Businesses experience an increased number of challenges concerning the efficient procurement process in 2024. The fast-moving market provokes the need to audit and maintain purchasing practices more effectively for organizations to keep pace with their competitors. The solution to this lies in procurement audit which offers a comprehensive look into how an organization is buying goods and services. Businesses should be aware of how to conduct it to thrive in the current dynamic market. Procurement audit, because of its holistic nature, results in a broad range of information on the company’s involvement in procurement, the most challenging areas, adverse consequences, and those areas or regions where innovation is thriving. To help you with procurement audit, the following steps have been listed down:
Step 1: Establish goals
Before anything else with, it’s critical to comprehend the precise objectives of conducting a procurement audit. See it as defining a goal or a target for our desired outcomes. Therefore, establishing our objectives clearly should be our first priority. This entails determining which particular facets of the procurement procedure we wish to examine in further detail. Would it be desirable for us to concentrate on our expenditures? Or is it possible that our primary concern is making sure we’re abiding by all the laws and guidelines? By establishing specific goals, we provide ourselves with a road map for the audit, which makes it simpler to stay on course.
Step 2: Gather information for the audit
This step is to gather all the information needed to conduct the audit once we are clear on our objectives. This will include information and evidence of our buying activities. Therefore, it covers looking at the documents such as the purchase orders, contracts, invoices, supplier agreements and the financial records so that, if possible, whatever can help us know how our procurement process is and where necessary to make them. The more information we have, the better the chances of having alternatives and coming up with the right decisions during the audit.
Step 3: Evaluate purchasing procedures
Now that we have gathered all of our data, it is time to examine our procurement procedures in more detail. This entails closely examining the real process by which we get the supplies required for our company. Are we adhering to the guidelines and rules that we have established for ourselves? Are there any situations when we could be working more productively or efficiently? We can find any areas where we might be lacking and devise ways to improve by evaluating our buying procedures.
Step 4: Examine supplier connections
You examine your relationships with your suppliers in great detail in this step. Here, you want to know how much they are assisting your firm with and how well they are performing. It’s similar to making sure everyone on your team is performing their duties effectively. To ensure that the items you receive are of high quality, you should check to see if they are offering you competitive costs and timely delivery. It could harm your company if they are not performing these tasks effectively. Thus, this is an important section for you to pay attention to.
Step 5: Examine Compliance
After verifying with your suppliers, it’s time to confirm that all regulations are being followed. This involves making sure everything is being done correctly. Regulations are the rules that govern business. These guidelines specify what is acceptable behaviour. Thus, you must ensure that you are adhering to them. In your organisation, you too have policies—your own set of guidelines and must also be followed by you.
Step 6: Recognise Opportunities and Risks
It’s time now to examine what can go wrong and what can go extremely well. It is similar to speculating about potential future events. Things may not always go as expected. For instance, the manufacturer of your goods may experience difficulties and be unable to meet your needs. You might run into problems with this. Thus, you must be prepared for these kinds of issues. However, positive things can also occur. Perhaps you locate a new provider who can offer you greater value or higher quality. This could spur business expansion. As a result, you too need to be searching for these possibilities.
Step 7: Make Use of Sourcing Tools
Sourcing software can enhance procurement processes rendering it considerably more effective and efficient. Sourcing software denotes a digital application also known as purchasing or procurement software that is used to manage suppliers, develop and negotiate contract terms and conditions, and handle purchase orders. With the ability to automate time-consuming, high-risk, and high-error undertakings such as bid analysis, request for proposal development and bid summary, and supplier choice, sourcing software saves organizations time and reduces manual error rates. In addition, sourcing software delivers intelligent data and analytics that support strategic sourcing and informed decision-making.
Step 8: Create an Action Plan
To turn the procurement audit’s conclusions into specific actions for improvement, an action plan must be created. For the purpose of resolving challenges and seizing opportunities, the action plan should specify precise goals, approaches, and techniques. To achieve buy-in and dedication to its implementation, it is imperative to involve key stakeholders in the plan’s formulation, including department heads, financial staff, and procurement managers. Setting up distinct deadlines and assigning duties are essential to maintaining accountability and keeping the action plan on course.
Step 9: Put the Advice into Practice
Putting the action plan’s suggestions into practice is the last but equally important step in the procurement audit process. Strong leadership, transparent communication, and committed resources are necessary for effective execution. To guarantee proper execution, it is crucial to designate roles for every action item and to offer the required assistance and training. To spot any problems or obstacles to implementation and move quickly to address them, regular monitoring and progress tracking are crucial. To maximise the impact of the recommendations and synchronise efforts, departmental collaboration and coordination are essential.
Wrapping up
In 2024, a procurement audit needs thorough preparation, data analysis, and strategic decision-making. Through adherence to the guidelines provided in this guide and the utilisation of sourcing software, companies can enhance their procurement procedures and foster commercial prosperity.