Even in these current troubling economic times, the healthcare industry continues to thrive. However, health insurance reform and new laws and regulations regarding healthcare have caused hospitals, medical offices and other healthcare institutions to seek out new and innovative ways to reduce costs. One way that businesses in the healthcare industry can reduce their costs is by taking advantage of purchasing and procurement options in the cloud. But if businesses involved in the healthcare industry can benefit from utilizing purchase to pay services, why aren’t all hospitals and medical practices using them today?
While the healthcare industry is a field that can benefit extensively from the use of cloud-based procurement software, many health care organizations have been hesitant to upgrade their procedures to utilize this great option. That is perhaps because the healthcare field is one in which years of experience give a medical professional the opportunity to be promoted to positions of power that involve making important decisions such as how to take care of purchasing needs.
Purchase-to-Pay Services For Hospitals
For healthcare organizations, purchasing and inventory control needs may be handled by a specific department that is tasked with specific duties. However, in the case of a hospital, the wide variety of inventory and purchasing needs sometimes leads to the tasks being divided up over several departments, which can lead to miscommunication and having a shortage of some essential items and an excess of others. For example, the nursing department may order supplies that are essential for them to do their job such as paper forms, medical equipment, medications and more. The maintenance department may be tasked with ordering cleaning supplies, purchasing cleaning equipment and even purchasing tissues and toilet paper. The cafeteria department may be required to place orders for food and beverages. The list truly goes on and on. However, it is the lack of communication between departments that leads to a breakdown in orders.
With cloud-based purchase to pay software and related services, hospitals can streamline the process so that essential items are ordered in advance of when they are needed and so that there are not multiple orders for the same items coming from different departments. This can potentially save a hospital a great deal of money as orders that are made in bulk are generally less expensive than smaller orders. It can also save the hospital staff time as they will no longer be tasked with completing and submitting purchase orders anymore. Just think of how valuable that will be! It will allow your nurses to keep their attention on tasks directly related to their job, will allow your receptionists to worry about phone reception rather than purchase orders and will enable your maintenance department to concentrate on issues far more important than ensuring there is enough toilet paper to place several rolls in each bathroom and in every room.
As you can see, procurement to pay services can be tremendously beneficial to hospitals and can help hospital staff to keep their attention focused on the essential functions of their specific positions while purchasing concerns are delegated to a dedicated service in the cloud.
We previously explored how purchasing in the cloud can eliminate your need to have a dedicated department within your legal practice that is tasked with procurement and purchasing services. In this entry we will explore why cloud-based software is a much better choice for a legal practice than conventional purchasing software.
If you are involved in the legal industry, you likely know quite well the vast amounts of paperwork that permeate every aspect of the legal industry. Even in the event that your law practice has taken steps to streamline your business and create online databases to eliminate the need for as much paper goods and printing equipment, you still need computing equipment, software, stock, office supplies and a whole host of other items. If there are ways that you can further streamline the purchase of items and track the inventory as needed, you owe it to yourself to take advantage of them to save yourself both time and money. Hiring a dedicated individual to complete the necessary research and to purchase items as they are needed is one way to solve the problem. However, that will require you to take on a new employee and provide them with compensation and perhaps benefits as well.
2. Cloud-Based Software is a Step Up From Conventional Purchasing Software
If your legal practice already utilizes purchasing software, you may incorrectly assume that cloud based software will not provide you with vastly better results. Purchasing software is definitely better than using traditional paper methods for your purchase orders and for tracking your inventory, but there are certain caveats with conventional purchasing software that are not present in the cloud. For example, most conventional purchasing software requires that you install the software on your dedicated business network and that you must then maintain it and update it as needed. This requires you to enlist the services of an IT professional and if you do not have an IT professional on your team, it means hiring an outside individual or outside business which can be an extremely expensive endeavor.
On the other hand, cloud-based software truly is a step up from conventional software. Cloud-based software does not need to be installed on your dedicated business network and is instead situated on the server that belongs to the vendor. All updates are done on the vendor’s end, eliminating the need for you to hire an IT professional for the job. Furthermore, cloud-based procurement-to-pay software fully automates every aspect of the procurement process. Ordering, handling transactions, creating graphics such as charts for business presentation – all of these tasks can be performed within the cloud. That means that the software is essentially a procurement department in and of itself! Better yet, most purchase-to-pay software enables you to complete transactions using any device that is able to access the Internet; and most purchase-to-pay software is extremely user friendly which means that even a novice can operate it properly.
