Procurement Workflow: Guide & Expert Tips for 2024
Discover how to optimize procurement workflows, automate tasks, and ensure compliance, addressing key challenges faced by 95% of decision-makers.
Amazon’s 2024 Global State of Procurement Report shows that 95% of decision-makers believe there’s room for improvement in procurement.1 This is because, without a dedicated procurement solution, you can end up with tons of manual work.
This issue intensifies when you manage your tech stack and subscriptions in a spreadsheet or don’t have a standardized procurement workflow.
You can address these challenges by exploring the recommendations in this guide.
We’ll walk you through what a procurement workflow is, its main challenges, and how to build and implement one in your business.
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What is a procurement workflow?
The term procurement workflow refers to the steps businesses take to source, purchase, and onboard software.
The length of this process varies depending on your company’s structure, though, whatever your industry or business size, it should follow best practices and your internal compliance policies
A typical procurement process follows these steps:
1. Receive a requisition
The procurement process starts when an employee makes a purchase request. This can happen through email or meetings, but requisition forms are best because they allow you to formalize the process and ensure you have exactly the information you need.
Customize your forms to trigger different questions depending on the type of procurement, for example, e-procurement, raw materials, or direct or indirect procurement.
2. Find suppliers and negotiate prices
If you’re looking for new suppliers, research, meet, and negotiate prices with potential candidates. Gather quotes from them and feed those that are within budget into your approval workflow.
Now, the purchase decision-makers can review each option and make a choice based on factors such as price, quality, and payment terms.
3. Collect approvals
Approval collection often happens at two stages of the procurement process: When the employee makes a request, and then when you share the provider’s quote.
We also recommend setting up an approval tree based on contract sizes and types of expenses. This simplifies approval collection and ensures you get faster responses by knowing exactly who to contact depending on the nature of the request.
For instance, department heads can only approve travel-related expenses of up to $5,000 per employee. Directors need to approve SaaS and +$5,000 expenses. Additionally, some approvals may require legal or technical oversight.
You can use Vendr to set up an automated procurement process. This way, the requisition form gets approved or denied based on clear and accurate data through a timely workflow and single source of truth.
4. Make a purchase order
A purchase order (PO) is a legal document that buyers create for suppliers once the negotiation is successful. With this, both parties commit to a price, delivery date, and payment terms.
When to use POs: To request one-time services procurement to agencies, consultants, and individuals. Or, to buy office supplies, manufacturing products, or goods.
When to follow an alternative process: Credit-card-required payments like SaaS tools, trips, and lunch meetings with clients.
You can use POs to pay for software subscriptions if they’re part of the contract negotiation.
5. Receive the services or goods
Pay the supplier the full or remaining amount once you receive the services or goods. Depending on your spend management system, you’ll likely be able to report receiving the goods in milestones or parts. Set up a process to define when and how to confirm that you’ve received a service.
For example, some spend management tools like allow the PO owner to mark the order as received (in full or in part). This generates a GR (Goods Receipt) code that you can share with providers to make the invoice. For ongoing services, you can build annual POs and give partial GRs.
6. Pay suppliers
Make sure you have a formalized and easily trackable process for making payments. This could vary depending on where the money comes from. For example, all SaaS spend is charged to the same cost center irrespective of the department.
The invoices need to match the PO amount, number, and date. All invoices should also include the GR code to be paid on time.
Since 47% of procurement teams believe one of the top internal challenges is dealing with complex systems and processes, build one that’s tailored to your operations.
Bottom line: If want to reduce your software spend and streamline the procurement and SaaS management process, use Vendr to save on time, cut costs, and get the best terms.
We’re expert SaaS negotiators and will build an automated procurement workflow for you. This way you can stay compliant, pay the best price, and avoid wasting time chasing down stakeholders.
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The problem with the SaaS procurement process
If you haven’t optimized your SaaS procurement process, you could lack visibility over your spend, pay for duplicate solutions, or be charged an unfair price.
In turn, this causes you to:
- Leave money on the table
Companies often overpay for services because many SaaS products don't publicly share prices. Without access to benchmarks, it's easy to miss out on better deals — so use Vendr Buyer Guides to access benchmarks and ensure fair pricing in your procurement strategy.
- Put compliance at risk
31%1 of procurement teams find it challenging to stay compliant with spending policies. The internal approval process for SaaS spend is often inefficient and circular, with decisions made by department heads based on employee input. This can lead to biased decision-making or poor reporting, risking future audits.
- Skip building relationships with new suppliers
Good deals often stem from strong supplier relationships. When employees pay for solutions without building these relationships, it becomes harder to renegotiate prices or address supplier performance issues.
- Have an inefficient negotiation process
SaaS procurement negotiations can be lengthy, with deals over $20k taking up to three months. This delays implementation and damages the procurement team's reputation. Lengthy waits may push employees to handle negotiations themselves, reducing visibility into SaaS spending.
How to build and optimize your procurement workflow
Your procurement workflow has a heavy influence on your finances and bookkeeping. Having a proper process makes it easier for teams to follow it, which allows you to stay on top of all business expenses.
To build and optimize your procurement workflow:
Automate repetitive tasks
Audit your procurement process to identify the tasks that take up most of your team’s time and which could be automated. For instance, turning email requests and approvals into an automated workflow.
“By investing in tools that digitize, automate, and streamline core functions and processes, procurement leaders can empower their teams to focus less on function and more on strategy,” says Doug Gray, CTO at Amazon Business.
Identify and implement standardized procedures
During an audit, you might discover that each department has a different method for making purchasing requests. Some send you an email, others ask you through Slack, and some people ask for a meeting.
Rather than having inconsistent and disorganized processes, implement standard procedures to solve repeated issues like forgetting to budget annual SaaS renewal fees.
Prioritize accurate data management
Procurement teams have three priorities:
- Sourcing and providing goods or services at a fair price
- Staying compliant with regulations and doing proper bookkeeping
- Looking for cost savings and cost avoidance opportunities
A standardized procurement process guarantees that these priorities are all met, especially the ones that refer to compliant financial management. For example, if you implement purchase orders, suppliers need to add the PO and GR numbers to the invoice. This promotes accurate data management.
Review and update procurement policies continuously
Lastly, conduct regular audits of your policies to ensure they’re up to date and aligned with your procurement cycle. For example, you may need to change guidelines for effective procurement.
Make it a priority to communicate policy updates with key stakeholders to ensure that they follow them.
Reduce manual procurement work while staying compliant with Vendr
The procure-to-pay process will be unique to your business needs. However, you should have procedures that make it easier for you to do your job.
To fully optimize otherwise faltering procurement workflows, use Vendr to streamline and automate your procurement processes.
Our procurement software will process all intakes through a form and trigger a custom workflow based on the specific of each case — with no manual intervention. You’ll work with expert negotiators and procurement specialists to:
- Standardize intakes. Receive procurement requests through a single source and with the same format. This provides better organization and protects you from misplacing any requests.
- Automate approval workflows. Trigger approval requests based on the requisition form information. This reduces the manual process of asking each stakeholder to sign off on an expense.
- Ongoing SaaS renewal management. Let us bring visibility to your current SaaS spend and manage the relationship with suppliers. We’ll identify any inefficiencies and alert you to upcoming renewals.
- Enjoy favorable contract terms and cost savings. We’re experts at managing SaaS spend and making software purchasing decisions. We’ll sit on calls to ensure a fair price and stay on top of contract management throughout the relationship.
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