Procurement Software

Growing businesses must be able to maintain supplier relationships and mitigate supplier risk if they intend to effectively acquire the necessary resources to create and distribute their own products and services.

Procurement software enables businesses to streamline the acquisition of goods and services by generating and verifying purchase orders, executing inventory-related transactions, maintaining an inventory of goods, collecting and analyzing data to maximize profits, and automatizing other key phases of the procurement process.

This guide covers what procurement software is, what it does, the different types of procurement software, common features of procurement software, and more.

What is procurement software?

Procurement software manages all activities related to an organization's expenditures. Procurement software is related to billing and invoicing software, purchasing software, and vendor management software because it manages all activities related to an organizationʻs expenditures. Procurement applications automate the resource acquisition and supplier relationship management process. With procurement solutions, employees can easily create purchase orders subject to review and approval by managers. For managers, procurement software offers a broad range of tools to track, analyze, and report on the efficiency of the procurement process.

What does procurement software do?

Procurement software automates key processes, such as purchase requisitions, contract approvals, and invoices. This enables companies to efficiently manage vendor relationships, process and authenticate invoices, collect and store stock data, analyze stock data, and provide insights into purchasing decisions. Comprehensive procurement solutions act as a central repository for all procurement activities, limiting manual imputation efforts by employees, which simplifies workflows and enables collaboration between internal and external teams.

What are the different types of procurement software?

There are many different types of procurement software applications that enable organizations to streamline the procurement process, including:

• Purchase order software: Allows users to create purchase orders from pre-formatted templates, auto-populating vendor terms and pricing information. With this type of software, companies can create, track, and manage all purchase order documentation securely.

• Supplier management software: Helps companies identify and establish relationships with the most optimal vendors for their supply chain. This type of procurement software collects important supplier information, including supplier track records, risk profiles, and performance metrics.

• Contract management software: Accesses and uses pre-configured libraries and templates to efficiently assemble new contracts or update existing contract formats. With this type of procurement software, users can automate contract approvals, track contract changes, and alert procurement managers to contract expiration dates. Users can also analyze all contracts across a business to aid risk analysis and compliance tracking efforts.

• eProcurement software: Allows businesses to create pre-approved catalogs of goods and services for sale. Customers first select the goods or services they desire, then a purchase requisition is approved and a purchase order is created. This type of procurement software focuses on streamlining the online shopping experience for customers.

• Comprehensive procurement suites: Offers software solutions that include all of the various types of procurement software on a centralized platform. In addition to the types of procurement software mentioned aboves, comprehensive procurement suites may include inventory management, asset management, project management, electronic invoicing, electronic sourcing, purchase order, and spend analytics software.

What are the common features of procurement software?

• Requisition management: Review, approve, and cancel requests for goods/services to be purchased.

• Supplier management: Manage various aspects of the relationship with suppliers (e.g., interactions, history).

• Cataloging/categorization: Create and manage digital catalog of products/services with their details, specification, and price.

• Contract/license management: Track, store, and access client/customer contracts.

• Fixed asset management: Track details of fixed assets such as depreciation and maintenance scheduling/history within a centralized database.

• Inventory management: Track and manage the quantity of resources on hand to maintain proper supply.

• Invoice processing: Create, process, execute, and manage suppliers’ invoices until the payment is received.

• Purchase order management: Create, send, and track purchase orders and their statuses.

• Spend management: Track the amount of money spent on a certain product or with a certain supplier.

How do small and medium businesses use procurement software?

Inefficient procurement practices often cause small and medium sized companies to make redundant purchasing decisions, which may result in loss of revenue. Since small and medium businesses typically have smaller budgets than larger enterprises, it's imperative to optimize each phase of the procurement process to maintain good financial standing as a company.

Procurement software enables small and medium sized companies to eliminate redundant tasks, reduce waste, and automate key aspects of the procurement process, such as maintaining inventory and processing invoices, as well as tracking, controlling, and approving each phase of the overall procurement process. With procurement software, small and medium businesses will be able to optimize operations, save revenue, and ultimately amplify their competitive advantage in the marketplace.

What is the cost of procurement software?

Most products in this market are priced on a per user, per month basis, billed annually. Pricing can be divided into three pricing tiers based on the starting prices:

Price ranges:

• $8 - $20

• $20 - $110

• $110+

*The pricing included is for the entry-level/lowest-priced offering found on vendor websites on April 19, 2022. These ranges correspond to the 25th, 75th, and 100th percentiles of pricing information gathered from vendor websites of sample products.

What is the software procurement process?

The software procurement process involves shortlisting potential software suppliers for any necessary software solution. To do so, organizations must prepare a request for proposal (RFP) for their suppliers, which includes information on the background of a business, requirements for the potential software solution for purchase, supplier confidentiality obligations, criteria used to determine the software selection, timescales for the software procurement process, and any other key contractual provisions. Most software procurers will then ask their software supplier for a trial of their program of choice or proof of concept to determine if it truly meets software requirements their organizations desire. After the software solution has been tested and accepted, a business can then begin to use it, completing the software procurement process.

What are the trends in procurement software I should be aware of?

Innovative technologies have profoundly impacted the trajectory of procurement software capabilities. Before purchasing a procurement software solution, familiarize yourself with the following trends:

• Potential of blockchain technology: Blockchain technology possesses the ability to fundamentally change the procurement process. With digital ledger technology, every transaction is recorded, providing a record of each moment in the lifecycle of the ledger. This allows for the end-to-end traceability of transactions, providing transparency during each stage of the procurement process and supply chain lifecycle.

• Rise of AI-powered contract review: In the future, organizations will turn to AI-powered contract review tools to make the procurement process more efficient. The contract negotiation phase of the procurement process is quite labor intensive and can take months to finalize. Instead, companies will be able to feed AI-powered tools information about their company playbook, allowing the tools to redline contracts in a matter of minutes.

• Increased utilization of self-service portals: In the procurement process, it's crucial to maintain good supplier relationships. In the future, companies will turn to self-service technology—otherwise known as supplier portal technology—to provide suppliers with heightened visibility into real-time supply chain data, enabling them to self-service key procurement activities such as onboarding, e-invoicing, reporting, etc. By doing so, organizations will be able to improve supplier relationships, as well as their processing and compliance efforts.

Sources

Products evaluated for the pricing calculation were taken from GetApp’s procurement software Category Leaders report. The pricing ranges exclude freemium versions of the products. The features highlighted were identified based on their relevance and the percentage of products in GetApp’s directory that offer them.