Procurement risks arise from unreliable processes. The trademark signs of these broken processes — inefficiencies, errors, delays, and frequent cost overruns — may sound familiar. That’s because they are far more common than any professional would like to believe.
The good news is that there are tools to help teams mitigate these risks. Processes can be structured, data can be integrated, and workflows can be automated and optimized to improve accuracy and speed. For most procurement teams, having the right set of tools can make all the difference between anticipating risks and being caught off guard by them.
Before we get to that, let’s consider some of the indicators of unnecessary procure-to-pay risks.
Assessing procure-to-pay process risks
Some risks are well known, but others may lurk just out of view, becoming obvious only once a crisis emerges. One tactic that procurement teams can use to identify risks is an informal process assessment. This is a straightforward evaluation of what is — and isn’t — working.
Some of the tell-tale signs that problems may be on the horizon can be first identified by looking for signs in the following focus areas:
| Focus area | What to look for |
|---|---|
| Process architecture | Connection between the purchase and accounts payable processes is fractured. Workflows lack cohesion. Activities like reviewing purchase requests or invoices take place in silos and communication is difficult. Stakeholders lack awareness or insight into the status of their requests or work. |
| Data | Data must be manually updated in more than one system or app. Errors occur due to the amount of manual data entry required. Information such as documents, contracts, policies, and vendor databases are not easily accessible. Gathering information is complicated and requires lots of follow ups and chasing between spreadsheets, emails, systems. |
| Visibility | Team or vendor performance reports are difficult to produce. KPIs and other metrics are difficult to track. Deadlines are missed. Non-compliant spot purchases slip through the cracks. Making strategic data-driven decisions takes more effort than it should. |
6 common P2P risks and root causes
Evaluating the procurement process at a high level can provide a general sense of the risk factor. If the procurement process shows any of these symptoms, then it’s likely that teams are struggling with much more specific challenges. Here are six of the most common risks and their causes.
| Risk | Causes |
|---|---|
| Incurred costs | Poor SLA management. Delays in invoice approval or difficulty retrieving data result in missed discounts or late payment penalties. |
| Non-compliance and maverick spending | Unstandardized processes and lack of accountability allow maverick spending and unapproved spot purchases to snowball. The company’s purchasing policy is difficult to enforce. |
| Fraud | Lack of visibility and process structure introduces the possibility of fraudulent activity like inflated invoices, unapproved purchase changes, single-source supplier/vendor schemes, bid rigging, duplicate invoices, or conflicts of interest. |
| Poor contract management | Fragmented data and workflows make it difficult or impossible to manage contracts. Buying power is lost, price changes, quality issues, and problems with delivery go unaddressed, and vendors who are no longer a fit for the business model continue to provide goods and services. |
| Costly errors | Duplicate data entry and unnecessary manual work contribute to a high rate of errors. Data silos and lack of visibility exacerbate the problem. |
| Less buying power and inefficient vendor management | Evaluating vendors can be tedious when done manually and without a structured and standardized workflow established. Collecting required information requires excessive follow-ups and the results are inconsistent. |
How process automation mitigates risks
Fortunately, all of the most common risks can minimized and, in some cases, totally eliminated. Business process automation software (BPA) is a tool commonly used to improve control and visibility over their procurement processes and workflows.
Here’s a quick summary of what process automation tools can do.
Structures and standardizes workflows
BPA makes it easy for teams to visualize and organize their processes and workflows. By defining start points, sequences, and results, teams can bring consistency to the way their work gets done — whether it’s a requester submitting a purchase request or a vendor updating their payment records.
By also applying rules and conditionals, teams can ensure that processes and workflows are executed the same way, every time. Structuring (and standardizing) processes is the first step to addressing and preventing risks.
The result is greater control and visibility across purchasing, accounts payable, invoice processing, contract management, and supplier management.
Streamlines data and communication via integrations
Process fragmentation occurs when data and information fail to flow through the different apps and systems that make up the tech stack. These silos interrupt communication, create blindspots, and slow down processes.
Process automation tools can (and should) integrate with all components in order to create a seamless ecosystem. Some process automation tools can even fill process gaps that arise when new components are added to the stack.
With a procure-to-pay process that’s integrated and automated from end to end, work handoffs and communication between systems and teams is seamless, consistent, reliable, and error-proof. That means a greater focus on maximizing savings and less time spent course correcting.
