Companies without purchasing management software struggle with cash flow visibility.
The CFO and controllers of fast-growing businesses don’t have tighter control over their spending. Unauthorized spending is common, and surprise vendor invoices cause problems with cash flow planning.
By setting up a purchasing management process, you control spending and can better predict your cash flow.
If you are a CFO or controller of a growing company and looking to implement purchasing management software, this article is for you. We will cover the key features and an in-depth review of the three purchasing management software providers.
You will leave with a good understanding of what features you need in purchasing management software and what is the best purchasing management software for your growing company.
A purchasing management software automates the entire procurement process. A complete procurement platform needs the following features:
Purchase requisitions automate your paper requisition process. If your employees fill up Google forms for requisitions or print requisition forms, the purchase requisition feature eliminates the manual process.
Purchase requisition refers to an electronic purchase requisition process that digitizes the manual purchasing process.
It reduces the time it takes to create a purchase requisition using catalogs.
Repeat purchases are a breeze using the purchasing requisitions.
Flexible workflow engine
To control spending, you need a mechanism to have a review/approval before making the purchase. That is where a flexible workflow engine automates the routing of purchase approvals to different stakeholders.
You don’t want your employees to choose who should be approving a purchase. It could lead to compliance risk and unauthorized spending.
Instead, a flexible workflow engine allows you to define an authorization matrix and approval controls. Once configuring the workflow, the cloud-based system does the routing for approval.
Purchase order software
After purchase approval, a purchase order gets generated.
The purchase order software automates the purchase order creation process. Your employees don’t have to generate the purchase order manually and email it to the vendor.
The system automatically takes care of that, saving you time and avoiding any manual data entry errors. Lower errors lead to better vendor management and controls.
Inventory management provides you with a single place to track your stock items.
You can track inventory usage, inventory value, and onhand stock.
Integration with the Accounting system
Purchasing management software must integrate with your accounting package. Otherwise, you have to recreate the data in two data systems. That is no fun!
With Accounting system integration, the purchasing software syncs the data with the accounting system. It saves you time and helps avoid any data entry errors. Integration with the accounting software is a must-have for a cloud-based solution.
The section below will compare three different purchasing management software providers and how they support these key requirements.
Note: ProcureDesk is our product, and we designed ProcureDesk to solve these five key purchasing requirements. You can read about it in detail below or schedule a demo to see how it could help your team.
ProcureDesk is a complete purchasing management software that is designed for growing companies. It provides the finance and procurement team with comprehensive purchasing controls so that you can control your spending and plan your cash flow.
Here are the key features of ProcureDesk:
Purchase requisition refers to the functionality of electronically creating purchase requisitions. You can easily cut the purchase request cycle time by 40-50% by implementing purchase requisitions.
A couple of aspects of electronic purchase requisitions that make it easier for employees to create purchase requisitions quickly:
With user defaults, employees don’t have to enter the same information repeatedly.
The common user defaults are:
ProcureDesk remembers the user defaults so that the user doesn’t have to enter the same information again. Here is an example:
Catalogs make it easier for employees to create new purchase requisitions, especially for items they repeatedly purchase.
A catalog is a collection of items that you purchase, and the user can select which item they want to purchase.
Since the pricing and description are already populated, the employee saves time creating the request.
The suppliers also benefit from this because the pricing is accurate, and they can process the order faster.
There are two types of catalogs.
As the name suggests, the vendor manages this type of catalog.
If the vendor is selling a large spread of items, it is easier for the vendor to keep an updated catalog vs. a catalog that the buyer manages.
It is common for large retailers like Amazon.com and companies to sell thousands of parts.
The vendor-managed catalog is also called a punchout.
Here is an example of Amazon.com and how the punchout works.
In this case, the employee clicks on the Amazon.com logo from the purchasing system (ProcureDesk).
The purchasing software then directs the user to the Amazon.com website.
You would need an Amazon business account for this work.
The employees can then browse the entire site, selecting what she needs to purchase.
The big difference is that the employee needs approval before making a purchase.
You request approval by clicking on the “Submit these items for Approval” button.
The system copies the cart data into the user’s purchase request in ProcureDesk.
Vendor catalogs combined with a user-friendly interface for purchasing can significantly reduce the purchase cycle time.
That’s how easy it is.
As the name suggests, a vendor doesn’t manage this catalog type.
Instead, the buyer creates and manages the catalog through supplier collaboration.
Suppose you have a small supplier and they only sell you 10-15 items.
It probably doesn’t make sense for the supplier to create a website and manage the catalog for you.
In that case, you can create an internal catalog. The supplier provides you with the required information, and you create a catalog.
Here is an example of an internal catalog.
The employees can easily create purchase requests by clicking on the “Add to request” button.
The rest of the process is the same whether you use a supplier or self-hosted catalog. Catalog management should be part of the overall supplier management strategy.
The approval workflow is an integral part of the purchase request feature.
With approval workflow, the employees don’t have to worry about the approval matrix and who needs to approve the purchase.
