Purchasing Process Report 2016 – What Finance Has To Say About the Procurement Process

A recent survey by Red Brick Research on behalf of Invu asked 209 UK finance workers (Finance Directors, Chief Financial Officers, Finance Controllers and Finance Managers) across medium-sized businesses (50 to 250 employees) how their businesses managed the invoice processing of purchased goods and services, the daily challenges they face and their view on protection against fraud with the tools at their disposal. If you haven't already seen the main results, published at the end of last month, we thought our procurement professionals might be interested in them. A full report of the findings is due to be published later in April, and you can reserve a copy here.

Invu is an Electronic Document Management (eDM), Accounts Payable (AP) and Purchasing solutions provider for a range of sectors, particularly those which are highly document-dependent or where compliance is important. It wanted to take the pulse of the mid-sized firms rather than the usual suspects of small businesses and large enterprises at the other two ends of the spectrum. Its report suggests that late payments are often a result of poor systems and processes further downstream rather than a Finance cash-management decision. A whopping 83% of these respondents said they are not paying their suppliers on time and 61% admit to sometimes paying a supplier twice. Is that down to not receiving processed invoices in a timely fashion? Or the often-quoted decisions made without of visibility or control?

Either way, 57% of respondents have genuine concerns about the effectiveness of their firm's purchasing process. Our procurement readers might want to delve into the report to discover more deeply what that implies -- but the research does show that 45% reported their purchasing and accounts payable departments are still working manually. As we have reported many times, in today's age of affordable and easy-to-use electronic procurement systems, this really shouldn't be an option any more -- especially in an environment such as procurement which is prone to risk of fraud and error. Another 83% of respondents said they are uncertain their Purchase Order Processing and Accounts Payable systems are robust enough to deal with fraud. That's shockingly high. We wonder whether Procurement teams would have the same level of concern.

It's also rather worrying, according to Ian Smith, General Manager at Invu that “... 50% do not refer to budgets at the point of making purchase commitments," little wonder then that "... 55% of these identify invoice processing bottlenecks that delay the production of management accounts, representing a real challenge in visibility and control over spending.” 

In the face of the 94% that say they plan to do something about the inefficiency of their purchasing process, Ian advises that: "One solution is the introduction of tools that make budgets visible at the point of making purchase commitments ... and given employee engagement is critical in the implementation of effective controls, ease of use should be a key consideration for businesses when selecting a purchase order processing solution provider.”

There's more in the report but top-level findings are summed up here in their infographic.

Purchasing Report 2016 INFOGRAPHIC




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