However, many companies still end up becoming victims of procurement issues and fraud. It may be due to low-quality suppliers and materials, higher supplier lead time, or even factors such as the market rates.
These are factors you have very little control over, and they can become a cause of concern for businesses. Many companies also have poor internal communication and documentation. Additionally, inefficiently planned processes may also lead to some procurement issues.
To understand why it’s important to solve these issues, let’s look at what a loose procurement process can cost your organization.
Poor Procurement Process: Costs Involved
Poorly designed and executed procurement processes can increase your costs by nearly five times. This monetary loss also gets combined with the loss of time and value.
Organizations in the USA and Canada alone are wasting about 32 million man-hours yearly due to their poor procurement processes and tools.
About 54% of companies still use paper-based invoicing, and about 48% of them say that manual data entry and poor processes are their biggest challenges.
Additionally, when there’s no centralized processing and tracking system for accounts payable, procurement fraud can become rampant. That’s the reason why about 29% of small businesses have been victims of billing fraud in the past, and 22% of them have faced payment tampering fraud.
Fixing Procurement Issues
One of the best ways of reducing procurement issues is through automation. By using procurement management technology, you can save both time and money. The software can help automate repetitive and simple tasks that don’t require human intervention, thus saving time.
Additionally, they can streamline your processes and organize your data in a better manner to make it more accessible. This increased accessibility can reduce the possibilities of procurement fraud and duplicate payments.
For instance, just by automating invoice processing, you can reduce your cost-per-invoice by up to 90%. In addition, your errors can be decreased by up to 40%. The automation of accounts payable can also help you make full use of nearly 75% of all available discounts.
To understand more about procurement issues and how you can solve them, you can refer to the infographic below by PurchaseControl.