Source to pay is an intrinsic function of any procurement department and entails the following processes
This plays a very important role in building a resilient organization where there is a constant pipeline of suppliers to deliver the best quality at the lowest cost and within desired timelines. This entails continuous evaluation of suppliers to evaluate both new vendors required as well as ranking of existing vendors based on their profiles. Spend analytics is therefore a very intrinsic part of this process wherein organization spends are cleansed, grouped, and analyzed to determine patterns, discovering maverick spends and recommending likely areas for savings efficiency.
The buyer team initiates the purchase requisition (PR) which is then sent for approval based on the approval matrix of the organization. Once approved, such PR is typically maintained for audit trails and the RFI / RFQ process is then initiated to the shortlisted vendors.
Managing release of RFI / RFQ to shortlisted suppliers (from existing vendor master or new vendors) has elements of workflow, document management, managing queries from vendors and eventually timely responses to bids. When automated and managed properly, there is immense potential for enterprises to not only reduce cycle to the process but also enable full transparency and visibility coupled with audit trails to ensure proper governance.
Supplier negotiations could be long and tiresome before the desired price could be finally settled on. This process when manual is very people intensive as it largely relies on the ability of the procurement officer to be able to effectively conduct negotiations. Enterprises look to automate this process via reverse auctions, thereby not only bringing down the cycle time but also to ensure that they reduce procurement cost significantly via lower prices offered by vendors during online auctions.
Managing the lifecyle of contracts include contract term negotiations, audit trails, workflows and eventually maintaining and having visibility of various contract versions coupled with archiving and safe disposition after the end of the contract period. This process is highly document intensive and when done manually could be difficult to have visibility of the current status of the contract as well as the latest versions from amongst tens of numerous versions of such contracts. Enterprises are increasingly looking to automate this process to have visibility of annotations and comments during contract negotiations for future use, automate workflows and ensure records management of contracts.
Supplier onboarding process requires that the procurement team receives all the KYC documents of the supplier and establish veracity and authenticity of these documents before creating the vendor master in ERP. When done manually, the process efficiency depends on the skill of the procurement officer to track completeness and correctness of the documents, do multiple follow-ups and then create the master record accurately. Enterprises typically automate this process to bring down the cycle time and maintain audit trails of documents for adequate governance.
For onboarded suppliers based on approved PR's, Purchase Orders are then created via the ERP and then released via mails or via vendor portals.
Once goods or services are received, there is a gate entry or confirmation of receipt into the ERP with detailed specifications including quantity, quality checks etc.
This process entails invoice receipt, matching of invoices and determining accuracy of various parameters including price, tax, matching versus PO and GR, identification of exceptions and passing for workflow approvals as per internal policies for material or service types and then eventually posting of the invoice into ERP. When done manually this process could be error prone for large volumes of invoices and could be cumbersome and time consuming. Enterprises typically automate this process with invoice automation softwares.
Invoices need to be paid based on agreed credit period and could require workflow approvals for posted invoices before they are paid. Release of the payments via direct remittances or physical cheques is then recorded and required entries are posted for reconciliations at a later date.
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