How to modernize procurement for modern business challenges

With 2023 well underway, an uncertain economic landscape is prompting business leaders to carefully assess their budgets and reduce spend wherever possible. However, many businesses today lack sufficient visibility into vendor costs, which can lead to uncontrolled spending and a host of new risks. After all, you can’t control the spend you can’t see.

Spend visibility begins and ends with procurement, a function that has remained largely unchanged for nearly a decade. With renewed business mandates to reduce costs, mitigate risk and increase efficiency, outdated procurement processes won’t meet requirements.

So, what’s a business leader to do? Start by evaluating current processes, identifying inefficiencies and potential blind spots, then implement the right procedures to achieve a modern, scalable procurement process.

The Business Impact Of Inefficient Procurement Processes

Many procurement teams today are limited by a multitude of factors, from team bandwidth to legacy approval workflows and outdated communication methods. These, in turn, are slowing down the procurement process and, in some cases, encouraging employees to make purchases that are outside of the bounds of procurement altogether.

Risk assessment is also difficult to navigate with an opaque procurement process. Poor purchasing practices and lengthy approval timeframes can tempt employees to use backchannel methods and lead to more unmanaged spend. Without proper security evaluations and the ability to audit spend for compliance purposes, businesses often take on more risk than necessary.

Five Steps To Modernize Your Procurement Process

Based on these challenges, here are five key steps to successfully modernize your company’s procurement workflow.

1. Redefine procurement as beginning at the moment of request initiation.

In a modern procurement workflow, employees need a standardized intake process that is easy for them to understand, access and use.

Say, you just joined a new company and need to build out your stack of software and services to do your job. The problem? You have no idea where to get started or how to request permission to purchase these vital tools. This happens all the time and is a critical moment to improve in the modern procurement workflow.

By providing a single, centralized resource for purchase request intake, not only can this common pain be quickly alleviated for employees, but businesses can also gain complete visibility earlier across the entire purchasing lifecycle and lower compliance risks.

2. Automate spend approval workflows across the stakeholder chain.

Start by creating a matrix that identifies everyone who needs to approve each type of purchase. This could include stakeholders in finance, accounting, security, legal and others. It’s also important to capture which approvals can take place in parallel, which can reduce the overall approval timeline.

Then deploy a solution that enables you to route requests to everyone who needs to greenlight purchases according to the matrix. Importantly, stop allowing one-off approvals. Focus on uncovering and eliminating non-transparent and confusing processes, and take advantage of automated tools whenever possible.

3. Stay ahead of renewals.

Leaving renewals on your organization’s backburner can make it harder to negotiate better pricing with B2B vendors. Without insight into when contracts are being renewed, many companies miss the date by which they must negotiate before the contract renews. Employees can also be left hanging in limbo as they await approval in the face of an impending service expiration date.

Have you ever tried to log into an app you use all the time, like a parking app, only to find you can’t get in at the moment you need it because the credit card information hasn’t been updated? Now you’re standing in the rain fiddling with your wallet, late for your important lunch meeting.

This kind of thing happens every day at companies for business purchases big and small and is easily avoidable if you have a transparent, centralized system that reminds stakeholders of upcoming renewals.

4. Integrate procurement processes with existing technologies.

It’s important that the procurement process is able to integrate seamlessly within a company’s existing tech stack and the day-to-day tools that teams already rely on.

For example, if a company is already using Slack or Microsoft Teams for internal communication, your procurement software should be able to easily integrate into these tools. Additional examples include ticketing and project management tools like Asana or Jira, or contract lifecycle management (CLM) tools like Ironclad.

Given today’s rapid pace of business, it’s critical for companies to be able to modernize their procurement processes without disrupting their existing workflows and processes.

5. Communicate procurement modernization early and often.

Be clear in your internal communications about what you’re planning to change—and why. At internal meetings or any company-wide gathering, explain these changes clearly to all employees from the start, then execute and share the results of these improvements with your team as you go. This provides greater transparency across teams as well as the ability to evaluate results to iterate on processes and workflows.

A modern procurement workflow has become a significant competitive advantage for businesses today. With greater visibility comes an increased ability to control spend and reduce risk. By taking steps to modernize your procurement process, your businesses will be well-positioned to weather the winds of economic uncertainty—and come out on top.

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Originally published on Forbes