Rogue Spending, Legacy ERP Top Challenges To Procurement Visibility

The procure-to-pay process is emerging as a new priority for the C-Suite, with procurement turning from an administrative task to a strategic one that can support financial and growth goals for the enterprise. But as procurement become automated and accelerated, industry experts at eProcurement and spend management software company eRequester say it must also be transparent.

Last week the company released a new report on the importance of procure-to-pay visibility, noting that even as organizations pay increasing attention to the importance of procurement and its effect on the bottom line, many still aren’t capturing full transparency of their purchasing practices and supply chains.

Citing a Spend Matters survey from 2015, eRequester said more than 70 percent of businesses don’t have full visibility into their supply chains. For procurement, that means the inability to optimize purchasing, with separate research from CEB finding that only about half of businesses said they scrutinize their own spend as thoroughly as they should. A lack of visibility and spend analysis could mean up to $14 million in losses every year for a buy-side company, researchers added.

“Successful business aren’t bogged down by inefficient spending, Instead, they have an acute awareness of where they’re spending money and who they’re giving it to,” said eRequester CEO Benjamin Litjen in a statement announcing the firm’s new eBook, The Complete Guide to Achieving 100 Percent Procurement Visibility.

In its eBook, eRequester said that procurement visibility is paramount to cutting back on those financial losses. From employees that go rogue and purchase off-contract or non-approved items for the business, to not getting the best deal on a product from one supplier to the next, a lack of visibility means money down the drain.

“If your employees are spending a lot of money behind your back and you don’t have enough visibility into your procurement process to detect it, your company could face serious consequences,” the report warned. “Depending on how bad the problem is, maverick spending can take tremendous bites out of your bottom line.”

There are five major challenges to gaining visibility to prevent rogue spend, optimize costs and more accurately identify cash positions, though.

According to eRequester, they include old and outdated systems and fragmented data. The two go hand in hand, with legacy infrastructure incapable of providing the up-to-date, real-time data analytics necessary to identify spending patterns.

In some cases, companies are using different, siloed systems across departments.

“When different departments are relying on different systems,” the report said, “it is next to impossible for procurement teams to get full visibility into their spend because, in many cases, they might not know where to look to begin with.”

When it comes to fragmented data, human error is also a costly hurdle to procurement visibility. Misspelled vendor names, for instance, can not only make it more difficult to find information on a particular order, but stands in the way of being able to understand patterns of spend with that vendor as a whole.

Rogue spending, as mentioned previously, is another top challenge to procurement visibility identified by eRequester, tagged as a “serious problem for many organizations.” Rogue spend means companies can’t control what and how employees are buying, and make it next to impossible to ensure that those workers are actually getting the best price on those deals.

Even ERP systems can’t always provide the transparency companies need, the report said, with a lack of classification identified as the fourth top challenge for visibility. Not all ERP systems are able to classify entries accurately, meaning inaccurate or incomplete labels and an inability to categorize and track spending patterns across those categories.

Finally, poor training and policies make for the fifth largest hurdle businesses must overcome to obtain adequate procurement transparency. If an employee isn’t properly trained on how to classify a purchase, or inaccurate files documents, these mistakes disrupt a firm’s ability to gain an accurate picture of their spend.

The company also identified several ways businesses can overcome  these hurdles, with a particular focus on inventory management, vendor contract negotiation, AP accuracy and automation, and a focus on fraud detection and mitigation.

“Instead of wondering where their money is going, these companies are constantly looking for ways to further optimize procurement,” added eRequester’s Litjen. “The better insight you gain into your organization’s procurement processes, the more effective your company will become. It’s that simple.”