If you are looking for someone to define procurement cycle, then you’ve come to the right place. For uninitiated business owners, the process of procurement may appear to be a very basic and simple procedure. Unfortunately, this is far from the truth.
You may think that all the process involves is located the goods you need, paying for them, receiving them, and then documenting the transaction.
But just like any important business function, procurement is something which is layered and fluid as a business process. It has a number of moving parts. There are quite a few stages as you would understand if you took a look at a procurement cycle diagram.
Procurement is very dynamic and requires regular analysis and monitoring within organizations. There’s always more for people to know, more data to analyze, and more forecasts. All of this ends up being the responsibility of the procurement team.
Procurement cycle steps
So, what are the procurement cycle steps? What are the parts of the procurement life cycle which are constantly evolving? Let’s take a look:
As you learn more about procurement, it becomes very obvious that every writer, theorist, and consultant firm that is involved in this process has a different opinion of the various stages of the procure to pay cycle.
But, here’s a solid list which includes all of the critical stages in the procure to pay cycle for you to consider:
This may perhaps be a very obvious step on its own. But it still must be mentioned nonetheless. Any business owner needs to recognize that products are needed first if you want to make purchases. This product could be a new item or part of an existing brand. It could even be something which is being re-ordered.
#2 Specific needs
Are there any specific needs for the various products in your industry? If this is the case with your industry, then it is essential that you stay up to date with all of the requirements and only place orders accordingly.
#3 Examine/Source supplier options
Each and every business must determine where they are getting their goods from. Certain companies have an approved list of vendors (This is highly recommended) while there are others who are trying to figure out which ones are the best for them. Once a company chooses a supplier, they need to stick with them and try establishing preferred pricing too.
#4 Price and terms
Once suppliers have been finalized, company’s need to stick with relationships and try establishing specific terms and preferred pricing. This is very important if they want to stay ahead of their competition.
#5 Purchase orders
Purchase orders are used as a type of formal contract for making purchases of a particular product. Purchase orders outline prices, specifications, and terms & conditions of products and services. They will also outline all other obligations that are associated with an order.
Purchase orders can be transferred over email, fax or mail. Email, of course, remains the preferred way of sending purchase orders.
In this stage, we take a look at the timeliness of services and the materials which are being delivered. Delays, for a number of businesses, can be very detrimental. Purchase orders must have information on expected delivery dates. This is absolutely essential.
#8 Receipts and inspections
Once orders are delivered, receiving companies need to inspect them and either accept or reject the order. Rejection, in most cases, is because of the products being damaged.
#9 Invoice approvals and payment
When you are at this stage of the process, there are three documents which will come into play. All of these documents need to match exactly if the seller is to be paid. The documents are the invoice, receiving document and original PO. This is something called three-way matching. If there are any discrepancies, they must be resolved before any payments are made.
#10 Records keeping
The company that is making the purchase needs to keep records properly. This means storing all of the relevant documents for all completed purchases.
Can e-procurement help with all of this?
E-procurement solutions can be quite a significant help source in all of the stages of this process. For example, e-procurement solutions can generate purchase orders for you electronically, with all of the information that you would usually have on one.
Also, e-procurement solutions are very important tools as far as delivery and record keeping are concerned. With these solutions, all of the purchase orders can electronically be sent through a system. Emails notifying parties that they have been sent can also be a part of this. This will ensure that delivery is completed in all instances, almost instantly.
Finally, e-procurement solutions are going to catalog each and every transaction in their system. This will ensure records are all kept up-to-date. The records are very important when it comes to financial forecasting. They will also come in handy in case of an audit.
The benefits of software’s like Precoro extend to each and every stage of this process.
If you are looking for the best way of streamlining your purchasing and procurement process, reducing employee headaches, it will also help you get rid of all sorts of annoying paperwork. There is nothing better than switching to an e-procurement system. They will really help you put all your headaches behind you.