by ProcureDeskLast Updated : Jan-29-2024
Do you ever feel the weight of managing costs through a manual purchase requisition process?
If you’re managing the finances of your company as a CFO or controller, you understand the challenges firsthand.
Having limited information often translates to a lack of cash flow visibility, which is a common pain point for CFOs and controllers.
In this blog, our goal is to help you discover how requisition management software can alleviate the burden you’re experiencing, so you can finally streamline your processes and become more empowered as a financial leader. We will be sprinkling different examples of how requisition management can be done with our tool ProcureDesk.
Let’s get started!
Without a purchase requisition software for your procurement teams, you might be experiencing the following challenges in your procurement process:
A manual requisition form process works when you have a small team (less than ten people), but the process doesn’t scale as you grow.
You have a purchase approval process, but it takes too long to approve the requisitions.
Employees have to constantly chase the managers for approval, or there is too much back and forth on emails.
One company I talked to said that sometimes it could take up to 20 emails to get a requisition approved.
Employees don’t have the relevant information, which drives correction for errors and the email back and forth.
Are expenses getting out of hand?
The other issue with the manual process is that it is not consistent.
Employees might or might not create purchase requisitions all the time. If they directly purchase without approval, you would get surprise invoices.
Surprise invoices cause cash flow issues and prevent your company from having cost savings.
Or you might spend most of your Spend on credit cards, and there is no way to know the exact expenses unless employees file the expense reports.
If you are a not-for-profit or your funding comes from grants, you know how painful the compliance process could be.
You need to keep track of all expenses (product or service) so that you can assure appropriate authorities that you are using the funds appropriately.
If you have a manual process, you have to dig through emails to provide proof of approval.
It is a pretty painful process unless you are printing all approval emails.
A requisition management software automates the manual purchase requisition process and gives you visibility into your entire process.
Employees don’t have to fill, print, and submit manual forms with purchase requisition software when doing a requisition request.
A procurement software with a purchase requisition feature provides the following:
If you are ready to automate the manual purchasing process, Here are the key features you would need in purchasing requisition management software.
The first step is to automate the manual purchase request process for employees.
The key is not to take your paper purchase request form and make it electronic.
You don’t need a purchase requisition system if you want to automate the paper requisition form; you can use an online form or survey tool.
The goal should be to simplify the process for creating the purchase requisition.
You do that by reducing the data entry for the users. You can achieve this by using requisition defaults and vendor catalogs.
Here is an example of how ProcureDesk allows users to create purchase requisitions.
The user doesn’t need to select the department, location of delivery, and so on.
The system automatically sets up requisition defaults based on user defaults.
The next step is to reduce the time spent entering the details of what the user is purchasing.
A purchase order software that offers vendor catalog features helps speed up the process of creating purchase requisitions.
Suppose you want to purchase products from Amazon.
You are probably following a process where employees have to first look at the item on Amazon.com, and then enter that in the request form.
Once the request is approved, employees go back to Amazon and complete the purchase.
Instead of doing all that, here is a simple process.
Employee selects the Amazon catalog from the purchase requisition screen by clicking on the Amazon logo.
The purchase requisition system automatically takes the employee to Amazon.com and connects the purchase to your business account. No need to share usernames and passwords with anyone.
The employee selects what they need to purchase from the site and then submits the request for approval.
The data from the Amazon shopping cart gets moved back to the user’s requisition.
All the user then needs to do is submit the request for approval.
After the request is approved, the system automatically sends the purchase order to Amazon.com.
Wasn’t that easy?
We integrate with 50+ vendors to enable a simple purchasing experience for your employees.
Sometimes the vendor is too small to maintain a website.
In that case, you can create your internal catalog and allow employees to pick and choose what they need to purchase easily.
Here is an example of a small internal catalog.
The user needs to click on “Add to Cart,” and the catalog item gets added to the user’s cart.
Here is an example of the item added back to the user cart.
What if you need to purchase supplies from Walmart and need a purchase approval before purchasing?
