Procurement is one of the less glamorous, yet very important, function within any business. It does not get as much attention as sales and marketing function, but it contributes equal value to the business. True, it does not generate revenue, but the savings you can achieve using the right procurement approach drops straight to the bottom line and substantially improves profit. This is why businesses that understand the value contribution of procurement pay great attention to deploying proper processes, personnel and technology to get the most out of it.
The rise of technology has enabled procurement personnel to do their job more efficiently using the right software and provide greater savings to the organization. There have been numerous advances in the purchasing and procurement management software in the last 5-10 years. Many of them are aimed at automating repetitive tasks, identifying anomalies and providing advanced notification for the inventory level.
Before we dive into the features of purchasing and procurement management software it is important to understand some of the key terms used in the context of this software.
- Purchase Order – A purchase order is a record that tracks an agreement between a vendor and a customer to purchase a specific product or services at a specified price with defined terms and conditions. The purchase order is typically issued by the customer to a vendor to show their intent to make a purchase. Many large businesses typically require their employees to get approval for and issue a purchase order before an item can be ordered.
- Invoice – An invoice is a document issued by a vendor to customer that describes the product purchased by the customer along with the price, quantity and any applicable discounts. The invoice is an official record provided by the vendor to their customers. The receiving organization tracks the invoice in their system to verify the purchase as well as to issue payment to the vendor.
- Inventory – Inventory shows the amount of any product that is still available in the warehouse of a business. Keeping accurate and dynamic count of inventory enables any business to keep pulse of what is available in their warehouse. Having a right amount of inventory is key to success for business. If it runs too low you cannot produce and sell the products to your customers resulting in lost opportunity. Having a high inventory results in money sitting idly in the warehouse along with risk of becoming those products obsolete.
Due to high importance of procurement function in the organization it is paramount to pay close attention to the features that are required in any purchasing and procurement management software. Here are some of the key features you should look for during the selection process:
- Low Stock Notification – As mentioned earlier if the inventory runs low you run the risk of not being able to produce and sell products. The software should send you alert when the low stock threshold is reached based in the pre-defined level. In some cases, it should automatically issue a new purchase order to the selected vendor.
- Payment Tracking – The procurement software should enable you to track the payment made against purchase invoice to so that you can keep track of which invoices have been paid and which are open. As you can imagine failure to do so can result in a chaos where some vendors may be paid twice, while others are not paid at all.
- Custom Fields – Any software should allow you to perform some level of customization using custom fields. Every business has its own unique requirements and needs to track certain items. Having an ability to define those items in the software using custom field will enable you to maintain and track them in the system.
- Custom reports – Any business will have a need to filter the purchase invoices and payment with number of criteria to show, for example, how many invoices are still unpaid, what was the total purchase last month, how much was spent with a particular vendor in a given time and so on. The software should allow you to create these custom reports for the management review.
Having the right purchase and procurement management software will allow you to manage your business more efficiently and save significant amount boosting the bottom line. Ensure you screen them using the features described above before making the decision.
