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Alongside wages, procurement is the biggest expense most businesses face.
Reviewing your process is a big undertaking, but with even bigger savings at stake, it’s worth investing the time and effort. But where do you start?
To help you on your way, we’ve listed some actionable steps you can take for better procurement.
For more ways to level up your company, check out our article on financial transformation.
1. Establish visibility
Did you know that on average businesses have no or limited visibility for around 20 percent their expenditure?
Businesses purchase a lot of low-value goods and services to facilitate day-to-day operations. But all too often, these items are considered too small to be managed by a procurement specialist.
This means thousands, or maybe even tens of thousands of pounds, are being spent without anyone really knowing how or where. The potential for savings in how your company procures low-value goods and services could be huge.
But of course, to realise those savings, you need visibility.
To learn more about the importance of visibility, check out our article on how to tackle expense fraud in your business.
2. Set procurement goals
Before creating a procurement strategy, you need to pick your objectives. Cost savings might be the first thing that comes to mind, but good procurement looks different to every business.
For some, the priority will be cost savings but for others it might be improved cash flow, or compliance, improving the quality of goods and services, or finding more efficient ways to utilise resources. So, decide what good procurement looks like to you and set your goals accordingly.
3. Adopt a cloud-based procurement tool
If you’re still operating with manual, paper-based systems then your ability to trace expenditure in your business will be limited.
Embracing digital tools is the way forward. Using a cloud-based platform will allow you to see where cash is being spent, while automation will help you streamline your processes.
If you’re in the market for an all-encompassing enterprise solution, tools such as Kissflow, Prokuria, and Claritum centralise all procurement processes, with features like supplier management, purchasing and orders, invoice approvals, and analytics.
These platforms, when used correctly by professionals, will transform procurement in your company. However, implementing them without the proper infrastructure isn’t recommended.
If you’re looking for an easy to execute tool to increase transparency in your procurement process, then expense management platforms are the way to go. They’re agile and low cost, making them easy to implement.
For example, accountabl gives you complete real-time visibility of company spending with expense cards, and complete control with approvals and pre-set limits. Which is vital as employee expenses, unless properly managed, can seriously impact cash flow and profit for SMEs.
4. Supplier engagement and communication
Suppliers are crucial to ongoing operations, particularly when they provide raw materials or keep critical infrastructure running.
Close collaboration is key to effective and efficient supplier relations. Building trust through two-way communication should form the basis of the ongoing relationship.
Other ways to manage supplier relations for maximal value include:
- Treating suppliers as strategic partners
- Looking for win-wins
- Creating a framework for problem resolution
- Monitoring supplier performance with specific key performance indicators and helping them to achieve them.
5. Use data to optimise your inventory
Getting your stocking levels wrong can damage your bottom-line, so proper inventory management is vital.
Many small businesses assess their inventory by manual stocktaking, but this is inefficient and disruptive, especially as the business grows in size and complexity.
That is why many CFOs are starting to use data-driven insights to uncover how best to manage their stock.
Utilising real-time data and analytics, along with mobile technology such as barcode scanning, makes organising, managing, and forecast inventory levels much more accurate and efficient.
Systems like Netsuite, IBM Supply Chain, and Cloud Commerce Pro help you to optimise inventory management, and to protect your bottom-line.
6. Contract management automation
The best time to start negotiating savings for products and services is before both parties sign a contract. But often companies fail to do this, usually because they lack a coherent contract management process. Leading to issues like a lack of consistency across contracts, cumbersome processing, and supply chain continuity problems.
Digitalising the process with platforms such as Contract Safe, Avetta, or Hot Docs, can revolutionise your procurement process.
They help you to extract more value from your contracts, provide a central, cloud-based repository for all your documents, send automatic alerts on contract milestones, renewals, and the chances of renegotiation, and monitor the performance of your suppliers.
7. Shift your focus to TCO – total cost of ownership
TCO goes beyond the cost of buying a product or service to considering the total, lifetime cost of owning it.
Establishing it and the value the purchase brings should be a standard feature of your procurement process, as it helps you to determine the impact it will have on your business. Plus, it makes for more informed purchase decisions and aids negotiation.
Work with your potential supplier to establish the TCO to see how they work and how transparent they are.
8. Regular reviews, continual improvement
Auditing your procurement management processes will give you more insight into where your company’s money is going. However, the journey doesn’t end after reviewing processes once. It’s important to instil a culture of continuous improvement.
The digital world is always evolving with new products and services emerging every day. So, it’s important to keep an eye out for new solutions. As part of this continuous review process, you and your business will become better at identifying and implementing tools that boost efficiency, save time and money, and ultimately boost your bottom-line.
To start your journey to better procurement, try accountabl for 30-days free.
