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How to Use Purchasing Data to Leverage Cost Savings and Negotiate Better Vendor Pricing


As your company grows and more people are spending money on behalf of the organization, it can become challenging to stay on top of the big picture of company spending.

Business owners and employees often use credit cards to purchase products and services. Because different managers or employees are purchasing goods and services at different times, using their own credit cards and then expensing the items, this entire process leaves holes when management tries to review overall spending.

What business owners usually end up with is a lot of duplicate purchasing and overspending. And they often find out after the fact, since their bills come in long after the purchases were made.

One way to control this excessive spending is by automating your purchasing processes. You gain the visibility you want into spending and can stop the duplicate and overspending before it happens. What’s more, you can easily aggregate spending to look for additional savings opportunities by negotiating better pricing with vendors you buy from frequently.

An automated purchasing system helps organizations turn ordinary buying into a comprehensive purchasing and invoice management system. You can set up your own custom policies, such as who can create purchase requisitions; who approves spending requests, with flexibility to assign category or high-limit approvers; who can generate and place purchase orders; whether or not you want to reconcile what is received via packing lists; who matches invoices to POs; and how payments are made.

Creating a purchase requisition is like a shopping excursion. You have immediate access to company approved online catalogs and can punch-out to preferred e-commerce vendors where you search and shop for the items you want. When items are selected from either a catalog or your e-commerce vendor, they are added to your shopping cart creating the purchase requisition.

Products from multiple vendors can all be added to the same requisition, streamlining the ordering process. Plus, you can also look up an in-progress order to prevent duplicate orders. You can attach scanned or faxed quotes, and allocate purchases across departments. When the requisition is ready, you route it for approval.

There is great flexibility in the way you can set up your approval processes, from a simple “named manager” approver, and/or by business unit, dollar amount and category. Once a requisition is routed for approval, approvers are notified by email that a transaction is awaiting approval. Once logged into the purchasing system, approvers can configure the approval screen so they can see the information most valuable to them to make informed approval decisions. For example, an approver may only be concerned with spending above a certain dollar amount, so the approval screen can be set up to view only those transactions.

Approvers can view any accompanying documentation, and can approve or reject items on a line-by-line basis. Visibility into budgeting data helps approvers make informed decisions about how spending will impact the budget. If overspending will occur by approving certain transactions, the approver can stop the spending before it happens.

Once a requisition is approved, a purchase order is generated. If multiple vendors are represented on the requisition, multiple purchase orders are automatically generated and can then be sent to vendors via their preferred methods.

Once the goods are received, you have the option of setting up a packing list that notes what items were actually received. When invoices arrive, your accounting team can match them with the approved purchase orders and packing lists, if used. This automated process helps eliminate duplication and over spending, and paying for products and services not rendered.

Access Spend Data for Better Cost Analysis

One of the specific benefits of using an automated purchasing management system to better leverage cost savings and negotiate better vendor pricing is the ability to access reports on category spending – e.g. airfare, lodging, office supplies, etc. These can tell you exactly where your company’s spending is taking place, and whether further investigation would result in additional savings. Areas where there is high-spend volume may provide opportunities for cost savings by negotiating with a vendor for preferred pricing.

You have the option of using preconfigured reports and modifying them by entering your filtering criteria. You may also want reports specific to your company, in which case you can leverage a custom reporting option which allows you to access information in just the way you need it. Once reports are created, you can export them for further analysis, and share them with others in your organization.

As you can see, there is great flexibility in a purchasing management system, and by automating your purchasing processes it is easier to control how money is spent. Every step of the way, as your company grows, you and your employees will be empowered to effectively perform their role in the purchasing cycle. What’s more, you will feel more confident that company spending is completely under control.

(Posted 3-3-15)

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