Click, click, buy. As consumers, we have the world at our fingertips. Books, bags, toys, tools, tents, holidays, cars. Online marketplaces with everything available, everywhere, anytime.
But as organisations? Our ways of choosing suppliers, ordering and paying for goods and services are stuck in the past. Too many people taking too long, making too many mistakes. And they’re costing us dearly.
We’d like to show you another way of doing business. One that’s like the old way, but without the paper, the mistakes and the time-consuming, costly consequences. One that gives you more control over who you buy from and how much you pay. One that could save your organisation thousands or millions each year. This is commerce.
In the beginning
In the beginning...
In ancient Mesopotamia, they used clay tablets for their IOUs. Paper made things easier. For hundreds of years, buying goods and services was all about paper: paper purchase orders, paper invoices, paper receipts. All hand-written or hand-typed, all needing to be filed away in the right place. In some organisations, it’s still like this.
Then came the internet. In the early days of e-procurement, buyers could deal one-to-one with suppliers over proprietary e-commerce systems. This was great for big business and IT departments, but it wasn’t so good for the little guy.
Cloud computing is making e-procurement a reality, connecting large networks of suppliers and customers in the kind of open, fast and flexible online marketplace that makes all that paper and filing a thing of the past.
But, did you know that for every £1 spent through e-procurement, savings of 5p to 15p can be made?
So, how does a commerce network work?
Follow us on the typical journey from planning a purchase to payment, through the pain points of traditional finance and procurement and the gains of going automated with a commerce network.
Start your journey here!
This is where every purchase begins
This is where every purchase begins. Your organisation probably has a strategy to map out its activities for the coming period. That will include a financial plan and approved budgets to cover the hundreds, maybe thousands of goods and services that will be purchased.
Even emergency payments for things like burst water pipe repairs are usually covered by some kind of approved contingency or maintenance budget.
How much does your organisation really know about what the thousands of smaller goods and services it buys each year? Does the lack of clarity and detail make budgeting for next year an imprecise science?
If you’ve got all the data about spending from previous years at your fingertips, in one, easily queryable database, forecasting and budgeting becomes a whole lot easier. You can zoom in and cut the data different ways to get a precise picture of what’s been spent on every kind of item.
And if you know exactly how much you’ve spent on stationery or mobile phones or water pipe repairs in the past, you can make a much better guess of what you’ll spend in the future. So all that money you tied up by overbudgeting can be used for stuff your organisation actually needs.
Your organisation makes all kinds of purchases
Your organisation makes all kinds of purchases: computers, carpets, lawyer services, cleaning services, software, stationery… The list is long. Some are low-value, others are high; some are one-off or short-term, while others are recurring or long-term. Each kind of purchase is handled differently.
Organisations generally control their high-value purchases carefully, with established, formal processes for selecting important partners and contractors.
The less expensive items, though, are usually bought on a more ad hoc basis, by many different people across your organisation.
And they involve many more suppliers, transactions and buyers than the high-value purchases.
It’s said that spending in most organisations follows Pareto’s 80/20 principle: 80% of it is spent on 20% of the goods and services bought, while the remaining 20% is spent on 80% of purchases.
Take cake. A cake for a one-off meeting would be a low-value short-term purchase. Croissants delivered daily to the office, on the other hand, would be a low-value long-term buy.
A foodie high-value short-term purchase might be the catering for a big, annual event such as a conference, while the contract to run the employee restaurant would be high-value long-term.
It all adds up. Around 20% of your organisation’s costs are spread across 80% of its purchases; lower-value one-off and repeat items like croissants and coffee machines and flowers and furniture.
The point is, if they’re being bought in the traditional, ad hoc, manual way, by lots of different individuals, with a separate pdf or piece of paper for every stage of the process and no shared list of suppliers, your organisation is losing out. It won’t be as productive as it could be, and it won’t be getting the best value available from its suppliers.
Say hello to automated procurement. And goodbye to trails of orders and invoices.
Automated procurement via a commerce network plugs staff into an online marketplace of thousands of suppliers. They can do everything – place orders, receive invoices and pay suppliers – through the network.
All purchases are channelled through the same online system. Which gives your organisation much more control over the ‘long tail’ of lower-value purchases.
It’s good for employees, it’s good for productivity and it’s good for trees.
How do you find the best-value supplier?
When someone in your organisation needs to make a purchase, how do they find the best-value supplier?
For items such as stationery or water coolers, there might be a preferred supplier. But since when? Are you still sure they’re the best value, or the best fit for your needs? It might feel like you’re doing the right thing… but how do you know?
An approved supplier list is like a garden pond: high-maintenance. It’s easy to let it stagnate if it’s not updated regularly and suppliers aren’t benchmarked.
That’s not all. It’s hard work making sure every potential buyer in the organisation has the right list, too. Where is it held – on a shared drive? In a folder? In someone’s head?
How do you stop ‘maverick spend’ by list-less buyers who use Google or yell.com to find a supplier? The manager who goes to an off-list recruitment agency to fill a post or the admin assistant who orders a water cooler from a not-cool source?
