4 Types Of Risks Involved In Procurement

procurement

Procurement of any goods or services to your organization, you need to get it done carefully as it comes at a certain risk. If one purchase goes wrong, it can hamper your brand value within the organization. Anything that is purchased for the organization must be thoroughly evaluated from multiple stakeholders with a proper vendor evaluation method. This ensures you to get the best deal for the company by spending a marginal amount.

It is very much essential to have a procurement process in an organization so that finance teams get complete control and visibility on where the amount is being spent.

This blog talks about the risks involved in the procurement process and how to overcome it. Let’s deep dive into it

Common Types Of Risks Involved In Procurement

  • Poor Vendor ManagementMaintaining a strong relationship with your vendors is one of the key ways for you to scale-up your business. Vendors can also be an important source of information, advice and trade credit. The main advantage of establishing a strong relationship with the vendor is that they can help deliver new products that help grab market share from competitors or provide you with adequate discounted prices.
  • Contract Mismanagement Before procuring anything to your organization, you must enter into an agreement with the vendor. Contracts are a strategic opportunity to form mutually beneficial partnerships with vendors and also an effective way to manage them. This helps the organizations to have a set of fixed pricing for a certain fixed period of time with the same vendor along with delivery timelines, returns policy, etc.
    Procurement_Risks
  • Improper Communication – Often the finance team will have to communicate with multiple stakeholders within the organization for validating the purchase request raised. The approved purchase request will be shared with the procurement team who’ll evaluate the vendors. The procurement team and the finance team must be aligned as to what they’re procuring and from whom they’re procuring and most importantly about the pricing. Any miscommunication around the number of items that are being procured, delivery timelines, invoice mismanagement, can damage the reputation of the company. Organizations might even lose up the preferential pricing jeopardizing their relationship with the vendors.
  • Unethical Practices – Finance team involves doing multiple transactions every day. There are many different ways in which CFOs can be taken for a ride like a lack of available data or fraudulent transactions. Numbers can also be mismatched by creating a fake purchase order, falsifying information pricing, the false record of bookkeeping, invoice fraud, embezzlement and money laundering. Vendors may lure finance team members by offering them gifts, taking them to parties, etc. so that they get the preferred vendor treatment.

Why mitigate Procurement Risks?

The procurement team is one of the main pillars of an organization. Anything to be procured, be it from stationery, laptops, toiletries, etc, the procurement team is involved right from the start till the end. One wrong purchase and the entire company’s reputation is at risk. On the other hand, the finance team gets a closer look at the company’s financials and see to it that they don’t go out of budget. By following a proper process & structure, these functions can move smoothly and efficiently.

Keeping the risk management plan up to date can transform it from a door stop into a vital project management tool

Bruce Pittman

The Solution

An e-procurement software like Finly provides a seamless vendor payments system. The finance team can just add the vendor details and automate the payments without missing the deadline. You can split payments and make vendor payouts, manage all your marketplace payouts to the vendor’s bank account and much more. Through powerful API banking, you can also schedule these payments, Vendors will be notified on receiving the payments through SMS or email.

Payables_AutomatedThe highly flexible & configurable platform allows you to customize multiple levels of approval-flow based on the organizational hierarchy. Multiple levels of approval stages can be configured involving various stakeholders to approve the request raised by an employee and be notified via email. The system can also be configured to automate the notification reminder to approve or disapprove any pending requests.

The in-built chat system allows finance or procurement teams to talk to vendors directly and avoid miscommunication. The finance team can always verify the invoice against the purchase order through our automated three-way matching solution. Each purchase order consists of an audit trail helping in a deeper understanding of the purchase and thus avoiding large email threads.

Automate the digital bookkeeping process by eliminating the error-prone manual process of entering data into your accounting software. Integrate your accounting software like Tally, Quickbooks, Zoho, SAP, etc., with the platform and ensure accurate entry for the GL record including the associated amount, account, date, description, transaction number, and type for each transaction.

Mitigate Your Procurement Risks Through Finly

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