Automates error-prone and resource-consuming work
One proven way to reduce risks in any process is to eliminate manual and repetitive tasks where possible. Take data entry as an example. Each time a team member has to enter data into a spreadsheet or app, there is a risk of error.
A high level of automation frees up the team from manual activities like updating requesters or updating vendors on the status of their payment. It also ensures that tasks don’t get stuck. With automated notifications and deadline alerts, bottlenecks are detected and process friction is resolved.
While not everything can (or should) be automated, activities that are repetitive, redundant, or that happen frequently can and should be automated.
Learn more about task automation.
Adds a layer of visibility to reveal inefficiencies and risks
Risks thrive in the dark corners of processes and workflows, and they grow bigger when there’s a lack of workflow ownership or accountability. Process automation tools can shine light into these areas by making it easier to find and access data, enforce role-based permissions, and creating audit logs that track all activities.
Most process automation tools also provide options for measuring process performance, and these metrics can often provide early warnings of problems happening just out of sight.
Supports smarter, more strategic decisions
What if you could analyze several months of purchase data to draw valuable insights and inform business decisions? What if you could quickly gather total spend for low-performing vendors? With AI-enhanced process automation, you can.
Quickly and reliably pull procurement data to make smarter decisions. Gain the speed you need to optimize your procure-to-pay process and eliminate the gaps (and potential risks) keeping procurement teams from operating more efficiently.
Tips for preventing procurement risks
| Risk | Prevention tips |
|---|---|
| Avoidable expenses | Automate notifications when invoices approach due dates to help avoid late payments. Structure payment processes with rules that require approval from managers. Use conditionals to route approvals to specific team members. Use AI to assess the total number of spot purchase invoices processed within a designated amount of time. |
| Fraud | Automate manual and repetitive tasks so that teams have more time to assess vendor performance. Collect information using customized forms with mandatory fields to prevent missing or incomplete information. Enforce role-based permission management for sensitive processes, such as vendor evaluation or payment processing. Apply rules and conditionals to ensure appropriate approvals take place when they need. Review audit logs to improve workflow accountability and detect unusual activity or actions taken. Use AI to gather information on invoices processed and common category spend. Use process management tools that include built-in security features such as MFA, SSO, 2FA, and which meet industry standards for privacy and security. |
| Non-compliance | Centralize requests into a single platform to keep up with all incoming submissions. Build processes with rules and conditionals that enforce policies. Automate notifications and alerts that are triggered when items in the process fail to meet defined standards, such as a deadline. Use portals to centralize policy information and create self-service workflows for requesters and vendors. Use customized forms to collect mandatory information. Implement rules and conditionals to prevent incomplete forms from progressing through the workflow. |
| Poor contract management | Integrate systems and apps to ensure contract information stays up to date across all components of the stack. Automate notifications to alert team members when a contract needs their attention. Centralize forms and documents into a portal that provides access to approved external stakeholders. Apply conditionals to workflows to ensure proper routing, especially for approvals. |
| Avoidable errors | Integrate systems and apps to ensure data moves freely at all points in the process and reduce the need for duplicate data entry. Customize forms to prevent missing or incomplete information. Automate tasks where possible to reduce instances of human error. |
| Poor vendor management | Standardize vendor onboarding processes by structuring and automating the workflow. Collect information from vendors using a standardized form built with rules to prevent missing or incomplete fields. Automate tasks and workflows where possible to give teams more time to engage with vendors and negotiate prices. |
Reduce risks with process automation
Process automation solutions provide easy-to-use tools that help teams minimize common procurement risks. For most teams, the benefits of using a no-code process automation tool include:
- Reinforcing security and compliance requirements
- Applying rules and conditionals to ensure process integrity
- Making it easy to automate repetitive tasks and notifications
- Helping teams build structured and standardized workflows
- Eliminating silos and blindspots by integrating all systems and apps
- Avoiding missing or incomplete information through standardized forms
- Using artificial intelligence to quickly identify trends and uncover root causes
See what’s possible with Pipefy
Pipefy offers procurement teams all of these benefits, and more. Pipefy is designed for ease of use and implementation that’s swift, straightforward, and secure. Best of all, Pipefy is easily adaptable for any type of workflow or process. Team members with the right permissions can quickly build or modify their workflows using a no-code interface.
Pipefy delivers native integrations to the most common procurement apps and systems right out of the box. Built in security features protect data and support compliance efforts, while artificial intelligence helps procurement teams access complex data insights in seconds.
Pipefy helps procurement teams avoid risks and take their place as strategic business partners.
