It’s important to have a purchasing process in place, and it’s even more essential to have a smoothly running purchasing process. If acquiring new stock, fulfilling multiple orders, and working with multiple vendors is a regular part of your business then you need to make sure you are not falling short.
When it comes to choosing a system, there are a lot of choices:
- Business Management software
- Procurement software
- Enterprise Resource Planning systems
- Module software
- Accounting software
- Paper based system?
5 considerations to think about for your purchasing process:
1. Your system does not show when you have made financial commitments
If your company uses purchase orders then it is important that sent purchase orders are reflected in your company’s budgets. A purchase order that is accepted by your vendor or supplier is your stated obligation that you will be accountable to pay in the future. Even if you have not yet received a purchase invoice your accountant will thank you for having a properly managed purchase order system. Your company will have an easier time managing its budgets if financial commitments are properly accounted for before it comes time to producing your year end or quarterly accounts.
2. No stock visibility
Failing to have a purchasing system that can tell you what has been ordered, is pending, has been received and how it affects your budgets will only cause inefficiency. If your team does not have instant visibility of ordered stock, received stock or incoming stock it is difficult to properly manage inventory levels.
Without a proper purchasing process, spend visibility can mean you are flying blind. You might end up doubling up on an order someone else already made, or ordering something that is in the process of being shipped without realizing you are over-purchasing because your system does not give the visibility you need. Making sure you have a purchasing system that provides instant access to stock levels will help prevent ordering more of an item than your company actually needs.
4. Receiving incorrectly
At some companies the person who orders goods is not always the person who is responsible for accepting and receiving them. If orders are placed without anyway to track them, items can often be received incorrectly. Orders can be incomplete and vendors usually have policies that require them to be informed within a certain time constraint of any mistakes to a shipment. Having a purchasing process that tracks and notifies relevant people is very useful in this situation. The receiver can merely bring up what was ordered and verify the shipment log matches the order; If it doesn’t then steps can be officially taken to rectify the situation.
5. Ignoring your purchase history
If your company is constantly ordering goods, it can be valuable to monitor your purchase history. Your company will develop relationships with vendors and you can notice trends based on your purchasing statistics. Purchasing processes that have the ability to track can establish which vendors are gems and which ones the company should move away from. This can save your company money and major headaches by consolidating orders through vendors with great track records and finding alternatives to ones that fail to meet expectations.
Every company has processes that can be improved. George Box, the industrial statistician, noted “every model is wrong, but some are useful.” It might take some work to get your processes to become assets for your company but ignoring their flaws will not fix anything.
Updated May 26, 2014