How to get more out of your procurement planning

As a finance leader, spending most of your time and energy focused on your organization’s top-line growth is tempting. However, one of the most strategic ways to increase your bottom line is by managing how your company spends money throughout the procurement process. Procurement planning is more than just cost-cutting; it is the key to aligning your company’s finances with its mission, goals, and values.

I lead the Buyer team at Ramp and we help our own teams, as well as our customers, save time and money on procurement. We've seen firsthand how much software pricing can fluctuate. A shaky procurement planning process could lead to death by a thousand cuts. While you’re focused on the big picture, lack of visibility and concrete procurement workflows could lead to bloated and inefficient spending that undermine every step toward your goals.

The good news? It’s never too late to build a better procurement strategy to enable sustainable growth as spend resets. And, with automation, it might be a whole lot easier than you think.

Centralize project management

If you want more successful procurement planning, the single biggest improvement you can make is to consolidate your finance and procurement operations into a single platform. Visibility into your finances is essential to making a better procurement management plan. However, according to a study by Deloitte, “65% of procurement leaders have limited or no visibility beyond their tier one suppliers.” This lack of visibility is often because “73% of contract management processes are executed in silos”(Supply Chain Magazine).These silos mean finance leaders and procurement teams are wasting a ton of time hopping between Slack, email, and paper purchase order forms to hunt down the information they need, likely losing most of it and just giving up eventually. Sound familiar?

By centralizing procurement in one platform, you can save time and gain a comprehensive view of where your money is going. With everything in one place, you can better identify maverick spend or spend that isn’t aligned with your procurement policy, forecast upcoming spend, improve your risk management, and ultimately put better controls in place.

Centralizing your processes means pulling all expense requests, expense reports, approval processes, cost reimbursements, corporate card management, billing, and spend data (including vendor information) into one tool. Once it’s all in one place, you can pull comprehensive reports in real time, complete with a full audit trail for ultimate visibility and improved spend management. And, if you’re using an AI-powered software, it might even surface cost savings without you lifting a finger, like notifying you of duplicate or wasted spend.

Create a concrete procurement process

According to Supply Chain Magazine, “90% of procurement leaders say current processes hinder them from addressing strategic priorities.” It follows then that effective procurement relies on concrete workflows that include each stakeholder in the approval chain at the appropriate time. The way to consistently and efficiently enforce these workflows throughout the entire lifecycle of a project is to use a centralized platform with automation and AI.

Include the following components in your workflows to set up an airtight procurement and purchasing process that will help you avoid unwelcome surprises and successfully deploy your finance strategies.

1. Clear spend approval process

To keep purchases in line with overarching company goals and operating budgets, make sure employees understand who needs to approve their requests. For instance you may want to set up the following approval layers:

• Below $1k: Manager approval
• Between $1k - $25k: Manager and finance team approval
• Above $25k: Manager, finance team, legal, and C-suite approval

Ask your team members to secure the necessary budget approval before making project or material procurement requests.

2. Eligibility criteria for procurement

Not all purchases need to undergo a detailed procurement process involving vendor negotiations and IT review. You may want to reserve procurement resources for big-ticket items that require more involved vendor management and meet the following criteria:

• Annual spend is over $10k
• Vendor will need access to customer or internal data
• Vendor has IP that you want access to

All other spend requests can be managed internally within each department.

3. Standardized procurement request form

For eligible purchases, make sure the reason for spending is clear from the very first stage of the procurement process by creating a standard request form template for your organization. With digitized request forms, you can create rules that require inputs in certain fields, so incomplete forms never even make it into the approval flow. You can also create multiple templates if your procurement needs are different depending on the project scope.

New ways of working, like hybrid and remote work, have created a shift in the needs of many companies.

As companies try to evolve quickly, procurement teams are flooded with tools requests, making the need for informative request forms even more vital.Good forms vet requests for finance policy alignment; better forms ask deeper questions that vet the core business needs of a request.

The form should guide your team in telling you the challenges they’re trying to solve with the tools they’re buying. By asking these questions, each approver will be able to vet requests for duplicate or unnecessary tools (i.e., zombie spend, shadow IT, and SaaS creep). When team members buy better tools, they build better processes instead of wasting time with tools that support fundamentally flawed processes.

4. Security checks for compliance issues

The first stop in the procurement process is an Information Security (InfoSec) compliance check. Typically, your IT team handles the review of technical specifications; they will check that whatever purchase is being requested won’t compromise the organization’s sensitive information or assets, such as client records or financial information.

This is also a good time for your IT team to look out for duplicate subscriptions or redundant spend. They should confirm that the vendor isn’t being used elsewhere in the organization or redundant with software that’s been purchased by another team.

5. Price checks and vendor negotiations

Once the IT department confirms the purchase won’t compromise the company’s security, the purchase request should go to the procurement team to handle vendor negotiations and cost analysis. This process often includes solicitation of bids through RFPs, acquiring price benchmarks to ensure the organization isn’t overpaying for the product, and negotiating the price or provider accordingly. For companies that use an automated procurement platform, it’s as easy as uploading the contract or contract package and letting the software do all of the work.

Encourage your team to allot at least 1-3 weeks for this step, to ensure sufficient time to negotiate with the vendor. It could mean the difference between saving hundreds vs thousands of dollars. Check out our ebook to equip everyone in your org with vendor negotiation best practices.

6. Terms check by the legal team

When negotiations are complete, thelegal team should review the final contract to ensure data compliance when entering into an agreement.

7. Budget check by the finance team

With a finalized price and terms in place, the finance team is then able to review and make sure the request fits into the budget and overall financial goals of the organization. At this point in the process, the finance team can check for duplicate spending, purchases that don’t align with the organization’s growth path, or purchases that are simply over budget.

8. Final approvals and implementation

The final step is an approved request, with each stakeholder's seal of approval, going back to the budget owner for implementation by the project team. Many of the smaller steps at this stage can be done via automation in procurement software, including vendor onboarding, vendor invoice processing, paying the final bill, and categorizing the expense.

Ramp and Buyer take care of the details so you can focus on growth

With everything else on your plate, it can feel overwhelming to add “implement concrete procurement plan” to your list of to-dos, but with Ramp and Buyer, all you have to do is set the controls, upload your vendor contracts, hit play, and then just sit back and watch the savings roll in. By preparing now, you’ll free up your time and budget to focus on growth.

Are you curious how much you could save with Ramp? Check out our savings calculator.