Procurement and Audit – The missing link?

When you’re spending a lot of money, let’s say, a new kitchen, how much time do you spend agreeing the specification and the price? A lot, and you probably spend a lot of time making sure that the work has been done properly and that you have been charged the right amount. You care…it’s your money!

But when your business is a buyer of services, how much time do you invest defining requirements, tendering, assessing, negotiating and agreeing precise scope and contract terms, all for something more complex? Probably more. And then we receipt, quality control, certify…

So how easy is it to be sure that the price is right? Especially if you don’t know anything about your supplier’s systems and processes? Yet some businesses spend little time on contract compliance when work is ongoing. And rights of audit are often just an afterthought when something goes wrong. Purchase orders are raised and as long as the invoicing is below the value of the purchase order, it is assumed to be accurate.

So what kind of behaviours does this promote? Collaboration. Accountability, continuous improvement? Some may argue that all the hard work in negotiating the terms is reflected in the commitment in the Purchase Order. And some companies manage this process very well.

But let’s go back to the behaviours which we want from our suppliers…collaboration, accountability and continuous improvement. If the majority of the engagement is at the front end, if we invested all that time then, then why not invest some time during and after, learning the lessons, improving performance?

Time and time again, even a little investment would make a difference. Because, when something does go wrong, the sooner you know about it, the better. And the longer it goes on without being addressed, the more time and effort to fix it. And let’s not forget the lost opportunity. Because most contracts are renewed. And that opportunity to understand, collaborate, feedback is often lost.

Contract compliance and audit can work side by side to improve performance. Is your strategy the right one?

If you have any queries, please do not hesitate to contact Ian McPherson or your usual AAB contact.