It's fair to say that B2B buying (aka purchasing) is one of the most misunderstood and frequently ignored areas. As a result, it's become one of the weakest links in the commercial chain, with many businesses ending up with highly inefficient processes.
In its most basic form, B2B buying is the ability to balance quantity, quality, and pricing in a way that meets your company needs without exceeding your budget.
But before we can set out to improve or even design the buying process, we first have to understand how it all works . As mentioned above, there are several different stages that make up the overall buying process:
• Step #1: Companies begin by identifying a need that drives the need for a purchase
• Step #2: An order must be placed and it must go through the appropriate levels of approval
• Step #3: When the order is sent and accepted by the supplier, it becomes a contractual agreement outlining terms and conditions
• Step #4: Once the items/services are delivered, they need to be checked to make sure they meet the buyer’s requirements
• Step #5: If all necessary requirements are met, the supplier can generate and send their invoice
• Step #6: When received, the supplier invoice is cross-checked against the (purchase) order and the delivery
• Step #7: If the invoice match the delivery and the order, payment can be made to the supplier
With all the above in mind, you’re probably wondering what the benefit of revising your current process would be in regards to your revenue? That is the right question to ask.
Let’s explore some of the key benefits such an action can deliver:
#1: An optimised process increases efficiency
Improving your buying process is likely to be highly beneficial to your business, saving you time and money whilst maximising cash flow. With easy and quick access to (purchase) orders in real time, budgeting and ensuring accountability will be much easier and will generate significant savings.
#2: It will reduce the risk of fraud
Fraud is a real danger to all businesses, big and small. Instances of both internal and external fraud is decidedly higher in the absence of a tracked buying process. A quick and simple way to remedy this is by ensuring an easily accessible, digital record is created for each and every transaction. This can be used to quickly identify any fraudulent activities, and also function as a fabulous deterrent to those who would think of attempting such criminal activity in the first place.
#3: It provides easy access to vital information
Better organising your company’s buying process not only improves accountability and efficiency, but also increases visibility, making it far easier to identify potential areas of improvement. This means, for example, that once your business has easily accessible digital records for a sustained period of time, it can record everything from supplier behaviour to buying trends per region or department so that you are able to better plan budgets for future orders and grow your profitability.
#4: It ensures better budget control
A huge challenge for many businesses is ensuring budget control, and a lot of small and medium companies struggle to identify whether they have sufficient funds available prior to making a purchase. With a well organised and real time tracked buying process, this is no longer a problem. Improved financial management and planning mean better pricing, planning, and control over cash flow.
So, we've outlined the benefits of better organising your company’s buying process, but haven't actually explained how to do it. In this section, we'll cover our top tips for transforming your buying process and boosting your bottom line:
#1: Utilise technology
Our first suggestion has got to be: automating your buying process.
The reason it's our very first tip is because it's sure to deliver the most immediate results. From time savings and process streamlining to reducing business risks and administration costs, automating your process through technology is a win-win move.
Transferring all your procure-to-pay (P2P) actions to a digitised, AI powered system will providing businesses like yours with speedier processing, an improved ability to track orders, and a reduction in labour-intensive investment.
#2: Empowering your teams
By giving your teams access to necessary information such a price lists, details of approved suppliers, budget levels in real time, one system for all buying actions and more, you will empower them to become more productive and able to deploy resources on growth, not admin.
#3: Cultivate supplier relationships
Businesses like yours can also benefit from improving their supplier relationships, especially if the focus is placed on increasing value. We've found that most suppliers will happily renegotiate their contractual terms if they know that doing so will help them to secure further business from your company in the future. A healthy relationship like this has the additional advantage of making it easier to navigate issues such as damaged goods, delayed shipments and price increases without conflict.
#4: Create an operating model
Identifying the strengths of your staff will enable you to best assign both commercial and technical tasks across the company. A performance evaluation to assess skills as well as regular reviews will make sure each member of staff is working in the correct role and therefore performing to the best of their abilities.
It may also be an idea to have all team members involved in company buying present at crucial meetings. This will enable them to keep them to keep on top of sales data and customer satisfaction levels so that they can apply this information to improve performance.
Whether or not your company is at a level of growth where a buying department is feasible or not, exploring the key responsibilities of staff handling purchasing for the company is very important.
The top responsibilities for the buying team would cover the following:
• Coordinating purchasing needs across all departments
• Carrying out market research to find the best suppliers
• Identifying suppliers
• Assessing and evaluating suppliers
• Negotiating both prices and terms & conditions
• Choosing the appropriate suppliers
• Handling contracts
• Issuing (purchase) orders
• Exploring and eliminating any supply problems
• Owning the complete purchase process
To be able to implement any kind of organised buying process however, a guide needs to be produced and shared with all team members and should outline information such as:
• Who their primary buying authority is (who needs to approve their orders)
• What items they can purchase given their role/seniority/department etc.
• The spend limit and authorised budget
• The top requirements used to select suppliers
• The types of contracts that can be entered into with suppliers
• The position of the business in case of conflicts
• The company’s position on accepting gifts
• The type of information regarded by the company as confidential
• The correct procedure for handling legal matters and/or questions
The last point to touch on is how to evaluate business suppliers – a process which must take place prior to the placing of orders. Aside identifying the best suppliers, you must also determine whether or not they will deliver a value equal to the costs.
This means assessing supplier performance and taking the following points into account:
• Average delivery times
• The quality of items
• The completeness of orders received
• Customer service levels
• Financial robustness
• Prior performance
• Ability to meet the product or service requirements
At InstaSupply, we score all suppliers on the platform based on the above criteria for all our customers. This enables them to improve the efficiency of their buying process and enhance overall performance and profitability.