Not every business has a procurement policy and in some cases it’s actually damaging not to have this document as public funding can stipulate that the requirements for funding requires you to have one. The reason being that it ensures transparency and that when you buy goods and services, you have a policy to follow ensuring you get consistent value for money.

Even if you aren’t applying for public funding, it’s still a good idea to have a procurement policy in place for you and your staff to follow. It sets the guidelines in clear terms for everyone to follow and consistently obtain value from selected partners.

The majority of B2B suppliers will look to get a favourable order on a regular basis. To do so, you’ll find bulk or combined services are offered in order to maximise billings for the supplier. This doesn’t always equate to value to you though as you could agree to bulk price discounts only to find you aren’t using what you pay for, which can increase your holding/storage costs.

For technical services for your IT department, or tech equipment you’re buying or leasing, do you have enough knowledge to know what you’re agreeing to?

For more expensive and what could be considered specialist services, you don’t really want to be relying on a supplier you haven’t done business with before. You’d be going on the recommendations of others at best.

A more informative approach would be to hire a knowledge partner or outsource to a specialist partner with the knowledge to listen to what you need, provide you with an assessment and engage with suppliers on your behalf. If you’re not confident in approaching certain sectors, it may be worth including in your policy what you’ll do in the event you need a specialist service.

As this will be a procurement policy for the long term, you want to make it as evergreen as possible. Plan it with growth in mind by including members of your staff who will be authorised to engage with suppliers for any goods and services their department requires.

It may also be worth having someone senior in your company named as a procurement officer who signs off on purchases before any other member of staff can proceed with ordering goods and services, or at least allocate budget amounts per department with anything exceeding the department budget requiring authorisation.

It’s much easier to award contracts to the right supplier when you set out clear terms of what you’re looking for from them. As an example, you could choose to look for the following criteria for suppliers to meet:

In cases when there’s high competition, using a selection criteria as a checklist will help you narrow down your potential pool of candidates to progress into discussion with.

Procuring business supplies could probably be done more cost efficiently than it already is. It’s the fastest way to increase profits – by reducing your expenses. Even what’s considered low value contracts; can over time, add up to a wholesome amount.

To really take control of your costs, a strong focus on your procurement process is vital.

One of a few factors considered by anything for your business is cost. Typically, you can expect cheap to last a lot less time than more expensive products. When you buy something, you want it to last. It’s why there is such a thing as depreciation accounting.

Invest in the best and you won’t need to spend more capital on replacements. This applies equally to supplies that affect what your customers receive, which extends to every area of your business including your telecoms, as you need the service to continue working for customers to reach your support team.

Every operational expense you have requires a focus on the total cost of ownership at the initial discussions before contracting, rather than agreeing to the cheapest proposal put forward.

The cost of over stocking can be exponential. In particular if you’re paying for square metres in storage costs using warehouses. Those costs can become extremely pricey if you’re ordering too much and holding.

This is particularly problematic when your supplier agreement is based on a minimum order quantity. That can see you get a good unit price but on bulk order pricing only, which results in you carrying an over-stock and therefore the savings are rendered useless as they’re just diverted elsewhere.

To manage your supplies and suppliers more efficiently, plan your orders according to what your customer demand is.

John Elkington coined the phrase ‘Triple Bottom Line’ back in 1994. It’s an accounting framework referred to as TBL or 3BL. The framework has three parts to it.

In other words, green procurement/sustainable procurement are nothing new. It’s been around for decades but essentially it’s the same as the TBL approach which has helped many a business prosper.

These days, it’s not really an option whether you go green or not. Consumers are looking to buy green products and suppliers are building in green initiatives into their operations. In some cases of RFPs, it’s stated outright that all proposals are to include a copy of the green initiative the company uses.

When you source strategically, you aren’t focusing on any one area, such as price alone. The needs of the customer, your employees, your business, and anyone that can be affected by quality or even by a social impact such as higher waste due to poor quality is considered. It can cost more upfront using strategic sourcing, but in the long-term, there’s extreme value to be had, including increased customer longevity due to the higher customer satisfaction, which will eventually bring your cost per customer acquisition down.

Every supplier you work with brings a new business relationship with it. You need to manage that, but what some companies get wrong is assuming that supplier management is about taking control over the service being delivered.

It’s not.

It’s about two-way communication being used to align the supplier and buyer together so that they work collaboratively to bring better value, which eventually trickles down the supply chain to benefit your customers, again, lowering your cost of customer acquisition.

The more you focus on bringing costs down in-house, improve your working relationships with suppliers and focus on value acquisition, the more profits can be reaped, whilst simultaneously increasing customer satisfaction.  

Cloud accounting has revolutionised the financial sector, with some major players breaking through and creating real world solutions that just plain work for simplifying the accounting process.

Where most fall short is with expense reporting, because it’s like all the major platforms need integrated with add-ons/additional apps to complete the package.

Part of managing your business requires you or your finance department to stay on top of all the expenses. That’s a tedious and time consuming chore in itself.

In our opinion, Expensify is revolutionising how expense reports are automated, created, shared and submitted.