Or you want to travel for a conference, and you want approval from the manager for travel.
If you have different use cases for purchase requisitions for your purchasing team, you need a system to support different purchase requisitions.
For example, a request for travel or a request for petty cash
Here is an example of how easily you can set this up with requisition management software.
For example, you can see two requisition types here:
Request for travel and standard.
Travel requests might need to be routed to the travel desk after the manager approves the purchase request.
However, the standard request might need to go to a buyer to review and convert into a purchase order.
By having different requisition types, the system allows you to have a different process for each requisition type.
Purchase request approvals are the key to controlling costs without struggling with approval chains.
With the approval workflows, you can route a purchase request to different stakeholders for approval.
For example, An employee wants to purchase a new laptop.
After the manager approves the purchase request, you might want to route the request to the IT department so that they can issue a new laptop or order one from a vendor.
In other cases, you might want to set up a workflow so that anything over a certain amount needs to be reviewed and approved by a senior management team member.
Here is an example of a purchase request workflow:
In some cases, you might have a multiple-step workflow for approval. The multiple steps are identified based on the amount of the purchase.
Instead of asking the employees to remember your approval matrix, you can configure the approval workflow in the system and let the system drive that for you.
You can automate your workflow using the purchase approval workflow engine.
The key to defining an effective workflow is to keep it simple.
You don’t want to send every purchase request to the CFO or CEO.
That is sure to create a bottleneck for approvals, and if you need to get the orders out fast, this could be a big challenge.
The best way to define an effective workflow is to route only the top 20% of requests to senior management. The department managers should approve the remaining 80%.
Once you have a purchase request approval process in place, the next step is to set up budgets for cost control.
You can set up budgets by department, location, or G/L account.
Here are the key features you would need to control budgets:
You might need a different budget structure based on your needs. For example, you might need a budget based on a department project.
Let’s say you want to assign and track granular marketing budgets.
So instead of just assigning the overall budget to the Marketing department, you can set up a budget as follows:
Department: Category, which then translates into:
Marketing – Advertising
Marketing – Media purchase
Marketing – Direct mail
And so on.
Here is an example of how to configure different budget levels:
With the ProcureDesk budget module, you can easily configure the different levels you need to set up a granular budget.
After setting up the budget, assign the budget to different departments or user groups.
For example – you only want the marketing department to see the budget for marketing, and no one else should be able to see and use it.
With the access control process, you can easily control who can see and use a specific budget.
Here is how you can control access to different budgets:
After creating the budget, the system can automatically keep the spending under control.
All you have to do is configure the budget rules so that the system knows what to do.
For example, it might be OK to go over budget by 10% after showing a warning to the end user.
Or, you don’t want any purchase to go over budget. So if a budget is not available, a user should not be able to proceed with the purchase.
Whatever makes sense to you can set it up in the ProcureDesk budget module.
Here is how you can set up budget controls in ProcureDesk:
Each user has a role to play in the procurement process.
For example, some employees can only create a purchase requisition, while others can create and approve purchase requisitions.
With access management, you can easily control who can do what in the purchasing system.
You can set up roles and then group the actions that role can perform.
Once you have set up the role, all you have to do is assign the role to a user, and that’s how simple it is.
For example – a finance user might not create purchase requisitions. Still, they want to see all the spending that is going on in the company.
At the same time, a marketing analyst might need access to create and manage her requisitions.
A purchase requisition tool can easily handle all these scenarios with access management.
The purpose of purchase requisition management software is to improve productivity.
But more important is to give you the ability to control costs and get better visibility into your cash flow.
With the Spend dashboard, you can have visibility at your fingertips.
For example, As a CFO, you might want to see what employees purchase.
You can see all this information as follows:
In the screenshot above, you can track what you purchased, from which vendor, and who purchased it, all in one single snapshot.
You can also run reports to track spending information or track what purchase requisitions are pending approval.
For example, the requisitions pending approval report gives you all this information without tracking every purchase request.