They’re costing needless pounds and none of these are likely to lead to the supplier with most suitable skills or products at the most reasonable price.
If the supplier selected is a new one, their details will need to be added to the organisation’s systems which is tedious, time-consuming and prone to errors. Get a digit wrong on a sort code and you can unleash a world of pain.
A commerce network can hold your approved list and let you update it as often as you need. Best of all, buyers across your organisation will know exactly who to order from, and do it through the system. Maverick spend – who’s he?
In the world of automation, suppliers enter their own data when they’re added to the network and update it whenever it changes, so you don’t have to. No mistakes and no mix-ups or costly consequences later.
Internet searches, direct marketing or word-of-mouth?
If there are no preferred or approved suppliers, your staff will find their own ways of sourcing the goods or expertise they need: internet searches, direct marketing or word-of-mouth. Staff like to find their own bargains, so how can you channel this?
RFQs can be a time consuming and laborious business, especially for the uninitiated. Is there a standard form? Where should quotes and paperwork be stored? And what is there to stop buyers ignoring the whole RFQ step, and getting a poor deal?
With a standard eRFQ process on a commerce network, you make it quick and easy for staff to get the best value. So quick and easy, it can be used for relatively small purchases. Just pick your suppliers, ping off your RFQ and review the quotes when they arrive back, all on the network.
A commerce network can be continually updated with new preferred suppliers. And benchmarking them is easy: fire off an RFQ to your shortlist and compare the responses they send back. No ring-rounds. No snail-mailed quotations.
A commerce network also offers total relationship visibility. You get to choose from a pool of competent, recommended suppliers, on an even playing field. Which means you get the best supplier for the job, based on what they can do and where.
Automation compels staff to do the right thing by making it irresistibly simple. In the old days, Gill, who works in a school admin office, might have cut a corner by simply calling her son-in-law builder to put up the new wall in the playground. Now it takes just a few minutes to get the required three quotes which everyone can see to keep things fair. Child’s play.
Before an order can be placed, there needs to be formal approval
After a supplier has been selected and a price agreed, and before an order can be placed, there needs to be formal approval from senior staff and/or your finance team.
Once approval has been given, the buyer can send a purchase order to the supplier.
You have to be prepared for a wait if you’re trying to get a purchase signed off by email. If one of the people authorising is out, ill or skiing in the Swiss Alps, it could be a while before you hear back from them.
The other problem with approval by email is that it can’t stop orders being placed without approval.
So you could say it’s not really approval at all.
When all purchases are going through a commerce network, none slip through the approvals net. The people giving authorisation simply log on and sign off orders with a click (Even from the Swiss Alps using their mobile app).
It’s easy to customise the approvals process, too. You might wish to limit certain staff to purchases within a category or below a price threshold, for example, or have all acquisitions of hardware signed off by the IT manager.
You could also take some of the load off senior staff by decentralising the approval process: giving blanket approval to low-value repeat purchases like bandages on a hospital’s wards or a school’s exercise books.
Police constables get through a lot of trousers. It’s all that chasing criminals over walls and fences. And if their senior officers had to spend time approving every request for a new pair, the crime rate would rocket.
Instead, police forces using a commerce network can allow constables to place their own orders for new trousers, with minimal sign-off from a sergeant or other officer. That means police can spend more time upholding the law instead of holding up replacement trousers. It might even take some of the stress out of pursuing gangsters over garden fences.
The supplier will generate and send an invoice
When a new order comes in, most suppliers will key its details into their system… And, later, key its details again into an invoice, probably on a different system. Not the best use of time, is it? But it’s been going on since the Middle Ages. Maybe even since the Ancient Egyptians. Organisations waste years of effort exchanging data with customers… and putting right the errors caused by the antiquated system of invoicing.
Suppliers that are part of a commerce network can give their keying-in fingers a rest. The data held for the item in an electronic catalogue is simply ‘flipped’ from an electronic order to an electronic invoice, instantly transferring all the original data into the new document, error-free and ready to send to the customer.
The three way match between the invoice, purchase order and receipt
Your finance or credit control team will reconcile the invoice to the purchase order, and to a receipt or other evidence that the items have been delivered, before authorising payment.
Non-matching paperwork offers no end of scope for admin havoc. A missing receipt, a lost order, an invoice without a purchase order number… Sound familiar? Then there are currency changes, price fluctuations, changes to the original scope of work, multiple purchase orders for the same item…
Normally done in a batch payment
Once your finance team has matched the invoice to the order and receipt of the purchase, they will confirm it can be paid. This is normally done in a batch payment from your bank, with multiple invoices approved for payment together.
Your bank needs to know who to pay. That means passing them your payee’s data – another drain on someone’s time, likely to lead to errors and late payment, not to mention an angry supplier.
It’s this long-winded, arduous, traditional method of payment that has led to the standard 30 or 60 days delay in invoices being settled.
Why it works!
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