ProcureDesk automatically identifies the approval routing and sends the purchase request for approval.
Many systems allow the employees to select who should be approving the purchase. It might seem that self-assignment is a more flexible approach. But this could cause an issue with compliance.
If an employee picks up the wrong approver, then it takes more time to approve a request, or in many cases, the request gets approved by the wrong person.
We will cover this in more detail in the workflow section.
With purchase request status tracking, employees can easily see whether a request is approved or not. If it is pending approval, the employee can easily track with whom it is pending approval.
Here is an example of how employees can easily track the purchase request:
Employees can also send reminders to the managers for approval.
A flexible workflow engine allows you to create purchase approval workflows based on your compliance needs.
ProcureDesk workflow engine allows you to create custom workflows to meet your unique approvals needs.
Here are the key components of the ProcureDesk workflow engine:
Workflow conditions allow the flexibility to create custom workflows and set up an approval management process. It allows managers to make informed decisions.
There are many workflow conditions that you can configure in ProcureDesk, but the following are the most common workflow conditions.
Approval reminders are an important part of the approval process.
Even though the system sends email notifications for approvals, managers forget to approve purchase requests on time.
And that is where approval reminders can help.
You can ensure that purchase requests are approved on time by automating reminders.
Here is an example of the daily reminder sent by ProcureDesk:
Everyone has their preference when it comes to approving purchase requests. If a manager is on the road all the time, they don’t have time to log in to the application and approve the purchase.
For people who are on the road a lot, a mobile app is the best way to approve purchases for people who are on the road a lot.
It is probably easier to log in to the application to approve the purchase request for approvers in the office.
Or they might want to approve over email.
An omnichannel approach to approvals is probably the best approach so that the approvers can approve the way they want to approve.
With ProcureDesk, you can use the web app, email, or mobile app for purchase approvals.
Here is an example of mobile app approval:
The purchase order software allows the employee to convert a purchase request into a purchase order and track the purchase order lifecycle.
Once the purchase requisition is approved, you can convert that into a purchase order.
A purchase requisition is just the authorization, and a buyer must convert it into a purchase order. A buyer then needs to send it to a vendor.
The vendor acknowledges the purchase order and then ships the product.
There are two exceptions to this process.
First, if you need to go to a brick and motor store to purchase the product, you don’t need a purchase order.
Second, a vendor doesn’t need a purchase order if you place the order on the vendor’s website.
ProcureDesk eliminates the need to manually create purchase orders from approved purchase requisition by automatically converting a purchase request into a purchase order.
You can set up automated rules on when to convert a purchase request into a purchase order.
Here is an example of a purchase order that ProcureDesk generates:
Once the system generates the purchase order, you can track the whole purchase order lifecycle.
When it comes to purchase order tracking, there are three things you need to track.
A purchase acknowledgment is a confirmation from the vendor that they have received the purchase order. It also allows the vendor to confirm if they can deliver the product or not.
For example, if the product is back-ordered, the vendor can use this process to inform the buyer that the product is currently unavailable.
Here is an example of a vendor’s purchase order acknowledgment:
With a shipping notice, the vendor can provide the tracking details of the purchase order.
You can request that the vendor submit a shipping confirmation directly through a purchasing system.
That way, you have all your information in a single place.
ProcureDesk then tracks the package and informs the stakeholders when the product arrives.
A purchase order receipt is a confirmation that the product has been received.
The order contact or the warehouse contact can create a purchase order receipt.
Here is an example of a purchase receipt:
When a buyer creates a purchase receipt, the AP (Accounts Payable) team knows that the product is received and the invoice is ready to pay.
If the product is damaged, or you need to return the product, you can note that in a purchase order receipt.
An inventory management solution is not a must-have feature for purchasing management software. It depends upon your business.
For example, inventory management is necessary if you have a lab and purchase lab supplies.
If you are a school, then the inventory management function is very helpful in tracking what supplies you have in stock before you order.
There are three main areas for inventory control:
Inventory tracking is a key function of warehouse management, and it allows you to keep track of what you have in stock at any time.
To get started, identify all the items you want to track inventory.
Then as you receive the items, the system will update the on-hand inventory.
Here is a snapshot of the on-hand inventory report:
Inventory adjustment allows you to reduce the on-hand inventory as you use the inventory.
A company can make inventory adjustments in multiple ways:
You can create an adjustment as you use the inventory, or one can update the inventory at the end of the month after an audit.
Here is an example of how to create an inventory adjustment:
With inventory valuation, you know exactly the value of inventory at all times.
There are primarily three ways to track the inventory valuation:
Average cost: Average cost method calculates the inventory cost based on the average unit cost. An average cost is the most commonly used method to track inventory valuation. But it is not helpful if the product’s price keeps on fluctuating.
LIFO: Last In First Out is the valuation method where the Last item is consumed first.
FIFO: First in, First out is the valuation method where the inventory valuation is based on the assumption that the items received first are consumed first.
