Today’s workforce is largely governed by external contractors, a group that exists outside a company’s full-time employees. According to Forbes, this group has been crucial to business recovery since it can be scaled to meet growing demand and now accounts for 42% of workforce spending overall.
Although effective in helping teams adapt to changing circumstances, the reality is most teams do not have the visibility or technology they need to manage these teams effectively. Not to mention, the actual time to complete a requisition-to-service Purchase Order (PO) is often slow, leading to inefficiencies and decreased profit margins for the business.
So, how can your team empower users in an accelerated purchasing process? We explore this topic in further detail below.
The Current Requisition-to-Payment Process
In a typical contractor engagement, departments must initiate an internal request for a contractor, where they must be awarded internal approval to proceed with the engagement. Once approved, workers will create and submit a paper timesheet with their hours for the project to be billed against a purchase order (and budget for the given project). Then, as month-end approaches, they may follow the hiring company’s invoicing protocol to submit these numbers to the approving manager. In many cases, teams may fill out a spreadsheet with their hours or invoicing template that they would go ahead and email over. After the manager has approved these numbers, payment will be processed and issued to the contractor. Keep in mind complexity comes to play when multiple purchase orders exist per team or project, leading to questions about what a team charges to which orders and deciphering between projects when the same people are being used on multiple.
For the manager, the process is equally manual, only amplified to account for all the contractors engaging with the approver. Consider that departments may oversee hundreds of contractors, each of which may charge a different rate and submit invoices as an electronic copy by email. Unfortunately, maintaining these documents through email, spreadsheets or paper makes it difficult for managers at month-end when these values must all be input into an ERP system. Hence, the department has limited visibility for progress against each total. Moreover, managers may find they are chasing contractors to submit their service entry sheets and make modifications so they can get paid on time, effectively being the go-between.
Only after these service entry sheets are approved can progress against budgets (purchase orders) be confirmed, and payment can be issued. As many teams note, any missing details left out by the contractor may add to processing time, thereby delaying payment.
Transforming the Requisition-to-Service PO
Starting from the requisition process, businesses can accelerate the initial purchase requisitioning to service PO step by allowing requisitions from a preferred contractor at approved service rates. Once the timelines, milestones, materials and an appropriate limit are negotiated and approved, the requisition can be automatically flipped into a service purchase order based on predetermined business rules.
Once approved, many teams noted a lot of the manual steps in the current process start at the point of collection. Therefore, rather than requiring a contractor to manually input their time and email it to an approver, who must then also manually input these details into an ERP system, many businesses have recognized that a major duplication of efforts was hurting their efficiency. Consequently, now leading organizations are looking for a service-master-based solution where a contractor could submit their time directly to the business's ERP system through a mobile app. It is only if an unexpected overage occurred, would a team member be contacted to investigate.
Therefore, as contractors submit time against a purchase order, employees will see progress against the contract within a single unified interface.
Approvals to Accelerated Payment Time
Where an approver once needed to manually compare invoices to the service master and the budget, there now sits a touchless alternative that empowers employees.
With an SAP process known as Evaluated Receipt Settlement (ERS), purchasing organizations can rely on business rules to automatically match services requested (services purchase order) to services received (service entry sheet) for the automatic payment of a contractor. The system relies on the premise that if the contractor exists on the services master and the validated services received match the purchase order, a business rule can be used in place of a manual approver.
Services Procurement Turned Touchless
After considering the services procurement process in-depth in this blog, one thing is clear. Building efficient processes starts with understanding and empowering the people that use them. Therefore, after looking at the previous methods in which teams would request and engage a contractor and track their time, many efficiencies were noted that can now be applied in a modern model that relies on business rules to make most of the management process touchless.
The ConvergentIS Rapid Vendor Portal for services procurement aims to support businesses through this digitization with an out-of-the-box solution built on SAP. Learn what this model would look like for your business in our free guide, available for download below.