What is Procurement Software?

Carol Francois

There are two main types of procurement software: electronic procurement or logistics management. Procurement software is typically part of an enterprise resource planning (ERP) solution or accounting package. Most software suppliers offer a fully integrated solution that incorporates purchasing activity into the accounting system. The benefit of this type of software is the ability to accurately report on all financial commitments at any point.

Some procurement software automatically generates forms for ensuring a delivery contains the correct items.
Some procurement software automatically generates forms for ensuring a delivery contains the correct items.

Procurement or purchasing is all activity that relates to the acquisition of goods and services for use by the business. A standard procurement system allows users to create purchase requisitions, goods receipts, purchase orders, and invoices. Goods returns, credit memos, and delivery confirmation are options often included in this type of software. The best procurement software includes significant reporting functionality, automated approval work flows, and commitment tracking.

Electronic procurement, or e-procurement, is a procurement software used to purchase goods from other suppliers via their websites. Typically, the user logs into an internal electronic procurement solution connected to the accounting software. The user can select from a list of approved suppliers and browse their catalogs for products. When selecting the products, the items are noted in the electronic procurement software.

The user is required to assign the internal accounts to the items in the shopping cart. The internal approval process is then triggered, typically with automatic emails or related tools. Upon approval, an electronic purchase order is sent to the supplier. When the items are received, the user logs back into the electronic procurement system to process the goods receipt.

The electronic invoicing process allows approved firms to submit their invoices directly to the customer electronically. Most systems have an automatic process to ensure that only orders that have been received are submitted for payment. Other firms require every invoice to be manually reviewed and approved before being processed for payment.

Electronic procurement software has experienced a huge growth in the last five years and is expected to continue to grow. There are significant savings available to institutions that implement electronic procurement. The savings are both hard dollar savings due to the reduced time to process invoices, and soft dollar savings due to reduced staff time required to process an order. Standard procurement software is a commonly used control mechanism to track spending activity and monitor the prices that suppliers are charging, as well as to ensure policy is being followed.

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