As you can see, purchasing in the cloud is an easy way that your law firm can streamline operations so that things run more smoothly and so that you can enjoy better profit margins by decreasing your monthly and yearly expenditures. You owe it to yourself to learn more about this great way to update your business with the newest developments in cloud-based purchasing software.
Purchasing in the cloud is hardly a new concept, but as the years go by more and more industries are beginning to take advantage of procure-to-pay services. The legal industry is one field that can greatly benefit from using cloud-based procurement software, but many legal practices have not yet updated their procedures to incorporate this novel way to keep track of inventory and place purchase orders as they are needed. The following information will explain how businesses involved in the legal industry can benefit from utilizing purchase to pay services.
Rather than entrusting the operations of a law practice to one individual, medium and large sized firms may create a procurement department so that there are several individuals available to research items and to purchase them as needed. However, even in that scenario, your purchasing department is only as good as the individual therein, and if they fail to perform their designated tasks appropriately, the work will fall on your shoulders once more and you may have to dig yourself out of a tight situation if you run out of key items that are essential for the operation of your legal practice. Purchase-to-pay services are a convenient option that provides law firms with the ability to entrust these duties to a dedicated entity that is designed specifically to complete the tasks that your business requires. Many legal business owners and attorneys overlook this concept because they incorrectly assume that it just won’t work for a legal practice, or because they think that it does not make sense financially to go outside of the company to obtain this type of services. That could not be further from the truth! Let us examine how procurement to pay services in the cloud can save you money:
1. Purchase-to-Pay Services Eliminate Your Need for a Procurement Department
If you are truly committed to streamlining your business and driving down costs so you can turn a larger profit, it may not seem like the best financial decision to go outside of the law firm in order to make your needed purchases. However, if you use procure to pay software, you will no longer need an entire procurement department and can instead have a specialist who is well trained in the software and who can also dedicate other hours on the clock to other job duties. You will no longer need to have individuals within a procurement department for communications tasks or administration duties, which as you know can save you a great deal of money. Plus you will not have to worry about inconsistencies within a procurement department due to the large number of individuals who are involved in each individual transaction or purchase order because you will only need to employ one or two individuals and provide them with the necessary training and education to enable them to use your new software effectively and efficiently. Just think of all of the other software programs that you will be able to cut out by adding one new type of software to your business?
It is easy to see how purchasing for both the service industry and the manufacturing industry overlap due to the way both industries overlap as a whole. That means that there are purchasing best practices that can make things easier for all involved in any such transactions. Many purchasing professionals incorrectly assume that there is an unbridgeable gap between the purchasing practices that are best for the manufacturing industry and those that are preferred for the service industry. Nothing could be farther from the truth. Cross-industry best practices do exist, and once a purchasing manager knows of them they can be used for great benefits. Here are some thoughts on how such best practices can be identified and utilized.
Organizations that specialize in manufacturing purchasing generally buy goods but leave the issue of purchasing services to other individuals. At many businesses, the purchasing department buys all of the products, but then each individual department makes its own purchases for services. This can have catastrophic consequences if it is not given the proper oversight. That is because not everyone employed at the business has the necessary training, experience and knowledge to be able to make the best purchasing decisions. That is why there is a Purchasing Department in the first place! Purchasers in the service industries sometimes do buy goods, but generally only when they are necessary to achieving the goal of selling services.
So how can the two industries come together? What are best practices that can be employed both by professionals in the service purchasing industry and professionals in the manufacturing purchasing industry? The first things to consider are the various similarities between the two industries. Professionals in both industries need to keep costs low, need to monitor the performance of suppliers and need to maintain good relationships with the suppliers they work with. That means that any practices that achieve those goals well for one side will likely work just as well for the other.
One manufacturing purchasing practice that is an excellent best practice for service industry purchasing as well is consignment. Certain types of items can be purchased on consignment rather than purchasing them brand new, which can save companies a tremendous amount of capital, especially when the company is making extremely large purchase orders. For example, if a large company is going to purchase office supplies or office furniture for a new location that is to be opened, choosing to purchase via consignment is an excellent idea whether the company is a manufacturing business or a service business.
Individuals who work as purchasers in the service industry can keep up to date with trends and best practices in the manufacturing industry by continuing their education. As in any professional industry, continuing education is essential to staying abreast of the new changes in the industry. Large businesses may even wish to consider building a library of purchasing books that is updated quarterly and then establishing a professional reading program that requires purchasing managers, buyers and purchasing agents to read at least three new purchasing books every year.
