How Do Procurement People Do Contract Management Today

Contracts being at the heart of every business relationship are instruments through which commitments and essential elements of business transactions are defined and governed. They are key assets to build competitive advantage to organizations in today’s fast paced and multilateral business landscape.

Organizations today are redesigning the entire business process workflows to improve productivity in front line functions like procurement or sales deal cycles (buy-side and sell-side).

In contrast to its tactical past, procurement today is on a journey to becoming a long term strategic function. The modern procurement organization, by embracing contract management and adhering to best practices, is an important force in creating and sustaining value to the businesses today.

Buy Side Contract Management

On the buy-side contract management, procurement professionals are empowered to take control of their supplier management processes. It is imperative for an organization to have a well managed supply chain which is integral to profitability and also a streamlined contract process.

Contract lifecycle management (CLM) has been well-established on the buy-side which deals with procurement and supplier contracts due to the increasing need for monitoring off-contract purchasing, managing compliance and costs.

Aberdeen Group Report states that many organizations have not yet realized the strategic competitive advantage coming from a mature contracting process despite the increasing significance of contract lifecycle management (CLM), and thus their contract management for the most part involves fragmented, labor intensive and ad hoc processes.

In this article, the objective is to explore how procurement professionals today are able to bring in efficiency and enhance productivity by following a well structured and effective procurement process.

Click here to read 3 Top Business Benefits Due To AI-Driven Contract Management

7 Steps in Procurement Process

To streamline the supply chain, an effective procurement process is crucial for an organization to procure the best products or services at the best price. This involves supplier selection, screening, negotiating payment terms, setting up contracts, and purchasing the required goods at the best possible rates.

A multi-faceted process like procurement helps an organization achieve cost savings objectives and also enhances supplier performance, compliance, risk management, sourcing cycle time and, contract utilization.

1. Identify Goods and Services to Procure

   When a business has a need for goods or services, the onset of the procurement process begins. The procurement department must identify the products that are needed in order to purchase it. Selecting the right product is critical for the business. This stage also includes setting a budget.

2. Explore & Select Vendors

   The next stage is very important to sourcing potential suppliers and determining their ability to provide best value and high quality for the goods and services, getting them at the right price. This process to evaluate relevant suppliers involves issuing RFQs, RFIs, and RFPs.

   This best practice is called strategic sourcing. During this stage, procurement professionals should short list the different vendors that provide the goods and services they require. Evaluation metrics such as cost, quality, reputation, speed of service, warranty, guarantee provisions, and customer service would be assessed and only the supplier who offers the best value will be selected based on the factors.

3. Negotiation of Contracts with Preferred Suppliers

   In this stage after the supplier is selected, the contract process begins. For maximum value creation and establishing buyer- supplier collaboration, contracting is a crucial step for any organization. Critical factors like price structure, timelines for delivery, terms and conditions are assessed in this process. Businesses get insights into cost saving opportunities such as dynamic discounting through detailed analysis and negotiation of contracts.

4. Submit Purchase Requisition & Create Purchase Order

   Once the contract is finalized with a supplier, the next step involves submitting a purchase requisition (PR) that has a description of the good/service, pricing and quantity, supplier information, and the approval workflow.

   After this is approved, the finance team releases the purchase order (PO) to the supplier. A purchase order is a formal contract between the buyer and seller to buy goods or services which has information like the price, specifications, terms and conditions of the product or service and other obligations.

5. Payment Process upon Receiving an Invoice

   Once the vendor receives a PO, he sends an invoice mentioning the price for requested goods or services. The procurement team matches the PO and the invoice to ensure quality and quantity. Then the respective departments validate the invoice and send it to finance team for payment.

   Within the payment terms defined in the agreement, the payment has to be made. In the accounts payable process, there is a best practice followed by matching the invoice against an approved PO and the delivery details for the order called three-way matching.

   If everything matches up the accounts team sends payment to the vendor within the specified timeframe. The payment is released pre or post delivery depending on the payment terms established between the organization and its suppliers.

6. Receive and Audit Delivery of Requested Goods or Services

   Based on payment and contractual terms, suppliers deliver the goods or services. Upon receipt, audit must be done by the companies to ensure that the suppliers have met expectations of their quality standards.

7. Maintenance of Proper Records of Invoices

   As a best practice, it is important to effectively store all documents from purchase requisition through invoice in one central location in order to track spend and other various expenditure categories within the organization.

   Click here to read 7 Contract Management Functions You Can Automate Today and Secure Peace of Mind!

Harnessing the Power of Digital Procurement with the Right Tools

If using traditional, non-automated processes, it just isn’t possible to obtain visibility of the whole procurement process where businesses have to align SLA`s with the contract terms.

Streamlining procurement processes by utilizing procurement software can help enhance decision making by increasing the visibility of critical information such as RFQs, emails and communication, contracts and reports.

Using the right Contract Management Procurement Software will enable stakeholders to obtain actionable data from their contract portfolio. Efficient procurement software helps streamline virtually every stage in the procurement cycle.

Vendor Catalogues

In the stage of searching for vendors, automated vendor catalogues makes it very easy than searching the web for vendors. This automatically helps the purchasers get linked to all vendors who have been selected previously company-wide.

Purchase Requisitions, Purchase Orders, Invoices

They can be generated, delivered and approved all in one place using procurement solutions without any manual intervention. Storing them in a central repository enables communication easier and quicker between parties.

Vendor Management

When vendor management is done manually with fragmented approach resulting in lack of coordination and unstructured communication, it can cause delays in delivery, substandard quality, cost, conflicts and disputes.

Using procurement software solutions helps organizations to pre-qualify and shortlist preferred vendors to mitigate risks. They also deliver real-time overview and visibility of key vendor performance metrics.

Audit Trail

With procurement software, a full audit trail can be kept for every order from requisition through invoice and keep track of every detail related to an order – without the problem of manual paperwork.

Procurement professionals following these procurement steps help control spending. Instead of relying on Excel and email to manage their procurement process, they by using procurement software can make purchases faster, require less time, and save more money.

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What Docucollab`S Procurement Contract Management Solution Can Do For Your Business

DocuCollab was built and designed so that businesses can benefit from its offering. DocuCollab contract management targets many organizations, providing solutions to those who need buyer support or supplier support. Small to medium businesses may best utilize the DocuCollab contract lifecycle management platform that provides highly scalable, secure, and reliable solutions.

DocuCollab`s all-in-one cloud-based contract lifecycle management platform provides enterprise-wide management of all contract functions (including the buy-side and the sell-side). It streamlines and accelerates contract negotiations for sales teams, so they can close deals faster. With its Strategic Sourcing Portfolio, it manages the entire sourcing, contracting, and spend analysis processes for all types of spending, all in one place.

Its key contract automation capabilities include a central robust repository, contract authoring, track approvals, enforce workflows, audit contracts, granular security controls, flexible routing and approval rules, and reports that are automatically generated and emailed. Users can edit contracts through the cloud, and contracts can be legally executed with the built-in e-signature functionality as well.

DocuCollab`s solutions improve customer, vendor and supplier relationship and commitment management; simplify procurement processes, enhance productivity, ensure compliance, reduce contract risks, and increase efficiency.

Ideal for both Buy-side and Sell-side contracts allowing businesses to negotiate best terms for all type of contracts, DocuCollab is truly procurement contract management software.

Click here to discover how you can automate every step of your contract management lifecycle through DocuCollab’s seamless contract lifecycle management tools.