Purchase Management

To improve the purchase-to-pay process in terms of efficiency and effectiveness, purchase management plays a vital part. Ideally, the business only purchases goods from suppliers with whom contracts have been negotiated and closed.

Indirect versus direct purchase

Products can be purchased for purposes of developing and producing sellable products. Many other products are non-product related or indirect materials that in one way or another support a company’s primary activity. 

In comparison to products that reflect the company’s direct costs, indirect materials typically, but not per definition, represent low volume, low value, low risk purchases. Examples of non-product related items:

  • Facilities: furniture, cleaning, office security
  • Finance & HR: administration, recruitment & selection
  • Sales & marketing: print, internet marketing, events
  • ICT: software, hardware, servers

In scope of optimizing the process from purchase to pay, it is of importance to standardize and automate the purchase of indirect materials as much as possible.

Automation of indirect purchase

Automating indirect purchases has a few challenges. Indirect purchases are typically conducted frequently, by many employees, and from many suppliers. This makes it hard to standardize such purchases. As standardization is a prerequisite for automation, it is no wonder that indirect purchases are performed manually in most companies.

The benefits of standardizing and automating purchasing are straightforward:

  • Better deals can be negotiated with preferred suppliers
  • Less overhead costs are required for selecting and placing an order
  • Straight-through processing of invoices become possible
  • Visibility on purchases made, which is beneficial in scope of spend analysis and compliance matters

One of the critical success factors in bringing spend under management, is making it extremely easy for employees to make purchases, which at the same time, are offered under management. The ease-of-use of popular online shops that are targeting consumers, should be applied for employees as well.

There are a number of ways to empower the business to perform their own purchases, while seeing to it that these purchases are conducted from preferred suppliers:

  • E-Catalogue: Preferred suppliers upload and manage their goods in a dedicated purchase platform, such as offered by Basware. Employees can conduct their purchases in this environment.
  • Punch-out catalogue: Employees conduct their purchases in a webshop / e-commerce platform of the preferred supplier. Thanks to a cXML connection between this platform and a dedicated purchase platform, such as offered by Basware, an employee is redirected to a dedicated purchase environment upon making a purchase in the supplier’s platform. The product that has been selected is then further processed in the dedicated purchase environment. With a punch-out connection, suppliers can manage their items in their own environment without having to manage a separate environment for a specific customer.
  • Automating the purchase of non-product related goods, typically commences with suppliers that capture a relatively large share of a company’s spend. It takes quite some effort and time to have these long-tail suppliers on board with e-catalogues or punch-outs. An intermediate solution would be the use of order forms that are integrated with a dedicated purchase platform, such as offered by Basware.

ICreative offers Basware solutions that focus predominantly on indirect sourcing and purchasing. However, with regards to invoice processing and spend management, our solutions pertain to both direct and indirect sourcing and purchasing.

White Paper | Lean Finance

The financial function of companies has been undergoing a digital transformation for well over a decade. This transformation offers ample opportunities for finance to gain much more control on business spend and to reduce the complexity of the purchase-to-pay process. In other words: the digital transformation leverages a lean approach in many ways.

Note that the white paper is currently only available in the Dutch language.

Spend under Management

The ultimate goal of automation is to empower employees. Employees should acquire the feeling that they have complete control in the purchases they make. If purchases are channeled towards preferred suppliers, employees should be able to make purchases on their own. To boost empowerment further, they should receive feedback on how their purchase fits with e.g. a payment plan.

At the same time, the procurement and accounts payable departments gain control by having real-time visibility on all orders and invoices processed. The visibility allows them to identify opportunities for process improvement and to manage purchases and invoices that are not processed in accordance to standards.

Thanks to automation, both departments also have the resources available for making improvements as most purchases and invoices are processed automatically. Procurement can mainly focus on rationalizing the supply base and negotiate better price and term deals with preferred suppliers. Accounts payable can support management with more complete and more up-to-date figures on spend.

We love to hear from you!

As Basware and Kofax partner, ICreative offers e-invoicing and purchase-to-pay solutions to large companies, institutions and governments. Our solutions provide more controle on business spend and less complexity of the purchase-to-pay process.

We’d like to keep you posted regarding purchase-to-pay and e-invoicing matters. If you’d like to exchange thoughts with us on how to improve and automate these processes, feel free to contact us.