ERP in procurement and how to use it effectively

As everyone involved will tell you, making procurement for your company is a complex and complicated process.

Why is this?

Three typical concerns that always arise in companies making acquisitions are:

• Finding the right suppliers: Just like finding the perfect pair of shoes or the perfect laptop for you, finding reliable suppliers that meet your quality, price and delivery needs can be difficult.
• Cost management: Procurement involves juggling several costs, from raw materials to shipping costs. Additionally, as procurement increases in your business, the costs of running a procurement team also increase.
• Manual processes: These are many operational and repetitive tasks that are prone to delays, inefficiencies and errors.

An ERP (enterprise resource planning) software is a platform that integrates and possibly automates multiple functions of a business or process into one well-packaged solution. It brings together all your different business activities, such as finance, inventory and human resources, into one interconnected system.

ERP for procurement

If your company uses an ERP, you may know that today's most comprehensive ERPs provide a dedicated module to facilitate, organize and centralize most procurement processes.

Examples of ERPs that provide procurement modules:

• SAP S/4HANA
• Oracle ERP Cloud
• Microsoft Dynamic 365
• Infor Cloud Suite
• Epicor ERP

This means that most of the processes included in the scope of procurement, such as

• incorporation of suppliers,
• contracts,
• inventory management,
• creation of purchase order,
• invoice processing,

can be managed through the appropriate ERP module.

This digitized ecosystem ensures that finding and onboarding the right suppliers is seamless, managing costs is easier due to complete visibility into spend, and manual effort is reduced by employing few automations.

ERP for procurement automation

Today, artificial intelligence and workflow automation have paved the way for complete automation of the process from procurement to payment.

Dedicated procurement automation software, such as Nanonets, employs them to streamline the procurement process, leading to:

• automation of manual tasks
  • Errors and delays associated with manual processes are eliminated.
  • Cost savings arise as software fees are drastically less than labor costs.
• better approval processes
• automated expense policy applied in workflow
• accurate real-time analysis
  • better supplier performance management
  • better spend visibility

Any procurement automation software today offers out-of-the-box integrations that integrate with your ERP to ensure a smooth procurement workflow.

Although ERP procurement modules have some automation features, these features cannot facilitate complete automation of the process from procurement to payment. How is that?

1. Integration Complexity: Many ERPs require manual data entry or intervention at various stages, such as during invoice reconciliation or purchase order approval, which disrupts the smooth automation flow.
2. Customization needs: Your company may have unique workflows (for example, vendor-specific workflows) that cannot be configured using standard ERP functionalities, and requesting customizations there is always costly.
3. Approval processes: While ERPs facilitate approval workflows, the lack of customization and flexibility in handling complex approval hierarchies is a problem. Plus, implementing your expense policy is a hassle.
4. Manual data entry: Many ERPs lack advanced OCR capabilities to capture invoice data, causing delays in manual data entry and processing.
5. Invoice reconciliation: Legacy ERP systems cannot perform 3-way matching.

To achieve complete automation of the process from procurement to payment, companies must complement ERP systems with procurement automation software. This partnership ensures complete automation of procurement.

Do you need ERP in Procurement?

Companies operating on a smaller scale may not see the need to invest in ERP procurement modules, which is fair.

In such cases, the best option is to directly use procurement automation software. This is why –

• The procurement module of an ERP would typically be quite expensive compared to a subscription to procurement automation software. Many of these software have flexible pricing plans that fit your business operations.
• Your procurement automation software can still integrate with your ERP modules like finance, inventory management, etc.
• Implementing a procurement automation tool is often much faster and easier than implementing a full ERP module. This means you can start seeing the benefits of automation almost immediately.
• Ongoing support and regular updates can be a big advantage for smaller businesses that don't have extensive IT resources.

What is procurement automation like?

Here's how procurement automation software like Nanonets can transform your workflow:

Purchase request: Employees can easily submit purchase requests electronically through the Nanonets portal.

Purchase Order Creation: Nanonets streamlines the process by automatically generating a purchase order (PO) based on the request details.

Purchase Order Approval: Within Nanonets, the purchase order goes through an automated approval workflow. You have the option to set predefined rules and conditional checks to ensure consistency, reduce errors, and prevent unauthorized spend.

You'll receive approval notifications that can be easily managed in popular communication tools like Slack and Microsoft Teams. These notifications even include direct calls to action (CTAs), simplifying the process and helping you make quick decisions.

Purchase Order Submission: Once approved, the system automatically sends the purchase order to the supplier through an integrated email or a supplier portal such as SAP Ariba or Coupa.

Delivery of Goods or Services: The supplier processes the order and updates the delivery status on their portal, which syncs with Nanonets.

Invoice data capture and collation: Nanonets automatically extracts data from invoices, purchase orders and packing slips, reducing manual entry and errors.

To ensure accuracy, an automated triple comparison is performed comparing invoices, purchase orders and delivery notes before processing payments.

Processing payment: With Nanonets, you can enjoy seamless payment processes, ensuring that all transactions are completed efficiently and on time.

Integration with ERP/Accounting Software: Nanonets integrates seamlessly with various ERP and accounting systems, providing a unified procurement and financial data management experience.

By automating their procurement workflow with Nanonets, companies can ensure seamless data flow between multiple applications, reduce manual errors, save money, and improve the overall efficiency of their procurement cycle.