6 Common Procurement Mistakes and How to Solve Them

An ideal procurement process is designed for speed, efficiency, and accuracy. But, as a company grows, the processes that used to work for 10, 20, or 30 people will start to falter, and procurement challenges can arise.

Problems in procurement ranging from a human error to the tracking of agreements can negatively affect a company’s purchasing abilities. It’s important to catch these challenges as soon as they arise because, over time, they can go on to severely impact efficiency, output, and even a company’s bottom line.

Thankfully, procurement challenges are easy to solve when you have the right tools and know-how on hand.

Here are six common procurement mistakes and simple ways to solve them.

1. Purchasing Duplicate or Excess Items by Mistake

Did you order the same item twice? Did each product come from two different vendors, or did someone accidentally order the wrong quantity? 

Purchasing duplicate or excess items by mistake usually stems from not having an effective purchasing approval process. When purchasing requests flow through an approval sequence, it provides greater visibility and control to exactly what is being purchased across the company. 

How to solve this procurement challenge

In the short-term, you can usually rectify this mistake by immediately following up with the supplier, especially if you have a good relationship with the vendor in question.

But in order to safeguard your company from this procurement problem, in the long run, you’ll need to adopt a better purchasing protocol that allows for approval from more than one person.

Being strategic about approval routing (i.e. adding the right people to approval sequences by location, department or account code) is one way you can ensure better visibility and insights into the procurement process. This leads to smarter and less wasteful purchasing practices.

E-procurement software that lets you set up customizable approvals can also help you avoid this problem altogether.

2. Employees Aren’t Following a Purchasing Protocol

Are you frustrated when you find out a team member has expensed supplies that were already in the office? 

Most companies try and follow a centralized purchasing model. This is when companies funnel all of their purchasing needs through a select number of “purchasing” people — individuals in your organization with the authority to make purchases on behalf of the company.

However, it’s more common that companies fall into decentralized purchasing mode, because their employees won’t (or can’t) follow an effective purchasing protocol.

Decentralized purchasing usually happens when an employee doesn’t have visibility or access to a purchasing protocol that enables them to get what they need, fast. In these instances, employees end up purchasing items themselves (and then expensing them) or convincing someone to loan them a company credit card for the purchase. 

Startups and software companies commonly fall under the decentralized purchasing model which, without a defined process, can result in surprise invoices, rogue spending, going over budgets and accounting headaches for internal finance and procurement teams.

 

How to solve this procurement challenge

If you’re finding that your company is in a “decentralized purchasing” mode, it’s time to examine and refine your purchasing protocol. Aim to introduce a company-wide purchasing process that allows all employees to request and get what they need in a timely manner while complying with purchasing requirements.

Your company’s request workflow should be accessible to all employees, simple to fill in, and allow for fast approvals. If these things aren’t in place, employees will continue to find ways to go around your centralized purchasing process, and you’ll be stuck with a team that doesn’t follow purchasing protocol.

A purchasing solution like Procurify allows everyone to request items with ease and speeds up the approval process with a mobile app. Check out Procurify’s request to approve workflows to see how this works.

3. Employees Aren’t Purchasing from Preferred or Approved Vendors

Buying from approved suppliers can help a company in more ways than one. Procurement’s decisions on which vendors to work with are directly linked to a company’s risk management strategy. 

Companies can ask more from approved vendors who they’ve worked with over time. And approved suppliers are more likely to accommodate a company’s needs, provide better terms and pricing, and become important business partners in the long run.

So, when your employees aren’t purchasing from approved vendors, business opportunities are missed and risk is introduced.

We typically find that not using approved vendors is a procurement problem faced by fast-growing companies and larger companies.

Multiple people in large organizations need visibility into approved vendors. So when an organization grows in size and spans multiple locations, alignment on how to raise a purchase order and which vendors to work with can get lost in the fray, and employees start working with non-approved vendors out of need.

How to solve this procurement challenge

You can fix this problem by introducing a centralized vendor management catalog that’s easily accessible to those who need it. A visible, easy-to-access vendor catalog allows for aligned purchasing, saved time, and negotiating power.

4. Company Purchasing is Exceeding Budgets (Without Anybody Realizing It)

The problem with most company budgets is that they’re only accurate after the end of the month, once the finance team has reconciled the books for month-end based on all paid invoices. 

This delay in up-to-date, accurate financials is the most common cause when company purchasing is regularly exceeding spending budgets.

When employees don’t have visibility into real-time budgets that include approved (but not yet purchased or paid) orders, they’ll make purchases that blow the budget because they see (or simply assume) that there’s plenty of money in the budget to spare.

 

How to solve this procurement challenge

If your procurement and purchasing transactions are exceeding company spending budgets on the regular, it probably isn’t due to reckless spending. It’s more likely that there is a communication and visibility gap between what’s actually left in your budget and what employees are seeing in your budget.

Because this problem could send your company financials into the red, you’ll want to address this procurement problem as soon as possible. 

Procurement and purchasing software can give your team real-time visibility into budgets and get company spending under control.

Instead of only seeing the impact of paid-for items, tools like Procurify’s purchasing pipeline can give your company real-time budget tracking by factoring your company’s billed, purchased, approved, and pending requests into your budget. By accounting for ALL of your company’s existing and upcoming purchases, your employees get real-time visibility into how much they can actually spend before they make a purchase.

5. Paying for Damaged Goods or Things that Never Arrived

Did your items arrive damaged or just get lost in the mail? Depending on who paid for freight, you must notify the courier and the supplier immediately to start negotiations and determine who is responsible for compensating your company. 

Bear in mind, if the items were damaged during transport and your company paid for the freight, the responsibility no longer rests with your supplier; your courier is liable in this situation.

You also have the option to refuse the delivery or accept the damaged items. Just make sure you record the condition of the shipment and document other important details (e.g. if only half of the order arrived, or if the order didn’t arrive at all).

How to solve this procurement challenge

Because several parties come into play here, solving this problem and ensuring that your company isn’t held liable for the purchase comes down to proper record keeping and follow up.

Make sure you keep invoices, receipts, and other relevant records of the issue on hand, especially if you need to use them to prove that your received goods were indeed damaged or lost in transit. 

With procurement software like Procurify, you can add receiving information to the purchasing workflow and match it to the original purchasing documents. This means the finance team then knows to only pay for goods if they have arrived in full, and the original purchaser can follow up with the vendor with full knowledge of what arrived. 

6. Rushed, Panicked, and Last-Minute Purchases

Rushed, last-minute purchasing is a common procurement challenge for fast-growing companies like startups.

When a company launches or experiences rapid growth, decision-makers usually want to ensure everything is ordered and in place all at once. Hitting the ground running often means ignoring the cautionary steps in a procurement process. 

While rapid growth is usually a good sign for companies, making emotional decisions and rushing to fix something will often result in procurement mistakes that can have severe consequences in the long run. For example, if purchasing gets out of control, cash flow issues can arise when company revenue can’t keep up for the unexpected spike in spending.

How to fix this procurement challenge

The fact is, fast-growing companies are the ones who need purchasing and spending controls the most. When a few bad purchasing decisions could severely impact company cash flow, approval-based purchasing workflows can make all the difference in a company’s future.

A platform like Procurify can help you regain control of all your company’s purchasing and procurement, without slowing anything down. Because the app works on desktop and mobile devices, your team can request the things they need and have full visibility into your company’s procurement and purchasing requirements at all times.

If you’re wondering how to solve common procurement challenges in your organization, learn how Procurify can help.

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