Optimize Each Stage of the Procurement Process
4 stages of Procurement and the contracts at each stage
Whether it’s acknowledged or not, every company has a system of agreement. Sometimes, it’s a haphazard mix of structured and random efforts—multiple steps tracked in a shared spreadsheet, contracts buried in email inboxes and others stored on someone’s computer desktop. These agreements are vital to procurement processes, detailing exactly what goods and services are being purchased, how they will be delivered, and how the vendor will be paid.
The first step in building a modern agreement procurement workflow is to audit the existing agreement process, detailing exactly how organized or disorganized it is. Once that process has been defined, the procurement team can take steps to streamline that system of agreement. Here is a breakdown of four important stages to optimize throughout the procurement process and the types of contracts involved in each stage.
Pinpointing exactly the right vendors to provide high-quality goods and services is critical for any procurement team. However, it’s not enough to just discover the best vendors. Organizations then have to convince the vendor to agree to a contract.
A productive way to attract the best vendor is to streamline the paperwork in the sourcing process. This is an early signal to vendors that your organization is modern, efficient, and will be easy to do business with throughout the business relationship.
If it’s quick and easy to generate, send, sign and manage contracts, the agreement process will improve for everyone, including internal stakeholders who will deal with those suppliers directly. Centralized, cloud-based Procurement solutions provide maximum visibility for every party and can cut the agreement time down to just minutes by enabling signatures from virtually anywhere, anytime, on any device.
Common sourcing agreements:
- Requests for proposal (RFPs)
- Sole source justifications
- Nondisclosure agreements (NDAs)
- Master service agreement (MSAs)
- Service level agreements (SLAs)
- Risk waivers and exceptions
Nothing slows down payment like a manual entry process. Duplicating data from one system to another by hand takes a long time and introduces opportunities for error. Timely, accurate purchasing agreements are at the core of healthy relationships between organizations and their preferred vendors.
When it comes to PO approvals, it’s best to reduce or eliminate manual, paper-based processes as much as possible. Simplify purchasing by automatically transferring data between integrated systems, and set up predefined routing approvals to ensure purchases happen at the speed that business requires.
Common purchasing agreements:
- Purchase requisitions
- Work orders
- Purchase orders (POs)
- Statements of Work (SOWs)
3. Contract management
Procurement teams lack visibility into the scores of supplier contracts across an organization. This creates challenges in managing costs, quality and compliance. Managing contracts as a series of one-off agreements is unsustainable as an organization scales.
A strategic centralized system of agreement provides contract visibility for every stakeholder, so procurement teams spend less time updating various people about contract status. A central repository for standardized contract clauses is an efficient way to ensure compliance across agreements and decrease exposure and risk.
Contract analytics can now help organizations negotiate more favourable supplier terms and improve performance. These legal insights reduce costs and risk by increasing access to historical agreements, pinpointing terms that correlate with certain outcomes and highlighting differences between a current agreement and a similar archived version.
Common contract management processes:
- Contract enforcement
- Agreement review
- Version tracking, alerts and status tracking
- Legal redlining
4. Invoicing and payment
A modern system of agreement uses digital technology to create new efficiencies. New agreement tools allow any organization to automate key processes like invoicing, payment collection, credit and financing requests, and more. Integrations allow data sharing between systems, reducing duplicate efforts and automating repetitive steps. Processes move faster, reduce costs, increase accuracy and help companies remain compliant.
Simplifying collection and distribution of payments is an easy way for procurement teams to improve relationships with suppliers. No one wants to be left unsure of when they’ll be paid, how the payment will be sent, or what amount will be delivered. Consistency and stability at this important part of the process maintains healthy relationships between organizations and their suppliers.
Common invoicing/payment processes:
- Invoice processing
- Payment collection
- Financing agreements
See how today’s most progressive organizations create effective digital Procurement workflows for competitive advantage: Building a Modern Agreement Workflow for Procurement