Why procurement compliance is crucial
Complying with rules when contracting service providers and when approving purchases is an essential part of procurement. Compliance entails formulating processes for company spend management, following them and enforcing them. By not monitoring how employees, suppliers and other relevant parties are complying with the rules for spend management and with the terms and conditions of agreements, organisations are exposing themselves to a host of risks. Compliance protects organisations from fraud, corruption and rogue spending. Below we look at further reasons why compliance in procurement is crucial.
Procurement compliance can save money and add value to the organisation
Procurement compliance helps you save money and add value to your organisation.
Dealing with procurement compliance is tricky; however, procurement can really drive savings, improvement and value if you establish the right metrics, use tools and technology to streamline the process and make sure the procurement department follows its own practices and guidelines.
Procurement compliance can help you to improve your supplier compliance
A good compliance process will help you improve your supplier relationships and supplier compliance. Clear policies and rules will leave your suppliers in no doubt of what you expect of them, and formalising your requirements with a supplier contract leaves nothing to chance.
Monitoring your suppliers makes them responsible for their own compliance and stops them from becoming complacent. Making use of tech can create an audit trail, removing the need for unwieldy spreadsheets, and can minimise timescales and maximise efficiency.
Procurement compliance can reduce purchase costs
Compliance helps the business to receive any discounts or offers they’re entitled to from their suppliers. It also instils the business with the confidence of reliability and can prevent last-minute spending.
Procurement compliance increases stakeholder satisfaction
Compliance ensures that employees and other stakeholders are certain the procurement will satisfy their requirements and meet their quality needs. As a result, procurement teams will work better and feel more satisfied in their roles.
Procurement compliance Increases procurement team efficiency
A well planned, strictly regulated process paves the way for quicker purchases and greater savings. Importantly, compliance allows procurement teams to gain clarity on processes and lessens confusion. They can improve their workflows and detect areas where they can make improvements. It’s essential not to add requirements that make processes more difficult to navigate and reduce service levels, and to review processes and challenge any steps to be sure the requirements are necessary to meet rules and regulations or to add value.
Procurement compliance can boost procurement ROI
Using good procurement software helps you to ensure compliance across the supply chain; not only that, however, but you can use it as a tool to evaluate your entire procurement department.
You can answer questions such as:
- How well does the procurement department achieve the aims and best practices it sets for the organisation?
- Is it hitting the benchmarks for process improvement and value generation?
- Does it adhere to guidelines on payment on time?
These important questions will provide useful insights that will put you on the path to a procurement function that leads by example. At the same time, you’ll be able to identify the potential for greater compliance, savings and building of relationships.
Procurement compliance encourages standardisation of processes
Streamlined internal control and following best practices are the most effective routes to good compliance. Standardising processes helps to close gaps so that people who want to exploit them can’t perform illegal or malicious actions to the detriment of the organisation.
Procurement compliances helps to maintain standards through regular auditing
Regular audits are a must in procurement because they help organisations and businesses to spot weaknesses and risks. They’re a good way to improve compliance because you can audit your suppliers regularly to protect the business. Other ways to achieve greater compliance include avoiding giving gifts to suppliers unnecessarily, ensuring quality control standards to steer clear of irregularities or offences regarding tax affairs, and improving control over procured items and making sure they follow the contract clauses.
Procurement compliance is necessary but not easy to monitor or implement. Do so successfully and you can enjoy cost savings and protect your business. If you’d like our help to achieve greater compliance in your business, contact us and find out how our experts can work with you.