One of your biggest business expenditures will be buying the goods and services needed for the company to operate. Whether these are raw materials, wholesale goods, or cloud services, you need someone to control this procurement process.

Managing procurement spending is vital to keeping the business cost-effective and competitive in the market. If you’re overspending on materials or paying over the odds to your delivery partner, this can start to significantly impact your bottom line.

How, then, do you get on top of this procurement spending and start becoming more efficient?

5 key ways to enhance your procurement spending

Managing cash flow is all about balancing your cash inflows against your cash outflows. If your procurement costs are high, it will be very difficult to maintain a positive cash position, so reducing your costs and agreeing to better terms is all part of the procurement process.

In short, the less cash is burnt up in procurement costs, the better the company’s overall financial position will be. So, how do you go about reducing these costs?

Here are 5 key ideas to focus on:

Reduce your base cost per item – where you’re buying in goods, one of the most important costs to consider is your basic cost per unit. This price is probably the most difficult to alter, but there are ways to reduce it. Get quotes from various suppliers and look for the supplier that offers the best mix of value, quality and reliability, at an economical price. Negotiating with competing suppliers can help to knock the price down further, allowing you cut that initial base cost and reduce your everyday spending.

Cut your logistics and delivery costs – when dealing with physical goods, these items must be transported to your premises and/or delivered to your end customers. These transport costs are unavoidable, but can be reduced as part of the procurement process. Look for well-priced carriers and logistics providers and see if their base prices can be negotiated. Ask about discounts for faster payment, or options for joining a preferred customer program to help reduce prices. If you can offer a long-term relationship with the carrier, this can result in greater trust and openness over time, and more potential for negotiating price reductions.

Nurture the best supplier relationships – the foundation for good procurement management is building solid relationships with your suppliers. The more stable your supply chain is, and the deeper the trust between you and your supplier partners, the easier it will be to negotiate good terms, beneficial prices and flexible contracts. Nurture these relationships, pay on time and set a good reputation with these suppliers. When renegotiating prices to cut costs, this will be far easier to do with solid foundations supporting your business relationship.

Reduce tax and duty costs – depending on which goods and services you’re selling, there will be certain territory-specific taxes and duties to pay when buying and transporting goods. If you engage a tax adviser with industry-specific knowledge, they’ll be able to check that you’re paying the right taxes on your goods/services and that they’re correctly categorised for taxes like VAT or GST. Working with a customs broker can also help to organise and streamline the customs process, and ensure that you’re paying the correct duty on all your imports and exports.

Using tech to get in control of procurement – in the modern digital world, there are plenty of cloud-based procurement solutions to help enhance the management of your processes. Having all your procurement information in one place, accessible 24/7 in the cloud, has enormous advantages. You can streamline your internal processes, manage risk more effectively and regularly check your spending against budgets, cash flow and expected expenditure. Where there are significant variances or instances of overspending, you can quickly take action to reduce the problem by putting caps on spending or switching to new suppliers that offer a more cost-effective option.

Talk to us about your procurement management.

When you’re in control of your procurement spending, that’s good news for your cash flow, your end profits, and the long-term health of your supplier relationships.

Managing your budgets, expenditures, and overall spending is a big part of the procurement process, and we can help guide you in the right direction in this area.

Come and talk to us about your current procurement issues to see where we can lend a hand.