Optimizing your Procurement ROI

In the current business scenario, companies require to create efficiency, certainty, and profit to maintain sustainability for their companies. For this purpose, enterprises are now turning to procurement experts UK to drive more value as well as returns. However, effective and strategic procurement needs to examine current performance and look for ways to make improvements. The best way to ensure that is through optimizing procurement ROI.

Importance of Measuring Your Procurement ROI

To know how to measure your procurement ROI, you must understand the importance of measuring it. To start with, purchasing professionals can have a better understanding of how and where to cut down on procurement costs to allocate them in other areas and boost performance through measuring procurement ROI. According to the reports of leading procurement agents UK, top businesses who measure their strategic sourcing ROI are experiencing better communication of value and enhanced performance. By choosing the right KPIs for your business, you can:

• Gain credibility with your partners and internal stakeholders
• Understand the value of applying more than one application
• Gain approval for your estimated budget for projects

Procurement ROI—the Best KPI for Your Business

Unlike the traditional ROIs, which are measured solely based on revenue, procurement ROI is calculated by comparing the costs of different departments including the total revenue they generate for the entire organization, both operationally and financially. Hence, procurement experts UK consider this metric is the ideal KPI for evaluating your company’s overall ROI. To accurately determine the sourcing ROI, you will need to take note of the following factors within the organization:

• Spend analysis
• Workflow management
• Utilization of time by your team
• Increased visibility
• Easy access to procurement technologies

Calculating Your Procurement ROI

To optimize your procurement return of investment (ROI), you need to have a clear idea of your goals, as well as a grasp of the current state of operations within your team. Further, you can utilize the following strategies to calculate the procurement ROI:

• Cost per Payment and Total Paper Check Payments: One essential element of measuring ROI is to shift to digital processes from manual ones. This will help you measure the progress in digitizing the procure-to-pay process.

• Total Cost per Invoice (Digital and Paper): This refers to the total cost of AP divided by the total number of invoices. In this process, using digitized processes, i.e. electronic invoices effectively reduce costs associated with scanning, coding, and typing paper invoices. This allows better reallocation of staff time, as well as e-invoices being updated automatically, reduce the chances of error.

• Catalog Compliance: Analyzing the total amount of Catalog Compliance lets you have a clear idea about your clients’ requirements of goods and services. If it is high, you can therefore reduce the costs and ensure savings by providing your employees with an electronic catalog and marketplace to give them a consumer-like buying experience.

• Total Rebates: Evaluating the total amount of rebates obtained for the goods and services that you purchased will effectively help you to decide whether you need to renegotiate discounts and payment terms with the suppliers, leading to creating value opportunities and improved cash flow.

If utilized properly, procurement agents UK can benefit from calculating procurement ROI in terms of optimizing purchase. Proper procurement is essential for any growing organization, and therefore, it is high time you consider implementing it in your business.