Create and track budgets
Activities towards goals
Budget management involves managing a company's revenue and expenses, and procurement management is an important function for managing budgets both internally and externally. Budgeting within a procurement team is one thing, but large procurements can easily make or break a company's overall budget.
The importance of procurement in budget management: purchasing activities help create the products or services that the company sells. However, procurement also provides office supplies, technology, and even utilities that businesses need to operate on a daily basis. Indirect spending – budget items not directly related to the production of goods or services – still requires procurement to operate. Therefore, procurement management is essential so that businesses do not break plans and become passive before set revenue and profit goals. And efficient procurement practices will help keep the entire company within budget and build healthy profit margins.
In addition, there is a contrast between the Finance department and the Procurement department in implementation because the company's goal is that Finance always finds ways to save costs, while procurement always wants to get the best benefits. the best products and services to serve the organization's operations. And this issue is always reviewed regularly by senior management and controlled by the company budget.
Set a budget for purchasing
Budget management for procurement has two parts.
- First, there are important costs related to production and business activities such as production supplies, main raw materials, tools and equipment, production machines, etc.
- Other costs such as employee salaries, stationery or training courses, and purchased services such as technology to upgrade employee performance.
Budget management needs to be transparent to all departments, as well as for finance to understand where to find savings and prepare for price increases.
Purchasing management software of ERP system will help the organization set and monitor budget implementation in a clear, transparent manner and control items that exceed the budget, thereby preventing risks of incurring ineffective costs or major problems. The bad news happened, affecting the company's finances.
Operations in purchasing management software comply with standard procedures so that cost tracking becomes more effective when the data reflects where the costs are and what activities the company is paying for. what and which supplier's goods and services the company is using, thereby saving future purchasing costs for the business.
Let's take a look at the main functions of what procurement management software can do?
- Budgeting by activity item: in ERP can help organizations manage as detailed as possible. The budget corresponds to the activities, thereby proactively finding financial sources according to the organization's set goals.
- Departments will base on their operational goals to disburse budget according to each request to implement and use the budget approved by leaders above.
- Conduct search and evaluation of goods and service suppliers, develop testing criteria to ensure the selection of the best supplier within the specified budget.
- Compare and choose suppliers based on price and given criteria. For strategic suppliers, the supplier's price policy function can be used to create orders automatically and be transparent in management.
- Prepare purchase orders and purchase contracts for selected suppliers.
- Monitor order fulfillment, acceptance and payment to suppliers.
- Manage budget according to actual implementation: approved budget, used budget, remaining budget. Real-time display data helps to effectively manage budgets and warn in advance of upcoming budget shortfalls.
