The definitive procurement system buyer’s guide (2024).

How do you evaluate your organization’s procurement strategies and systems? If your assessment points to “needs improvement,” you’re not alone. In fact, according to Amazon’s 2024 State of Procurement Data Report, 95% of decision-makers feel that their procurement solutions could be optimized.

As market dynamics evolve and technology advances, more and more companies are looking to upgrade their legacy procurement software. A modern procurement system that fits your business needs can streamline operations, improve vendor relationships, ensure compliance, and manage risks more effectively.

To help you navigate the challenges of procurement, we’ve created a guide that outlines the different types of procurement systems, the benefits of a modern solution, and the key features you should consider.

Whether you’re an agile startup or a multi-national corporation, this guide will help you find a procurement solution that aligns with your business objectives.

Benefits of procurement systems for businesses.

Not sure if a procurement system is worth the investment? Here’s what a modern procurement solution can do for your business.

Cost savings through streamlined processes.

Automated procurement processes significantly reduce the amount of manual time and labor required for order processing, invoice matching, payment execution, and more.

This translates into direct cost savings and optimized operational budgets. Organizations can leverage this technology to free up both funds and personnel for more strategic business initiatives.

Increased efficiency in procurement operations.

Automating procurement tasks also streamlines the procurement lifecycle from requisition to payment, maximizing efficiency.

Modern procurement software allows for faster approval workflows, real-time tracking of purchase orders, powerful inventory management, and efficient management of procurement documents.

This leads to a reduction in procurement cycle times and enables procurement professionals to focus on strategic rather than transactional tasks.

Enhanced supplier management and relationship building.

Effective vendor management — from onboarding to payments — is key to supply chain resilience and procurement efficiency.

Procurement software provides comprehensive tools for managing contracts, evaluating vendor performance, and strategically building supplier relationships. This enables businesses to set supplier benchmarks, negotiate from a position of strength, and foster long-term, mutually beneficial partnerships.

Improved compliance and risk mitigation in procurement processes.

Procurement platforms play a critical role in ensuring compliance with both internal policies and external regulations. They provide a structured framework that helps organizations better manage contracts, adhere to procurement policies, and enforce compliance checks.

In addition, modern procurement systems also offer risk management capabilities, identifying potential supply chain disruptions and supplier issues, and allowing businesses to mitigate risks proactively.

Types of procurement systems.

There are several types of procurement platforms that businesses can choose from, including:

On-premises procurement systems.

On-premises procurement management systems are hosted within an organization’s IT infrastructure, offering complete control over the procurement software and data.

These systems require a significant initial investment in hardware and software, along with ongoing maintenance costs.

On-premises systems are best suited for organizations that prioritize data control and have the capacity to manage IT infrastructure in-house.

Cloud-based procurement systems.

Cloud-based procurement management software is hosted on the vendor’s servers, so users access it via the internet. These systems offer more flexibility, scalability, and cost efficiency, as they eliminate the need for large, upfront investments in IT infrastructure.

Cloud-based systems also enable remote access, which may be a priority for organizations with distributed or remote teams.

Open-source procurement systems.

Open-source procurement solutions provide a customizable, cost-effective option for organizations with the technical expertise to tailor the software to their specific needs.

These systems are built on source code that is freely available for modification and enhancement. However, open-source systems require in-depth knowledge and experience to set up, customize, and maintain. So it’s important to ensure that you have the right in-house IT professionals who can handle the complexity.

Integrated procurement suites.

Integrated procurement suites are comprehensive solutions that encompass all aspects of the procurement process, from sourcing and contracting to invoicing and payment.

These suites are designed to provide a seamless flow of information across procurement functions for more efficient data management and process integration. Integrated suites are ideal for organizations seeking an all-in-one procurement solution.

Specialized procurement systems.

Specialized procurement software focuses on a specific area of procurement, such as supplier management, e-sourcing, or contract management. These systems offer deep functionality and advanced features tailored to specific procurement activities.

Organizations that are mostly happy with their procurement operations and only need to improve a few key areas can save on costs by strengthening current systems with specialized platforms.

E-procurement systems.

E-procurement systems automate the purchase of goods and services over the internet, streamlining procurement and eliminating numerous manual processes. These systems enable electronic transactions, competitive bidding, and online supplier catalogs, enhancing procurement efficiency and transparency.

An e-procurement system is an excellent choice for any sized business that wants to modernize its procurement operations and foster digital transformation.

Core modules for an ideal procurement system.

