Over the years, due to increased competition, the role of procurement and procurement compliance in the organizational ecosystem has evolved. Initially, companies employed a passive procurement approach, which was primarily a clerical function supporting the technical aspects of a company. This evolved into independent procurement, which had more focus on improving efficiency, then supportive procurement, which is a strategic facilitator for business.
For maximum efficiency, which translates to a competitive advantage, companies are now using integrative procurement. In this case, procurement does not only facilitate the firm’s strategy but is integrated within it. As such, the procurement arm of the organization is in constant communication with other departments.
However, for integrative procurement to deliver on its promise of efficient business operations, organizations must practice procurement compliance actively. As the name suggests, procurement compliance means adhering regulatory requirements as well as internal procurement procedures.
Procurement compliance requirements vary from one industry and organization to the next, depending on the level of regulation for the goods or services in question. Nonetheless, regardless of the level of regulation, procurement compliance is non-negotiable as it not only boosts efficiency but protects your organization from procurement fraud.
How to Ensure Compliance in Procurement?
Though there are no standard procurement practices, taking the following measures will help ensure your organization is compliant with procurement guidelines.
1. Vet Suppliers and Potential Partners Before Closing Any Deals
Procurement processes involve interactions with suppliers and partners. Therefore, even as you take stringent measures to ensure your employees follow compliance requirements, you should also insist on the same high standards from partners and suppliers.
Though auditing or investigating your suppliers is challenging, you can insert compliance clauses in every contract. The risk of non-compliance with regulations is significantly reduced when all parties involved in contracts take necessary precautions.
2. Conduct Audits Regularly
In procurement, there are many potential areas of weakness that can be exposed. As such, it is vital to conduct regular audits in the procurement department to identify them and ensure none has been used. Such inspections will help you:
- Discourage any attempts at procurement fraud
- Check that quality control procedures are being followed and procured goods are as stipulated in the contract
In addition to internal audits, you should also make sure that vendors conduct similar checks.
3. Review Partnerships With Suppliers
Suppliers are crucial to the continuity of operations and the overall success of a company. Therefore, along with ensuring that they do not expose you to noncompliance risks, it is also important that they are reliable. This can be achieved by constantly revising the verification process with every supplier. By doing so, your interactions with suppliers will be transparent at all times, which helps foster healthy long term relationships.
This will also help you identify unreliable suppliers before they expose your business to any risks.
4. Have Standardized Procurement Processes
Any laxity in ensuring procurement compliance can be detrimental to the growth of the company. However, the procurement process is very dynamic and has numerous gaps. One of the best ways to make it more manageable and reducing the chances of exposure is by standardizing the process.
A standardized procurement process is easier to analyze and identify areas where there are deviations.
Technology and Procurement
In recent years, the role of technology in business processes has been rising fast. This is the same case with the procurement process. By leveraging procurement tools, you can not only ensure procurement compliance but make the process easier.
ISS Group offers seamless Business Process Improvement (BPI) solutions to organizations using the QAD ERP system to ensure continuity, efficiency and accuracy from remote locations. Our solutions significantly enhance QAD by automating business processes utilizing innovative ‘Data-Driven’ Approval Routing and Workflow technology.
Get in touch with us today and see how you can automate processes such as Purchase Requisitions/Order Creation, Accounts Payable, Unplanned Issues and Receipts, New Item Creation, Sales Order Creation, Capex Budget Requests, Journal Entries, Customer Credit Limit Maintenance, HR & Benefit Requests….. and much more.