The term ‘purchasing manager’ can be difficult to define, because purchasing managers truly do wear multiple hats. The following is a brief overview of the various types of duties that are traditionally assigned to a purchasing manager, purchasing agent, buyer or purchasing director. Management duties, procurement duties, contractual duties and analytical duties are explored in length, to show how versatile an individual has to be to have a great level of success while employed in the industry.
At a large business or corporation, the Purchasing Department will generally have its own set of managers and directors who are tasked with directing the department and supervising the employees who work within the department. Management duties generally include creating and implementing policies, procedures and best practices; managing all resource needs and inventory controls; and planning for future projects and growth. There will usually be a separate position for a contract manager, but that individual will usually meet with the manager(s) and director(s) whenever it is necessary to negotiate contracts with supply companies.
Purchasing management also involves a great deal of interdepartmental cooperation, because the Purchasing Department is essential in all transactions involving the business and the supply companies that provide the necessary products and services for the business. It is extremely important that positive relationships with vendors are developed and nurtured in order to obtain the best prices and the best value. Purchasing management also needs to have a good idea of trends and new technological developments within the purchasing industry as a whole.
At a large business or corporation, the Purchasing Department typically contains two different types of purchasing agents: capital purchasing agents and non-capital purchasing agents. The non-capital agents need to know much about materials acquisition, and also have to have the necessary skill set to make professional judgments regarding bids, quotations and pricing. They also need to be able to select the right vendors to work with. Purchasing agents typically receive a request from a specific department and then must find the proper vendor, negotiate a fair price with the vendor, order the necessary goods or services (typically done via a Purchasing Information System), and then keep track of the order until it arrives. Purchasing agents also need to ensure that all purchase orders and supply requests that other departments present to them are in accordance with all relevant company policies.
Purchasing agents also have certain contractual duties. For example, entering into a contractual agreement with a supplier that is regularly used will generally produce the most favorable prices for essential equipment and supplies. The negotiation and contract drafting process usually is very time intensive and can be a bit tedious, and sometimes involves the assistance of an attorney. Some Purchasing Departments have a contract manager who is tasked with all contract negotiations between the company and its suppliers. The contract manager’s duties do not end once the contract is signed. The contract manager also has to keep an eye on the transactions to ensure that the supplier continues to comply with the terms of the contract.
Analytical duties are an important part of business within a Purchasing Department. Every Purchasing Department needs at a minimum one expert who can analyze all of the data for all transactions that take place on a daily, monthly, quarterly and yearly basis. That individual may also be tasked with creating metrics and scorecards for review. This individual will also work closely with other departments and point out any errors, discrepancies or concerns; and likely will help out in creating a budget and reviewing all business conducted by the Purchasing Department.
Those who are wishing to enter the job market as a purchasing agent or purchasing manager will be glad to know that the job outlook for purchasing agents is far more favorable than the national average, both when percentages and growth projections are examined. Recent projections indicate that the number of individuals employed as purchasing agents, purchasing managers and buyers will grow as much as seven percent in the upcoming eight years. This is due to the large number of companies that are scaling up the size of their existing purchasing departments as the local and national markets continue to give way to the rapidly expanding global marketplace.
While computers and the internet may have made it easier for purchasing departments to do their job by streamlining the actual purchasing process and creating easier access to product suppliers and manufacturers globally, the Internet has caused purchasing departments to need to take on additional responsibilities such as making computer-related purchases for equipment, hardware and software. In addition, international consumers are now able to utilize the Internet to buy goods that were previously unavailable to those within specific geographic locations. New EDI capabilities within wholesale, retail and manufacturing businesses are also responsible for the creation of additional jobs.
One purchasing industry that may not see as high growth and thus may not have as sunny of a job outlook is the retail purchasing industry. This is because of the effect of mergers and acquisitions. Even for the farm and agriculture product purchasing industries, while there may be more positions, technology will continue to create more automation for certain jobs and others will likely be outsourced, which will greatly limit job growth.
The industry does not look so bad for the purchasing industry, as detailed above. Projections indicate that there will be many more positions created for those who wish to work as a purchasing manager, purchasing agent or buyer. If you are already working within the industry, this means that you can enjoy a reasonable level of comfort regarding your job security that others in different industries may not be able to have.
If you are to be graduating college soon with a business degree, an economics degree or an engineering degree, you will be glad to know that job prospects look pretty good for those in your position. Here are a few statistics you can consider if you need more specific information regarding your likelihood of landing a job fresh out of college:
- It is projected that the number of jobs for purchasing agents, purchasing managers and buyers will rise by about 38,500 jobs to a grand total of 565,900 jobs in the industry by the year 2018.