Other options for tracking mileage is to use the GPS setting, which will also record the data of where you or your staff travelled to and from to warrant the expense, or users can input the odometer data to file mileage expenses.

All of that done via a mobile app!

If there’s one thing going to get on your staff’s nerves, it’s waiting too long to get paid back what they are owed. What Expensify have done is included an option to automatically reimburse staff based on amounts predetermined by you.

What you can do with this is set a maximum limit that you’re happy to automatically reimburse, provided that your policy has been met, which you can set to include a receipt, ensuring that the expense report submitted to you has the necessary attachments for you to attach to your own reports and reclaim the expenses through your business accounts.

With any number of employees submitting receipts for expenses, it creates a monster workload to review expense reports and then account for them by filing in the appropriate categories. Then depending on your company policy, you may have chain of command where the reports need approved and then sent up the chain of command for final approval and payment processing to reimburse the expenses to employees.

The Expensify app has a user friendly interface so anyone within your company will be able to use it. Only those authorised can manage the workflow though.

You can use this to create policies at management level, which will then instruct users what they need to do before they are able to file their expense reports; no more back and forth with incomplete reports. If it’s not got the data you need, it can’t be submitted for approval.

You can require your staff to tag expenses to an appropriate category, such as travel, meals, accommodation, mileage or entertainment. For each expense filed, you’d be best to set the policy to only allow reports to be submitted with a receipt attached.

Employees will be able to submit their reports with the population of a few fields and attaching the receipt and then just clicking submit. When the report is submitted, it sends an email to whoever is set up to manage the expenses letting them know there’s a new expense report awaiting their review.

Depending on how your policies are set up, the person reviewing the expense report submission can approve and reimburse or they can forward it further up the chain of command for someone senior to authorise or deny it.

The workflow can be as simple as authorising one person to sign off on legitimate expenses, or it could be used at enterprise level, passing expense reports from department to department until it receives the final seal of approval.

Payments can be reimbursed automatically and you can set filters to only pay amounts under the value you specify, ensuring that by enabling auto reimbursement that you aren’t going to run into cash flow problems.

Expensify uses the slogan, “expense reports that doesn’t suck” and it’s actually true of the product they have. What can suck about getting your staff more motivated by giving them what their owed faster and thereby never leaving them out of pocket for longer than necessary?

Besides, your finance people need this because it’s automation of a tedious task and will work to increase productivity and boost staff motivation.

When there’s something you can automate, that’s what to do. Now you can automate your expense report creation, submissions and automate the reimbursements of legitimate business expenses to your employees, whilst simultaneously ensuring that you have all the required information for your own accounting records.

We think it’s neat!

It doesn’t matter what size of company you have, you will have suppliers, overheads and bills coming in that need paying. You’re also going to have contractual obligations, whether or not you have an internal legal team and/or procurement team at your disposal.

No matter the size of your operation, you must control your overheads otherwise they’ll rip your organisation apart.

Late payments, supplier difficulties, delayed deliveries, expired contracts, rates increases etc. The list goes on.

What tends to happen in business though is the early stage start-ups focus on strategic growth without concern for the consequences.

Growth will happen when you put the efforts in and focus on strategic growth tactics, but when you do find your organisation growing, so too will your obligations, probably your staff and most certainly your overheads.

The more obligations your business has, the more reliant you will become on your suppliers. Without careful management, you risk your business being placed in a vulnerable position should your supplier find themselves with a competitive advantage because of your inability to control your procurement processes.

You absolutely must have processes in place, policies to control them and strategic systems to manage them both. Without those in place, your overheads will increase – substantially if you’re not careful.

If you’re focusing on growth right now, get yourself ahead by preparing for when you reach that stage. Visualise your business a year from now, two years from now, five years from now and you’ll likely see yourself going places.

Perhaps you’ll have a team of 50 employees or you could expand your operations by opening on more sites, hiring more people to aid in your expansion, in which case, prepare for that time.

If you don’t have the capital to invest in your own procurement staff to get things under control, outsource your outsourcing. The reason being that whilst the cost-savings will take longer to experience, you won’t be wasting cash flow in the short-term by spending on growth strategies to see the fruits of your labour wasted. You will retain more of your profits by having proficient supplier management processes in place, preventing things getting out of control.

All too often, what happens is companies experience expansion, then realise too late that they’re spending way more than they’re comfortable with and then have to bring in experts in procurement to clear up the mess made by inefficient sourcing and supplier management.

When companies look to bring about cost efficiency, procurement experts are trusted to deliver on savings. To do that, it takes strategic sourcing, contract reviews, a huge advisory role and often a complete transformation of sourcing due to non-existent procurement policies.

As such, the savings commitment you will be looking for, will take longer to deliver because more tactical groundwork will need to be done before savings can be realised.

For any business focusing on growth strategies right now, get prepared for the increased obligations that accompany that by putting in place efficient procurement policies, and processes to manage the increase of suppliers and the relationships that come with them.

The more proactive you are with your procurement; the more savings you’ll lock-in before you start wasting it on inefficient sourcing methods. 

Image courtesy of norcazacademy.co.za.