Businesses of all sizes—from lemonade stands to multibillion dollar defense contractors—need to know how their money is being spent. Otherwise, they could go out of business after procuring 200 pounds of lemons for 20 cups of lemonade, or 50 ejector seats for ten fighter jets.
The practice of making sure those kind of miscalculations don't happen is called spend management or purchasing management—in other words, overseeing and directing financial expenditures within an organization.
Purchasing management can encompass multiple business functions—such as procurement, contract management, and supply chain—so using stand-alone systems for each part of the process is not an efficient way to go about things.
An integrated purchasing system, on the other hand, brings together all the practices and processes organizations use to manage spending and increases visibility over them.
How integrated purchasing management can help
There are many ways integrated purchasing management software can help your organization save money, reduce inefficiencies, and improve communication. Let's look at a few.
1. Centralized access to data
Access to information is one of the most important drivers of business growth. Just having access to data can be a competitive advantage and an effective barrier to entry.
An example of an integrated spend management platform (Source)
With a spend management solution, you can centralize access to spend data so that all stakeholders can make decisions more effectively. Since the software is stored in the cloud, data can be accessed by all users at any time, from any location.
Also, since data is updated in real time, you can ensure that all parties have the most up-to-date data to work with. The software also secures and compartmentalizes data so that you can control access to sensitive information.
Along with centralized access to data, an integrated purchasing management platform also comes with multiple communication tools that allow the stakeholders to collaborate easily.
2. Transparency and visibility into the process
With the centralized access to data, there is more transparency in operations and visibility into the process. Gone are the days when different departments and business units spent money without oversight and buried these transactions in lengthy reports and complicated spreadsheets.
Integrated purchasing management software can also improve accuracy. Through integrations and other automated methods, software can receive transaction details directly from source systems, and since there is no human element involved, there is no space for tampering or inaccuracies in data.
Take an expense transaction, for example. When an employee buys a flight ticket offline and has to enter details into an expense report, there is a chance that an error might be committed in data entry, or a scheming employee could inflate the amount to claim more. However, a purchasing management solution can be integrated with third-party booking solutions, so all the transaction details can be sent directly into the expense report.
In spend-related processes such as procurement and accounts payable, there is a great need for transparency to ensure that funds are not being mismanaged. Spend management software logs all the actions of the stakeholders and makes them available for checks and audits.
3. A single platform to run all purchasing
Perhaps the biggest advantage of an integrated purchasing solution is that it offers organizations a single platform on which to run all their spend-related processes and activities. This helps organizations avoid many of the pitfalls associated with disjointed processes and lack of collaboration between business units.
In spend management, data should flow seamlessly between different systems, since tasks are interdependent, and with an integrated solution, this data is available faster and more conveniently.
Take procurement and accounts payable, for example. Though one department or unit procures the necessary supplies, these bills have to be paid by the accounts payable team. If data from procurement is not available, or if communication gaps occur between these units, payments go haywire and business comes to a halt.
In contrast, the spend platform ensures seamless and real-time access to all purchase information so that the AP unit can get invoices verified immediately and disburse the payments.
4. Mission-critical analytics
Gartner states that analytics programs will become even more mission-critical throughout and across industries (full research available to Gartner clients).
Analytics are fast becoming one of the most important arrows in organizations' quivers. They offer the scope for competitive advantage, and—by virtue of allowing organizations to improve their processes and task management continuously—even allow them to develop and nurture capabilities and core competencies.
The benefits of analytics are not limited to a few individuals or business units. With integrated purchasing management software, analytics can be made useful for all stakeholders. The software encompasses divisions and units and allows business processes to be run in a more validated and informative manner.
Since analytics and data management instill discipline and accuracy in the stakeholders, predictions and forecasts can be made with much more accuracy.
5. Full or partial automation of purchasing processes
Automation is one of the pillars on which an integrated purchasing management solution is built. It helps automate many spend management processes. It minimizes human intervention—and the resulting potential for human error—and increases speed and accuracy of the process.
In expense management, various tasks, such as data entry into expense reports and approval routing, can be completely automated with employees only supervising and approving them.
In procurement, you can automate orders, purchase order handling, and approvals and validations. Incoming invoices can be automatically sorted and matched with existing invoices to help AP specialists process them quicker.
Analytics can also be automated—the software can be instructed to automatically process the given data and come up with insights. These insights can be automatically reported to the stakeholders through emailed reports.
6. Potential for expansion with future integrations
Though the spend solution comes pre-integrated, it is by no means a closed solution.
Users have the option to further integrate solutions with the platform to increase its scope of operations and provide them with greater cohesion and synchronization among business units.
You can integrate an online signature software solution to make approvals more effective, and you can integrate customer relationship management or human resource management software solutions, if necessary.
It's time to try an integrated spend management solution
An integrated spend platform can be very helpful in managing your purchasing-related processes in an effective and comprehensive manner. It helps you avoid many of the pitfalls of business solutions and gives you an all-round seamless experience.
Check out Capterra's purchasing management software directory, and filter for features such as contract management, inventory management, and invoice processing to see some of the integrated purchasing systems that are available to check out.