Best Practices to Improve Your Purchasing Department

The purchase department is responsible for acquiring goods and services. While that may seem simple enough, they actually have to perform a lot of tasks in between researching the best deals and making the purchase. If you’re an SMB, you know that your purchasing department does a lot, and it’s up to them to make smart purchasing decisions that impact the entire business.

Think of it like this, your purchasing department is responsible, at least in part, for the success of your business. You never want to waste money on purchasing products that you can get elsewhere, and it’s this department’s responsibility to make sure this doesn’t happen. 

Why Should You Improve Your Purchasing Department?

The answer to this question is simple: money. Improving this department and the way it functions can end up saving you tons of money each year. This includes saving on product costs and making your employees efficient enough that during their 8-hour workday, they are accomplishing more and making your business more profitable. 

How-to Improve Your Purchasing Department

When you’re first starting out, it can be difficult to nail down the purchasing process so that everyone in the department is on the same page. However, using these tips, you can improve your purchasing department and positively impact your entire business.

Step One: Improve Buying

Not every single person in the purchasing department needs to be responsible for calling suppliers and finding the best deals. Instead, you can put a team in place responsible for this task and allowing other members of the department to focus on the next stages.

You can also manage acquisitions systematically buy appointing one person to be in charge of calling suppliers and another for comparing prices. Whatever you choose to do, you must have a process that outlines the rules of buying so that everyone is doing it the same way and accomplishing each task.

Step 2: Analyze Spending

To analyze spending, you will need to conduct a spending analysis. This analysis is a detailed review of how you spend, and it’s critical to review in order to improve the procurement system. Make sure to analyze each and every factor that affects the price of products, such as:

• Raw material costs
• Inventory costs (including space requirements, heating, and insurance)
• Transportation expenses
• Supplier charges 
• Payment terms
• Shipping and handling costs

By improving this aspect of your purchasing department, you can save enough money for other areas of business, such as marketing, and hiring more employees as you grow.

Step 3: Analyze Demand

To analyze demand, you’ll need to find out your company’s essential needs when it comes to purchasing. Only focus on the critical purchasing decisions that you make. In order to do this, you may have to rewrite internal policies that include new criteria that determine which products and services are essential.

You’ll also need to focus on quantity. If you’re buying in bulk for a lower price, consider how much it costs you to store items that you may not need for months to come.

You may want to consider buying cheaper goods from overseas. However, purchasing from foreign suppliers comes with costs that may make it not worth it, such as higher shipping costs. Since there are time differences as well, you can also expect a delay, so it’s not recommended that you use these suppliers for items that you need immediately.

Step 4: Reduce Complexity

You can simply buy more standard parts or goods from suppliers instead of the more expensive customized items. If this is possible for your business, talk to your suppliers to make sure the purchases fit your needs and that you’re not overspending on customized items. If you have a good relationship with your supplier, they should have no problem helping you cut costs, because you’ll continue to make purchases that benefit both your business and theirs.

Step 5: Build Strategic Partnerships

Building partnerships is easy. However, building strategic partnerships may be difficult for some businesses. If you work with a lot of suppliers, you’ll want to start cutting down the list and try working with only a few.

If you work with fewer suppliers, you can save time and resources. You’ll also be able to build better relationships because you have fewer businesses to work with.

Your suppliers will feel honored as they have been chosen to be the few you do business with. This will help continue to build relationships so that you can expect more flexibility from them when it comes to your needs.

Always remember that your partnership should be mutually beneficial. You should be helping them succeed just as much as they are helping you. When you negotiate, keep in mind that you’ll have to help them see how both sides can benefit. This will help establish trust between you and them so that you can continue to be successful.

Step 6: Evaluate Suppliers

Once you have a smaller list of suppliers to work with, make sure to evaluate them regularly. You can establish your own system for assessing their performance, but make sure to include these factors:

• Flexibility
• Delivery time
• Costs
• Quality of service

Having a document available for your suppliers to review will also help them see where their performance can be improved, which can help your business and theirs as they have multiple buyers they deal with.

Final Step: Invest in Purchase Order Management Software

In the modern age, there are so many technological tools that can help your business grow and succeed. Your procurement process may have once been simple enough to warrant the use of a spreadsheet. However, as you grow, you’ll find more human errors and complications that make using manual processes impractical.

Many SMBs start out using QuickBooks to help them send purchase orders more quickly by creating a QuickBooks purchase order, which automatically fills in fields for you. While automation is key to success in the modern age, this program can’t do everything you need when it comes to procurement. Instead, users can integrate Bellwether with QuickBooks to:

• Enter invoices into ePMX
• Three-way Invoice Matching (PO, Receipt, and Invoice)
• Bridge invoices into QB for payment

Integrated procurement software will help you manage all of the day-to-day functions of the purchasing process so that you can save time and money while your employees focus on more important tasks, like building relationships with your suppliers.

For businesses who want to save significant time and money, robust purchase order software can help you manage vendor/ supplier relationships, find the best deals, and turn POs into invoices with a few clicks of the mouse. These technologies completely revolutionize the way you’ll handle purchasing, making everything from acquisitions to approval processes much more simple.

Bellwether is the leading purchase order software trusted by thousands of businesses with plans for purchasing departments of all sizes. Get your demo today.