Why Transparency Is Critical in the Procurement Process

5 MIN. READ

transparent-procurement-processA procurement process without transparency is like mountain climbing in the dark.

You cannot see how high you are, or what is above, below and to your sides. You do not know where there are loose boulders or snakes hiding in crevices. Plus, your team on the ground cannot track you, and the odds of a misstep are against you. The stakes are high.

If you try to run procurement processes without transparency, you cannot see what you are paying to whom or whether the price is right. You cannot see where you should be concentrating your efforts or whether dishonest employees and suppliers are stealing from you (until it is too late).

Significant losses may be brewing, but you do not see those either. Your finance team does not see what you are doing, and they cannot support you.

Procurement can be full of bad surprises in the dark, so you need to shed light on the full picture.

The importance of transparency in the procurement process

According to a Harvard Analytics survey of 779 business leaders:

  • 60% believe that there is a lack of transparency between finance and procurement management.

  • 24% say that manual data entry processes prevent proper supplier evaluation.

  • 50% of their procurement functions run on spreadsheets.

  • 26% estimated that improved transparency between finance and procurement functions could yield 11-20% cost savings.

  • 60% said they will be running initiatives to improve transparency between finance and procurement teams.

The dependence on manual data tracking limits procurement leaders' abilities to think and act strategically. Clearly, transparency is vital to provide necessary insights into procurement processes. With the right steps (covered below), you can maximize the benefits of transparency.

As you begin optimizing for transparency, keep technology and digitalization in mind. Manual processes are slow, labor-intensive and error-prone, especially for smaller companies with limited procurement resources. You want to spend your time creating a competitive advantage, not fighting fires.

Leveraging technology enables transparency in a streamlined and compliant manner, allowing you to maximize success.

Now, explore more about why transparency in the procurement process matters and how to achieve it with technology.

1. It helps avoid duplication of orders and errors.

These cost you money and time. Jobs are late, pricing is incorrect (which leads to disputes) and you could lose bids. To combat this issue, provide checks and balances with a built-in supervisory review and approval of significant orders.

2. It eliminates the opportunity for illegal activity.

Without a line of sight into ordering activity, dishonest employees can place fraudulent orders and collude with suppliers in kickback schemes. Transparency makes this riskier for them through a formal, consistent approval process that sheds light on this activity. Be sure to keep records of orders in an accessible place.

3. Transparency makes auditing easier.

You need to conduct your own audits at least quarterly, preferably by someone outside of procurement. The IRS may want to audit as well. Again, you need to maintain clear, correct, complete records of transactions to stay compliant and make the process smoother.

4. Transparency identifies opportunities to reduce your costs.

You cannot go to market with bids if you do not know your spend. Suppliers know it! And if you do not know how much you spend, you cannot know how much you save with bidding.

You may also discover leverage to do bulk purchasing. Plus, with accurate and complete information, you can track supplier pricing.

5. It builds credibility with your finance function.

If they can clearly see and validate your procurement-driven savings results, your finance team will work more effectively with you and support your efforts.

The need for transparency is real. How can you achieve it?

Manual processes will not maximize transparency. You will just be pouring time and money down the drain. Instead, you need to enable your procurement process with technology, and Raiven (formerly Qmerit) has the solution.

To digitize your procurement process from buying to supplier management, first sign up for Raiven Marketplace. If you are a smaller business and do not want to commit extensive resources to procurement management, sign up to our industry-first buying consortium with Avendra.

You can save between 7-25% on supply purchases by using our universe of precontracted, prequalified suppliers. In addition, you avoid time- and resource-consuming procurement initiatives!

What is more, you will have readily accessible spend data at your fingertips in real time. You can use that data to provide accurate analyses and reports on the savings results you achieved.

With fact-based reporting, you can establish credibility with your finance function. They can see your source data and validate your reports through Marketplace. In the end, communication will be clearer, collaboration will improve and your finance team will support your program.

Raiven Marketplace is an easy-to-use, cloud-based one-stop shopping platform for your buyers. The simplicity of use makes compliance easier, providing guardrails to steer your buyers away from nonapproved suppliers and back to approved ones. This reduces rogue purchasing.

It also provides a central place to keep records of your procurement activity for easy auditing. Less manual data input and less spreadsheet maintenance mean fewer errors!

Additionally, if you hire subcontractors, the Raiven contract management platform not only saves you time and money on procurement but enables you to efficiently manage, measure and motivate all your subcontractors. The platform lets you track your subcontractors' performance over time, including price, quality and contract compliance. Subcontractors simply upload their compliance information, and you review it right then. It also has guardrails to prevent you from hiring contractors with issues like expired licenses. This level of transparency is impossible without a digital platform!

The lack of transparency in your procurement and subcontractor process poses real financial and legal risks to your HVAC company. Raiven has the tools to shed light on the situation and establish a foundation for future procurement management excellence.

For more information, contact us today!

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