Pros and Cons of Online Procurement Software
For businesses, moving into the digital age has revolved around using software for process improvement. The next phase is expanding your platform into the cloud. This is especially true in procurement. Online procurement software, also known as eProcurement, offers instant access and heightened flexibility that makes it a popular choice for businesses.
But is migrating to an online procurement software system the right move for your company? Answering that question depends on which industry you’re in and your security requirements. However, you can use some general guidelines to assess whether or not online procurement automation software is the right solution for you.
If your company struggles to manage purchases and place orders in a timely fashion, then disorganization is probably your most critical issue. After an established process becomes disorganized, it’s often difficult to change. And once the system is broken, exceptions start to proliferate. Migrating to a standardized, online tool not only streamlines purchasing but also reduces the possibility of an “exception” purchasing process being permitted. It also makes it easier to centralize purchasing if you want to go that direction.
ERP systems are workhorses, but they don’t always get down into the details as well as you need them to. Online procurement software is typically more flexible in what you can include but also more agile in providing access restrictions. You can typically limit everything from the type of purchases made and vendors picked to the items ordered and accepted prices per vendor. Keeping a tighter grasp on these critical elements reduces rogue spending and maintains consistency in items ordered. And if you purchase a good-quality software, it should integrate seamlessly with your existing ERPs.
Reconciliation & Reporting
When purchases don’t match invoices exactly, the results can be a nightmare. Everyone acknowledges the importance of reconciliation but when the pressure is on, it’s one of the first things to go on the back burner. Trying to pull together historical approvals, or even reports on purchases, made can be exceedingly difficult in a manual or ERP-based system. Online procurement software alleviates this problem with customizable reporting.
eProcurement software systems are typically very cost-effective. If you’re working with a reliable software provider, they’ll be upfront with their pricing and you won’t have to worry about any hidden fees. Ideally, you’ll only pay for the services you use and the provider won’t charge extra for user licensing fees. Plus, the time your employees save by using a more manageable procurement system means your company won’t have labor fees driving up their processing cost per purchase order.
Faster Updates and Implementation
With online procurement automation software, there’s very little wait time to implement a new system. You’ll be able to switch over the new system very quickly with little trouble for your IT department. Plus, you’ll get regular updates from the software supplier rather than having to upgrade your system manually.
Works With Other Systems
Another big advantage to using online procurement software is that it can work with your other businesses process automation systems. Quite a few companies that offer eProcurement software also offer other software modules to automate the AP department, manage capital projects, and streamline other financial tasks. If you stick with just one company for your software needs, you’ll know for sure the software modules can all work together and it’ll make it easier to implement a new system.
Flexible procurement software packages offer a wealth of classification and data analytics detail. In fact, there are so many ways to customize that you can even get a little carried away with your software. You can use online procurement software to micromanage. But having too many fields confuses users and can ultimately slow down your system’s reporting efficiency. The good news is, you can adjust things to find what level of customization works best for your company.
Lengthy Approval Chains
When the opportunity to expand insight occurs, there may be some people within your organization who want to review purchases for varying reasons. These can also be the same people who take longer than others to pass purchases on to the next approver. It’s very important to separate the necessary from the unnecessary early in the process of updating your procurement mangement. This helps keep approval chains from becoming bogged down.
Best For Indirect Materials
Whether or not eProcurement will benefit your company depends in part on what you’re buying. It’ll definitely help facilitate catalog based buying of indirect materials like office supplies. The ROI of implementing a procurement software system for things like that is definitely good. But it gets a little more complicated when buying direct materials and services. Procurement automation software might not help as much if your company is used to negotiating purchases in large, strategically important multimillion dollar deals.
Supplier Onboarding Issues
Although most suppliers will take to online purchase orders well, there’s a chance that some of your older vendors may have some difficulty adapting to a newer system. Small companies can also have trouble using an online procurement software, especially to update catalogs and other detailed information. Determining the extent of your supplier’s involvement in the new software rollout will be a critical piece of project scope.
Less Direct Involvement
Some companies prefer using an on-premise procurement software system rather than going with an online, or cloud-based, solution. On-premise systems can be more customizable, easier to integrate with existing software systems, and comply with more strict security requirements. However, the additional hassle of updating and managing the software yourself makes online procurement software a better fit in most situations.
When looking at the issues facing your purchasing team, you might find that now isn’t a good time to implement an online procurement system. Maybe the cons outweigh the pros for you, at least for now. Still, keep in mind that as the business landscape changes new challenges may require technology fixes. You might still find yourself turning to procurement automation software someday.
On the other hand, maybe looking over this list convinced you the pros definitely outweigh the cons. Maybe you’ve decided an online procurement software system is exactly what your company needs right now. In that case, the best tip we can give you is to look for a good software partner. You want a software supplier who will help you avoid common pitfalls and build the platform you need. We think NextProcess is that kind of company, and we invite you to find out for yourself how we can help you implement a procurement automation system that works for you. Just get in touch with us and we’ll schedule a free, no-strings-attached demonstration of our Purchase Order Module so you can see how it would work for your business.