies, and the procurement process has a significant impact on an organization’s competitive and operational health. Unlike before, procurement processes are essential to improving a business’s profitability and performance, especially in the current competitive market.
Businesses should be wary of several best practices for business procurement and implement them effectively in their procurement systems to improve process efficiency and generate a positive cost-income ratio. The best practices include the following:
1. Automate procurement processes
Procurement is among the few core business activities that affect nearly all aspects of your business. Unfortunately, most procurement teams still rely on outdated processes and tools, which makes the process overly tedious. Business managers should avoid this by automating procurement processes.
A survey found that only a third of businesses agree that automation can prevent or mitigate bottlenecks and disruptions in procurement. Interestingly, only 23% of firms with procurement departments have already automated their processes. Procurement automation eliminates the tedious manual processes and repetitive tasks, such as updating records and data entry. This saves time, reduces human error, and decreases processing costs.
2.Encourage process transparency
Making your procurement process transparent unlocks the potential savings and minimizes the opportunities for fraud. 27% of businesses agree that transparent procurement processes also eliminate unexpected disruptions in procurement. Procurement process transparency ideally involves allowing all stakeholders unlimited access to information and documentation that will help them complete their parts flawlessly.
The benefits of encouraging process transparency include:
- Faster processing: Few hitches will arise in the procurement process if all parties know what to do and standards to follow.
- Cost reduction: Transparent processes eliminate back and forth emails, saving time and costs.
- Accountability: Transparent documentation ensures that the business and vendors understand and are accountable for every stage in the procurement process.
3. Improve supplier relationships
Suppliers are proactive partners in business success. The more you nurture supplier relationships, the better the chances of accessing valuable opportunities. You can also secure the best prices and create a reliable and flexible supply chain that helps your business thrive even during tough times. You can improve supplier relationships by:
- Focusing on mutually beneficial business opportunities
- Prioritizing supplier communication and collaboration. Connect and build trust with your suppliers.
- Monitoring compliance and performance using KPIs
- Being honest with your suppliers
- Making use of digital tools to merge data streams, share crucial information, and improve business intelligence
- Using procurement tools to streamline invoice processing and ensure timely payments. This builds your reputation as a reliable client.
4.Take advantage of cloud-based procurement tools
Digitizing your procurement process is an important step in ensuring that your procurement process is future-ready. Like automation, cloud-based procurement tools eliminate repetitive procurement activities, freeing members to focus on other important tasks. Digital procurement solutions ease supplier management, purchase requests, invoice approval, spend analytics, and integrations.
As the cost of doing business increases steadily, businesses should evaluate procurement processes, as they take up a lot of business finances. Even though most companies still use manual procurement methods, a complete overhaul of procurement functions is required to match business demands.
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