Procure to Pay
How E-Procurement can reduce Purchase Price Variance

Any organization or enterprise needs to purchase products and services to support their operations and or maintain their business. Companies and government agencies alike need to purchase these commodities at the lowest price possible to generate a profit.

Purchase price variance is the effect of not having up to date contract pricing information when items are purchased. The actual cost and the price being displayed at time the requester selects the item are different. Unfortunately this effect can cause wasted time and effort if reconciliation is necessary.

End users will go the path of least resistance when trying to find an item they are looking for usually an old paper catalog. These prices may have changed several times and of course are wrong when the actual Purchase Order is sent.

E-procurement can have huge positive effect on this issue as the end user now goes to a single portal to review and select from all online pricing contracts established by the purchasing department. These online contracts can now be adjusted by the supplier or the purchasing department at will when pricing is re-bid or new contracts are established.
Because the requester is no longer searching old catalogs, the purchase price variance problem will begin to be less of an issue as the “procure to pay” process is more efficient and allows better contract management. With E-procurement tools, the variance between actual cost and purchase price is now minimized because better information is available to all outlying users.

In summary, an e-procurement application can move your organization light years ahead in terms operational efficiency when it comes to purchasing commodities and services.  Some of these e-procurement tools will even integrate with your financial ERP system to allow seamless information exchange to maximize budget management. Your procurement process becomes a part of your daily business that no longer causes the organization pain when it comes to variance in purchase price.

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