Most modern procurement solutions are made up of modules, with each module focusing on a specific aspect of procurement. Not only does this make the platform more user friendly and easier to navigate but it also allows organizations to save on costs by only purchasing the modules that they need. However, at the same time, you want to avoid being too lean, and missing out on key tools.

An ideal procurement management system will include these four modules:

Guided procurement.

Guided procurement modules help users navigate the entire procurement process, ensuring compliance with procurement policies. These modules offer interactive buying guides and catalogs, organization-wide standards for purchase requests, and configurable approval workflows. This simplifies purchase requisitions and approvals and streamlines the procurement process for all parties involved.

AP automation.

Accounts payable (AP) automation modules streamline invoice processing and payment execution by automating manual tasks like invoice matching, approval workflows, and payment processing. This significantly reduces the risk of manual errors and ensures financial accuracy.

Expense management.

Expense management modules provide tools for tracking and controlling company spending. They help businesses enforce expense policies, streamline the submission and approval of expense reports, and monitor spending patterns. As a result, organizations have better control over their budgets and can make more informed financial planning decisions.

Corporate cards.

Corporate card modules facilitate real-time tracking and management of business credit card transactions. Through automated expense reconciliation, organizations can ensure transaction accuracy and adherence to corporate spending policies.

In addition, these modules offer greater spend visibility, which can help businesses control spending and save on costs.

Key features to look for in procurement systems.

Now, let’s discuss the primary features you should look for in a procurement management system. To maximize efficiency and reduce costs, make sure your procurement platform offers the following tools.

Accounting automation.

Accounting automation seamlessly integrates procurement activities with your accounting system. With this feature, all procurement-related financial data, such as purchase orders and invoices, will automatically transfer directly into the accounting ledger.

AP automation helps eliminate manual data entry errors and provides real-time financial reporting and improved accuracy for more effective budgeting and financial planning.

Advanced approvals and workflows.

Advanced approval workflows strengthen procurement control and oversight. Organizations can configure customized approval hierarchies and workflows that enforce internal control structures and policies.

They can also streamline and automate the purchase requisition approval process, ensuring review and approval by appropriate personnel based on pre-defined criteria like purchase value or category.

Real-time reporting.

Real-time reporting capabilities enable informed decision-making based on current and accurate procurement data. Customizable dashboards and reports offer deep visibility into key performance metrics, such as spend analysis, vendor performance, and contract compliance, delivering actionable insights.

With these tools, procurement professionals can monitor trends, identify opportunities for cost savings, and assess the impact of procurement activities on the organization’s overall performance.

Automatic audit trail.

An automatic audit trail ensures procurement transparency, accountability, and compliance. This feature automatically records detailed logs of all procurement transactions and activities, including requisitions, approvals, purchase orders, and invoice processing.

Organizations gain a comprehensive record of procurement actions to make internal and external audits a breeze — all while keeping compliant with regulations.

Receipt management.

Receipt management features help to simplify invoice and receipt tracking, recording, and reconciliation, which is vital for comparing received goods and services against purchase orders and invoices.

With effective receipt management tools, businesses can avoid overpayments, payment discrepancies, fraud, and contract violations.

Mobile app.

A procurement system that offers a mobile app increases flexibility and caters to remote or distributed teams. Users can submit, review, and approve requisitions, access procurement information, and communicate with suppliers anywhere, anytime, preventing bottlenecks and delays.

Multi-subsidiary support.

Organizations with multiple locations or business units can especially benefit from multi-subsidiary support.

This feature creates a centralized database for procurement data and operations, while accommodating the specific needs and policies of different subsidiaries. Businesses can enforce consistent procurement practices throughout the organization, increase visibility into subsidiary spending, and consolidate data for strategic analysis and decision-making.

Security and fraud detection.

Security and fraud detection tools protect sensitive transactional and procurement data from unauthorized access and ensure compliance with data protection regulations. These features typically include advanced encryption, multi-factor authentication, role-based access controls, and real-time monitoring of transactions for suspicious behavior.

User management.

User management functions give businesses granular control over access rights and permissions. Administrators can define roles and permissions based on job functions, giving users appropriate access to features and data.

Effective user management prevents unauthorized access to sensitive information, enhances system security, and ensures that only authorized personnel can make and approve purchases.

Spend visibility.

Spend visibility provides a comprehensive overview of organizational spending. This tool allows procurement teams to analyze spending patterns, identify cost-saving opportunities, and make strategic decisions based on detailed spend analyses. Spend visibility is essential for managing budgets, negotiating with suppliers, and optimizing procurement strategies.