Overview
Untracked approvals, incomplete supplier records, and outdated questionnaires can pose a risk to procurement. This can also cause difficulties for internal audit and compliance teams. They have to reconstruct months of activities to prove that the right processes were followed.
It is, therefore, better to treat procurement audit as a continuous process. When organizations consider daily purchasing activities, they can easily manage procurement compliance. In this scenario, audit evidence can be generated naturally as work happens in a continuous environment.
This blog discusses the importance of building an audit-ready, continuous procurement process. We’ll also go through the role of procurement compliance software in keeping the process audit-ready.
Let’s start with the issues related to traditional procurement compliance.
Traditional Procurement Compliance and Audit Pressure
Many organizations still rely on traditional procurement policies. It is, however, challenging for such organizations to prove that those policies were followed consistently. A procurement team may have documents related to approval thresholds, supplier qualification requirements, etc.
Yet the supporting evidence is available across various sources like spreadsheets, ERP records, and supplier portals. This results in a lack of continuity in evidence availability. Continuous compliance using procurement management software can change this model completely. Let’s dig deeper.
Continuous Compliance Approach and Comparison
Continuous compliance is about embedding such activities into procurement workflows directly and monitoring them as transactions occur. It requires procurement processes to capture evidence at the point where organizations make decisions. Here is an example of this scenario.
When an employee submits a purchase requisition, the system records all the information, such as who requested it and whether the transaction followed the rules. When a supplier is onboarded, required documentation and questionnaires can become part of the workflow rather than a separate exercise.
When supplier performance or ESG information is collected, that information remains associated with the record instead of becoming another spreadsheet. This creates audit-ready procurement without requiring procurement teams to stop their regular work for compliance preparation.
Embedded procurement controls enable the approval workflow to manage transactions as per the defined rules. The resulting procurement approval trail records the action instead of relying on employees. This creates a more consistent relationship between policy and execution.
Here is a quick table showing the difference between the traditional procurement approach and the continuous compliance approach.
Traditional Approach | Continuous Compliance Approach |
Policies reviewed periodically | Controls embedded into workflows |
Evidence collected before an audit | Evidence generated during daily activity |
Approval evidence spread across emails | Centralized approval history |
Supplier documents stored in multiple locations | Supplier records linked to required compliance information |
Manual audit preparation | Ongoing audit readiness |
Exceptions discovered during reviews | Exceptions surfaced during procurement activity |
ESG information collected separately | ESG information incorporated into supplier processes |
The core objective of a continuous compliance approach is to eliminate the hindrances to demonstrating what happened.
How to Build Audit-Ready Procurement Process
A continuous compliance model is practical, and companies can consider several connected areas to build it.
1. Capture Every Approval
Approvals are among the most important components of procurement lifecycles. A purchase may require approval based on the product’s value, category, cost, and supplier. A centralized workflow creates an approval history for each relevant transaction. This record has the following information.
Requestor
Approver
Approval level
Date & time
Purchase amount
Approval or rejection decision
Subsequent workflow actions
This can create a consistent audit trail and make it easier for auditing. It also supports segregation of duties among people involved in each transaction.
2. Make Onboarding a Part of Compliance
Supplier risk begins before the first purchase. An organization may need to assess a supplier’s legal documentation, certifications, financial information, risk factors, or ESG practices before doing business with them.
When organizations handle supplier onboarding through disconnected forms and spreadsheets, maintenance of records becomes difficult. A structured workflow is, therefore, necessary for suppliers to submit defined information in advance. This supports supplier compliance by making requirements trackable.
Making compliance a part of supplier onboarding can bring a fundamental shift from retrospective collection to continuous evidence.
3. Compliance as a Continuous Process
Supplier qualifications should not be performed just once because supplier risks, business requirements, etc. might change, and certifications will eventually expire. This is why supplier compliance should remain a continuous process rather than one-time onboarding. It is possible to achieve such a goal through advanced procurement systems.
A continuous process provides procurement and compliance professionals with a better basis for determining supplier risk, hence, for evidence and actions to take.
4. Connect Spend Compliance with Procurement
Control over organizational spending is essential for addressing compliance. Spending outside the approved supplier list, contracts, categories, and procedures poses compliance-related risks to the organization. Spend compliance enables organizations to monitor the procurement and approval process clearly.
Such compliance helps auditors audit in a more focused way since they do not need to look through all transactions in search of possible exceptions. They can go through review system-generated documentation. In turn, this helps them focus on defined exceptions or high-risk transactions. This way, auditors get better evidence for making a decision.
5. Bring ESG Procurement into Workflow
ESG (Environmental, Social, and Governance) requirements play a crucial role in supplier evaluation and procurement decision-making. It is, however, fair to say that ESG information can become difficult to audit when companies collect it separately from the supplier and sourcing process.
ESG procurement works more effectively when relevant information alongside supplier onboarding, sourcing, and performance is available. For example, an organization may collect information related to environmental certifications, ethical sourcing, and other supplier-specific criteria.
The exact requirements, however, will vary by organization and industry.
Procurement compliance software can be useful in building an audit-ready process. Let’s go through a procurement audit checklist and the role of advanced, dedicated software.
Audit Checklist and Role of Procurement Software
A procurement audit checklist is beneficial because it defines what auditors and compliance teams need to examine. Each item in the checklist can be mapped to a process, control, or system-generated evidence.
Audit Area | Continuous Evidence |
Purchase approvals | Approval history and timestamps |
Supplier qualification | Supplier onboarding records |
Required documentation | Supplier document status |
Policy compliance | Workflow and exception records |
Spend controls | Transaction and supplier data |
Segregation of duties | User and approval records |
ESG requirements | Supplier ESG information |
Contract compliance | Contract and purchasing records |
Supplier risk | Risk assessments and review history |
Procurement compliance software can connect all these together-policy, approval, workflow, supplier documentation, and the evidence. It streamlines the cycle, making compliance an inherent property of the procurement process.
Role of Procure Suite in Continuous Compliance
Procure Suite, an advanced procurement process management software, can help with continuous compliance by connecting process workflows to every aspect. It does not matter whether it is a supplier process or sourcing; Procure Suite keeps the documentation and helps organizations comply.
Procure Suite helps procurement teams create structured workflows to ensure that the evidence is created at every step of the lifecycle. The record of approval helps procurement teams create a procurement approval trail.
Centralized procurement information can help internal audit and compliance teams have a more feasible foundation for reviewing activity.
Concluding Remarks
Compliance should be an ongoing process in the procurement lifecycle. When approvals, supplier onboarding, documentation, ESG information, and purchasing activities are monitored every day, organizations can create a continuous evidence trail. This can make an audit-ready procurement or continuous compliance model different from a traditional process.
Continuous compliance is essential for improving procurement risk management. Organizations can use advanced enterprise procurement software to ensure audit readiness and avoid a periodic scramble in the process.
