Do you purchase goods and services for your business only when the need arises? If your purchasing is increasing, maybe it's time to look at your requirements and implement a plan to ensure you're spending wisely.
You could save money and improve your cash flow by strategizing when to buy and from whom. Planning ahead prevent running low on supplies and inventory that let you operate. A strategy will help you achieve the balance between missing out on the best prices and having a surplus of supplies that take up space.
A purchasing strategy might allow you to buy a higher volume of goods and services, which often leads to a discount. The effort put into planning can have other advantages, too:
- Being loyal to certain suppliers can help you negotiate discounts.
- Combining orders can reduce shipping and administration costs.
- Choosing standard over customized parts or goods is less expensive.
- Working with green suppliers may result in credits or incentives if you recycle. Green purchasing may further your business' mission.
Start your purchasing process by choosing one person or team to be responsible for this task. Training, especially in areas such as negotiating skills, can be helpful. Defining the purchaser's role is a good place to start. Purchasing involves:
- Putting orders together and staying within budget
- Finding suppliers and placing orders
- Confirming that the goods received are in good condition
- Checking the invoice and forwarding it to the person responsible for payment
You can then fine-tune your purchasing strategy:
- Examine your expenses to trim costs related to shipping, taxes, tariffs, and storage.
- Try to make substitutions. For example, instead of buying new equipment, you may be able to buy used or refurbished.
- Consider implementing a purchasing decision chart to function as a checklist if you deal with a wide range of dollar values and approvals; a purchase requisition form to track purchases (description of goods and services, required quantity, price, delivery and payment details); and/or software.
Learn more from our section on supply chain management, and, in particular, on finding and managing suppliers. Or search Canadian Company Capabilities, a free database of Canadian companies, to find potential suppliers for your needs.