Here is an example of a report that shows you all requests that are pending approval:
You can then export the report into a spreadsheet to further analyze the data.
If you are not a decision-maker and need to convince your boss to implement purchase requisition management software, this section is for you.
We will provide three key benefits and how to quantify that in a business case.
Here are the key benefits of implementing requisition management software
Automating a manual purchase requisition process is the simplest way to increase the productivity of your entire team. A manual requisition management process is slow and introduces errors that lead to rework.
Employees don’t have to print and fill out forms. Managers don’t have to continuously look up the pending items in their inbox to approve.
A purchase requisition tool presents a single dashboard that allows users to see what is pending approval and with whom they need to follow up.
Managers also have a single dashboard to track all the pending items for their approval.
How do you quantify productivity improvements?
You can do a time study and note how long it takes to create a purchase requisition.
And then safely assume at least a 50% reduction in that time.
Let’s say an average requisition takes 10 minutes. With the purchase requisition management software, it is approx. 5 minutes.
Suppose you create 200 requisitions per month, that is a saving of approx—17 hours per month.
Don’t you hate to see surprise invoices that no one authorized?
That is what you can avoid with a purchase requisition system. Since you can approve the purchase before it happens, you have full control over your spending.
That means no surprise invoices.
As an owner or CFO, you might want to approve everything so that you can control the spending.
Theoretically, it makes perfect sense, but do you have time to approve every requisition?
So what is the solution?
Delegate the approvals for small purchases to managers and Directors.
And you only approve large purchases. We covered this topic in the approval workflow before, but it is worth mentioning again here.
Focus on the top 20% of the transactions contributing to 80% of spending: Rest – delegate.
Just because you have delegated the approvals doesn’t mean you don’t have visibility into your Spend.
With the reporting and Dashboard, you have instant visibility into what is purchased and how much cash you need to satisfy open AP. You will finally have a real-time tracking process by simply using a requisition software.
If you implement a purchase order process, you can rely on supplier payment terms reports to see how you pay your vendors.
You can then calculate if extending payment terms would help with better cash flow management.
Not every invoice needs to be paid on Net 0 terms!
You can always negotiate better terms, which helps you with better cash flow management.
Software requisition refers to the automated process of requesting, approving, and tracking the procurement of goods or services within an organization.
It replaces traditional manual methods with a digital system, enhancing efficiency and transparency in the procurement workflow.
Manual requisition management often leads to inefficiencies, delays, and errors.
Paper-based or spreadsheet-driven processes can result in a lack of visibility, making it challenging to track requisitions, approvals, and expenditures accurately.
This can hinder overall workflow productivity and increase the risk of costly mistakes.
Requisition management streamlines workflows by automating the entire procurement process.
It enables users to digitally submit, review, and approve requisitions, reducing delays associated with manual paperwork.
Automated alerts and notifications keep all stakeholders informed, facilitating faster decision-making and enhancing overall efficiency in procurement workflows.
Requisition management software is crucial for several reasons.
It significantly improves accuracy in procurement processes, reduces processing time, enhances visibility into spending, and ensures compliance with company policies.
By providing a centralized platform for requisition management, it helps organizations make informed financial decisions and maintain better control over their budget.
The implementation time for requisition management software can vary based on the complexity of the system and the specific needs of the organization.
Generally, a well-planned implementation can take anywhere from a few weeks to a few months.
Factors such as system customization, data migration, user training, and organizational size all contribute to the overall timeline.
It’s crucial to work closely with the software provider to ensure a smooth and efficient implementation process.
So what to do next?
The key to successfully implementing requisition management software is finding a system that matches your business process.
Yes, that is obvious!
Yet many companies straight away jump into evaluation without first defining their key requirements.
Take some time to note down your key requirements. Here are some examples:
List down the top 4-5 requirements and then evaluate 2-3 vendors that best suit your requirements.
Then select a vendor, implement the requisition management software, and say goodbye to the manual requisition process!
What you should do now
Whenever you’re ready… here are 4 ways we can help you scale your purchasing and Accounts payable process.