Here is an example of an inventory valuation report with an average cost:
Purchasing management software is incomplete without a real-time integration with the accounting system.
For effectively booking the cost to different cost centers and general ledger accounts, you need the cost account data in the purchasing system.
If you don’t integrate with the purchasing system, the AP team needs to re-create the accounting system’s data.
The transactions created in the purchasing system need to be updated manually into the accounting software package. For example, purchase orders that are created in ProcureDesk.
That is why ProcureDesk supports integration with different accounting packages. The purchasing data is synced automatically with the accounting system.
Here is a summary of what data is exchanged between the accounting package and ProcureDesk:
ProcureDesk supports integration with the following systems:
Procurify is a complete spend management company that helps streamline the procurement process. The product helps finance and procurement professionals to control spending and get complete visibility into the cash flow.
The product provides complete purchasing management software capabilities.
Here are the key features of Procurify:
Procurify purchase requisition module automates the manual purchase requisition process.
The purchase requisition module is designed to support different types of purchase requisitions. For example, an employee can create a request for purchase, travel, or just an expense.
The users can quickly track what purchase requisitions are pending and what are approved.
The system supports user defaults. When creating the purchase requisition, the system automatically defaults the user location and department.
A buyer can create the purchase requisition or “request for order” in three ways:
Here is the purchase request dashboard:
Procurify offers a flexible workflow engine that allows administrators to set up the purchase approval workflow.
The workflow engine allows different approval setups using the concept of workflow groups.
You can set up a workflow group and assign conditions to those groups. It is similar to ProcureDesk entry conditions, where you can define different conditions for workflow.
Once the group is defined, the system dynamically assigns the approver to the purchase requisition.
The user doesn’t need to remember who needs to approve the purchase, which reduces compliance risk.
Procurify has a mobile app that supports purchase approvals.
Procurify’s purchase order software module is designed specifically for buyers.
Once the purchase request is approved (called RFO – Request for Order in Procurify), buyers can convert the purchase requisition into a purchase order.
The important thing to note here is that you need a purchase request to create a purchase order.
A buyer can’t create a purchase order without creating a purchasing request first.
The system allows you to combine multiple requests from a single vendor into one purchase order.
This feature could be beneficial for reducing the freight cost because buyers can combine the orders.
A disadvantage of this approach is that if the vendor doesn’t support multiple ships to addresses on the same purchase order, you can only combine purchase requests that are going to the same ship to address.
Procurify doesn’t provide an inventory management system at the time of this writing. Please check with the vendor for the latest on this topic.
Procurify supports integration with different accounting systems to sync the data to the accounting system.
Procurify supports QuickBooks Online and QuickBooks Desktop integration.
There is support for Netsuite, and Procurify is certified to work with Netsuite.
The system supports integration using CSV files for other systems like Microsoft Dynamics.
In that case, the data is extracted from Procurify and imported into different accounting systems.
The company is focused primarily on the purchasing management use case.
Here are the key features of the Precoro purchasing management software.
The purchase requisition module allows employees to submit a purchase requisition electronically.
The purchase requisition starts with the user selecting the date, department, and location.
It doesn’t seem that you can set up user defaults for the purchase request.
The user can then add the items they want to purchase.
There are two ways users can achieve this in Precoro.
Once the user creates the request, they can submit it to the approver for approval.
In Precoro, admins can set up workflows around users.
Here is how the approval workflow setup process works in Precoro.
The approval workflow setup process is simple and easy to manage for small companies.
But for large companies, there are always so many personnel changes, and it will be cumbersome to manage the approval workflows based on the named users.
Rather, we recommend an approach based on the reporting manager. You can link your purchasing management system to the HR system so that it can automatically import the users.
With the purchase order module, Precoro provides an easy way to create and dispatch the purchase order to the vendor.
A buyer can create a purchase order from a requisition, or you can directly create the purchase order in the system.
An employee can create a purchase order by entering the item’s description or selecting an item from the catalog like a purchase requisition.
Once the PO request is ready, the PO creator can submit the purchase order for approval.
The system allows you to attach supporting documents to the purchase order.
Precoro provides the ability for companies to track the stock of the items in inventory.
The process starts with setting up a warehouse or location where you want to stock the inventory.
You can then update the status or on-hand quantity by downloading a spreadsheet and uploading the inventory data into the system.
The users can request the inventory through a warehouse request process. It is separate from a purchase request process.
The system allows you to control access to different functions of the inventory management process. For example – you can easily set up access for who can manage the inventory and who can create a warehouse request.
Precoro supports seamless integration with QuickBooks Xero and Netsuite.
Precoro also has an open API that you can leverage to pull the transaction data and import it into your accounting system.
Purchasing management software allows an organization to scale the operations and implement a cost control process.
Most of our clients see the following benefits in the first 30 days of implementation:
So, where to go from here?
We have presented you with three viable options for purchasing management software. Schedule a demo with these three vendors and see what purchasing management software best suits your needs.
To schedule a demo with the ProcureDesk team, click the button below.