- It is projected that the number of purchasing managers will rise by about 1,200 positions to a total of 71,400 jobs in the industry by the year 2018.
- Projections also indicate that positions for purchasing agents and buyers will rise by as much as 37,400 jobs to a total of 494,500 jobs in the industry by the year 2018.
A purchase manager is in individual who is tasked with purchasing services and goods on behalf of a company or an organization. Purchasing managers are also sometimes referred to as buyers or purchasers in other industries. Retail buyers and wholesale buyers are individuals who purchase goods for the purpose of reselling them. A product purchasing agent who works within the farm and agriculture industry buys items like grain, feed and other products that are grown naturally in order to resell them or to use them for industry-specific purposes. Purchasing managers who work within larger corporations and companies are usually tasked with many highly complex purchases and may therefore manage a team of junior purchasing agents.
If a purchasing specialist works within the retail industry or the wholesale industry and focuses on the purchase of finished goods for the purpose of selling them, such a purchasing specialist may be referred to as a buyer or a merchandise manager. In both the retail industry and the wholesale industry, merchandise managers are tasked with overseeing distribution, inventory control, and management of buyers. Retail buyers purchase some types of products from wholesale companies and other types of products are purchased straight from the manufacturer of certain products that are purchased for resale. The decision often is decided by the difference in price.
Purchasing managers need to have the necessary skill set to be able to select products that have high consumer demand and that will be consistent in their profitability. Wholesale buyers many also purchase products straight from the companies that manufacture them. Doing so may provide lower prices for purchasing managers so that they can resell the products to various other companies and organizations to make a profit.
The various duties delegated to a specific purchasing manager many vary greatly. Job duties may include: tracking inventory, calculating sales, checking the sales activities of competitors, monitoring overall economic conditions and monitoring consumer behavior trends. Buyers need to be able to intelligently interpret trends in the industry and sales data so that they can keep an inventory of products that will sell and also avoid expensive markdowns. If a purchasing manager is working for a larger corporation they typically focus on just a few product lines. On the other hand, a buyer for a smaller retail business purchases a wide range of products that are sold in physical stores.
When a purchasing manager is working for a governmental agency or a manufacturing company they may have one or more of several titles, including director, purchasing agent, manager, buyer or contract specialist. The terminology varies greatly by industry. A contract manager within a governmental agency or a manufacturing company may also be referred to as a supply manager due to their responsibility for managing and negotiating various supply contracts.
One of the most important considerations is that buyers need to be entirely confident in the specific timing and delivery of all services and products. Specific deadlines, quality specifications and cost restraints for purchases are generally laid out within the initial purchasing agreement.
Fiona Fraud has been working as a secretary for the School of Nursing at College Town University for nearly fifteen years. She has a reputation for being friendly and approachable, and is generally good at what she does. In addition to her secretarial responsibilities, Fiona is also tasked with arranging catering and entertainment for all of the events that the School of Nursing puts on each year when their newest group of graduates is matriculating. It is easier to let Fiona have full control of the graduation events, as to split up the task between several employees would make things more complicated for everyone involved. That is what Fiona has told her superiors, and they have no reason not to believe her or to think of her as a potential fraud risk – or so they think.
Fiona has credit accounts with several various vendors and party stores, and also has company credit cards with several local department stores and chain stores. Whenever invoices arrive from the vendors, party stores and department stores, Fiona hands the receipts over to the accounting and billing department, who then ensure that the amounts on the receipts match up to the amount that appears on the bill. So far there has never been a discrepancy between any of the bills and the receipts.
The problem is that no one is examining the receipts other than those in the accounting and billing department and those who work within that department do not know how much Fiona is supposed to be spending. Because the amounts that Fiona spends are about the same each year, the company has no clue that Fiona purchases her entire summer wardrobe on the company’s dime each year and that she also buys her Christmas presents for the next winter by using the company credit cards in the spring. The company does not realize the risk they are taking by entrusting Fiona with the cards and has no idea of the large scale fraud she has been perpetrating for over a decade.
The School of Nursing can prevent such fraud from occurring by establishing a purchase order system where a supervisor must be notified before Fiona goes on her yearly shopping trips to gather supplies for the graduation celebrations. Such a system can involve various components like requiring that Fiona fill out a preprinted purchase order slip, and then placing a call notifying the stores that Fiona travels to that there must be a preprinted purchase order or that the store will not receive the funds for the purchases.
