Purchasing is often a misunderstood and ignored area of a business. 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 this article, we’re going to look at the benefits of a great buying process, how to organise your buying process, company buying roles and evaluating your suppliers.
The benefits of a great buying process
Let’s explore some of the key benefits of revising your purchasing process:
#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 deterrent to those who would think of attempting fraud 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.
Organising your buying process
So, we've outlined the benefits of better organising your company’s buying process but haven't 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
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, delivering immediate results.
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 as 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.
#3: Cultivate supplier relationships
Businesses 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.
Company buying roles
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:
Evaluating your suppliers
The last point to touch on is how to evaluate suppliers. To do this well and objectively, you’ll need to review a number of factors based around your relationship with suppliers, including: