Introduction
Remember when every time you had to get a screen protector, you would have to go to that phone kiosk in the mall, and because your phone is 3 years old, they might have one single option? Or, they might send you to another kiosk, and on kiosk bouncing, you go…
THEN, online shopping happened! Now, with a click of a button, you have access to hundreds of screen protectors for your ancient phone, and they can be delivered the next day!
🤯
The same change is currently happening in the Canadian construction industry. Contractors need to be taking steps towards purchasing automation to not be “mall phone kiosk” status. In this post, we’ll define Purchasing Automation, outline 3 of its benefits, provide 3 tips for picking the best tool, and give one example for implementing purchasing automation in your company.
Table of Contents
- What is Purchasing Automation?
- Why is Purchasing Automation Important?
- 3 Benefits of Having Purchasing Automation
- 3 Tips for Picking the Right Purchasing Automation Tool
- A Real Example of a Purchasing Automation tool
What is Purchasing Automation?
Purchasing Automation refers to the digitization of your purchasing process. It enables your company to have an easy-to-track paper trail that confirms approval, delivery, and payment on each order. This system ensures accurate and timely payments and keeps your on-site workers accountable for the orders they submit.
Ideally, you want to manage purchasing, approving, and supplier monitoring through a single platform. This platform will ensure open communication throughout each stage of the purchasing process, both for the contractor and the supplier.
Why is Purchasing Automation Important?
All companies, regardless of where they are situated along the value chain, have a choice: either defend the core and transform to adjust to the changing environment, or actively reinvent themselves to attack and disrupt the markets they operate in.
Mckinsey, 2020
Outdated purchasing processes are time-consuming because they rely on manual data entry, human intervention, physical records, and lengthy approval processes.
Your company needs a purchasing automation tool that provides visibility on historical spending and current activities. Information needs to be available at your fingertips and accessible at all levels of the company. This means that your team needs to see records and purchase orders at every stage of the process in real-time.
3 Benefits of Having Purchasing Automation
There is one primary way to reduce waste, and that is by reducing the friction that comes from suboptimal purchasing processes. Ultimately, it is about getting better pricing by processing payments faster and becoming a better customer to your suppliers.
1. Accountability
By offering on-site workers an efficient process for filing the receipt of goods you can eliminate the need for rework due to inaccurate invoices, late payments, and wrong orders.
2. Written Copy
Purchasing automation ensures that there is always a written copy of the material request. This way, the purchasing department can reference a record of the conversation, making it easier to issue purchase orders and change orders because accounting can find all of the information on a transparent platform.
3. Lowered cost to issue a purchase order
Our research shows that the cost to issue a paper purchase order comes out to $120. This includes supplies, time, and any other administrative costs.
In general, we found that electronic POs cost half as much as handwritten POs.
HOWEVER, if you ensure that your company is using the right automated solution, you can bring that number down to $16 per PO.
3 Tips for Picking the Right Purchasing Automation Tool
Using an automated purchasing system is an important transition for all companies to make in the construction industry. As more and more construction companies rely on automation to speed up their internal workflows, it is important to understand how your company can pick the best fit for its existing processes.
1. Growth
As your business grows, you want the software to be able to grow as well. This means that you need a tool that will support your company as it transitions from 15 people locally to 500 people nationally.
2. Ease
The purchasing automation tool needs to be easy to use not only for your accounting team but also for your on-site workers.
This tool also need to be easy to adopt and not slow down work efficiency.
Ultimately, it needs to be able to translate the needs of both of these teams to each other in order to create seamless communication.
3. Savings
Most importantly, the tool that you implement needs to present cost savings compared to your current operating system. Especially if you are spending up to $120 to issue a PO for a $15 order, finding the right purchasing solution will save your company time and resources.
A Real Example of a Purchasing Automation tool
QuoteToMe has built an automated accounting system that is focused on reducing process costs through digitization. It contains safeguards to ensure that you cannot process purchase orders without authorization. Also, orders are only valid if there is a 3-way match.
Outsourcing with QuoteToMe helps to better manage your supplier relations and become the lowest-cost customer.
We provide you with accurate and timely project data, which will create transparency on spending within the organization.
With the added benefit of saving time and money, your purchasing processes will be more efficient than you ever thought possible.
Conclusion
Purchasing automation is a step into making the Construction Industry
As the Canadian Construction Industry transitions into the future, it is important for your company to understand how to implement purchasing automation to Accuracy, Accountability, and Cost Savings. By picking a tool that grows with your company, is easy to use, and saves resources, your company’s purchasing will be more efficient than you ever thought possible.
Get yourself that competitive advantage. Because you’re worth it.
Are you ready to help your business have the most efficient PO process? Purchase orders issued from QuoteToMe are timely, accurate, and fast – all with minimal effort from the user!
Note about the Author
Natasha Mager is a Customer Success Specialist at QuoteToMe. She is passionate about inbound marketing and organic growth. Her goal is to help the construction industry learn how they can optimize their purchasing processes. You can find Natasha on Linkedin.