If Fiona’s supervisors are in on the fraud (for example, Fiona may be shopping for them as well), things may become more complicated. Having more than one person sign off on any purchase order is a great way to further minimize risk and prevent Fiona from being able to perpetrate the fraud. The more safeguards are in place and the more people who are aware of each time Fiona will be using the company’s funds to pay for purchases the less likely it is that she will be able to continue her behavior undetected. Purchase order software has many safeguards built in that prevent someone like Fiona from perpetrating fraud upon your company.
The business world of today is wrought with perils that face business owners each day. Procurement fraud is an expensive problem that is costing businesses a great deal of money each fiscal year. This problem is not unique to large business and is also an issue for medium and small sized businesses. The good thing is that procurement fraud prevention is possible so long as business owners take certain steps. The following information is intended to explain a few measures that you can take to prevent procurement fraud. By conducting thorough background checks, establishing a whistleblower hotline and reinforcement from management that fraud will not be tolerated, your business is much less likely to have to deal with the repercussions of procurement fraud.
Background checks are so important for businesses. By taking steps to ensure that you are not hiring employees who have a criminal history or who have had issues involving fraud at their prior places of employment, you are much less likely to end up with employees that misuse corporate funds. If you do not have the resources to conduct background checks on your own (an issue that many smaller businesses may face), you can enlist the assistance of a professional by hiring a third party to come in and perform the background checks for you. Some background check services even enable you to send the names and personal information of potential employees to them via a secure channel so that you do not have to travel to their location or have them travel to yours in order to relay the information.
Establishing a whistleblower hotline is imperative for procurement fraud prevention. Additionally, in accordance with Sarbanes-Oxley, public companies are required to have their own anonymous whistleblower hotlines that their employees can call if they wish to report violations, accounting issues or auditing issues. Many midsize corporations are not required to follow the rule, but midsize companies can also benefit from a whistleblower hotline. Inside tips are one of the major ways that fraud is detected within corporations, and a large percentage of inside tips come via a whistleblower hotline. It is generally advisable for a third party to operate the whistleblower hotline, so that those who wish to submit a report are not afraid of internal backlash after they have submitted a complaint.
Reinforcement From Management That Fraud Will Not Be Tolerated
The most important thing for procurement fraud prevention is that management sends a strong message that fraud will not be tolerated. The message needs to come from the top. Senior management members need to ensure that those who work beneath them understand that incidents involving fraud will not be tolerated under any circumstances and that any such instances of fraud will be prosecuted to the fullest extent. Employees tend to follow the example that is set for them by members of middle management, and members of middle management tend to follow the example that is set by the members of upper management.
In today’s business world it is exceedingly important for business owners and operators to take steps towards procurement fraud prevention. Procurement fraud costs businesses millions of dollars every year, losses that can likely be avoided if certain measures are taken to assist in procurement fraud prevention. Whether a business is small, medium or large, procurement fraud may occur. The following information is designed to explain how you can take measures to prevent procurement fraud by taking steps to segregate duties, by having regular audits and by using purchasing controls to your advantage.
One way that managers and business owners can promote procurement fraud prevention is by segregating duties. In other words, in any business transaction, more than one individual should play a role. For example, the person who starts the purchase order process should not be the same person who will approve the payment. In addition, the person who takes the payment should not be the same person who handles bookkeeping matters.
Some smaller businesses fail to segregate duties for their employees, either because they are too short staffed to do so or because they are simply too short sighted to do so. Procurement fraud can start off on a very small scale, but the costs truly add up and if individuals see that they are getting away with it they may continue to do so for years and on a much larger scale.
Conduct Regular Audits
Segregating duties is an important first step, but it is not enough for thorough procurement fraud prevention. Conducting regular audits of all of the business’s purchasing practices is vital to preventing procurement fraud. Estimates by PricewaterhouseCoopers suggest that regular audits are responsible for the detection of almost 20 percent of all reported cases of fraud. Best practices for audits involve having some that occur on a regular schedule, and others that are ‘surprise’ audits so that those who may be engaged in procurement fraud will be caught off guard.
If your business is too small to be able to afford its own internal department tasked with doing audits, you can still conduct audits by hiring an outside consultant to come in to audit your business. Such an individual will typically examine contracts, financial documents and internal work processes. Any accounts that do not reconcile may be a red flag that indicates that procurement fraud may be occurring.
Install Purchasing Controls
Another excellent way that companies can engage in procurement fraud prevention is by having clear policies that delegate who is able to make purchases for the business and to have monetary thresholds for such purchases. It is also a good idea to keep a list of approved vendors and to encourage those employees who have purchasing power to keep their transactions between them and the list of approved vendors at all times. Corporate credit cards are another great idea, and there is software you can invest in that will help you to keep track of all expenses so you can see how money is being spent.