Keeping your costs under control is one of the fundamental keys to ensuring your business stays afloat and manages to grow, which is why you need to keep a tight ship when it comes to purchasing decisions.
One of the best ways of achieving that aim is to set up a formal purchasing program so that you have a clearly defined structure to help you keep your costs under control.
Here is a look at the various components that combine to create a purchasing program that works for your business. There is an overview of why you need to implement a program in the first place, tips on how to create a workable system and how to derive the most benefit from your purchasing program.
Keeping your eye on the ball
If your business is growing and all of your team are flat out responding to customer demands and fulfilling order requests, it can be very easy to order the goods you need on a reactive rather than a proactive basis.
This means you can end up placing ad hoc orders without having any real control over how much the business is spending, whether you are paying the right price to your suppliers, and what impact this strategy is having on your bottom line.
This is why it is so important to keep a close eye on your expenditure and maintain a strong level of control over your purchasing decisions and it is why it pays to take the time to create a purchasing program which will work as a framework that gives you control over costs.
Timing and pricing
If your business is in the market for a new piece of equipment and you are visiting a site like www.reliantfinishingsystems.com/powder-coating-equipment/powder-coating-ovens/ for further details and prices, there are several rules of engagement that should always apply.
Whether you are ordering a high-value item of equipment or regular supplies for the business, wise purchasing decisions are centered around the timing of the order you place and how much you are going to be paying.
If you are putting together a formal purchasing policy it will provide the discipline needed to tick all the right boxes every time you are going to be spending company money.
The key to purchasing wisely is to buy the right quality and the correct quantity of what you need, at the most competitive price available at the right time.
This purchasing process is a simple checklist that works by forcing you to answer all of those vital questions before you place the order.
Getting the best deal
If you can plan ahead and work out how much stock you need, this allows you the opportunity to negotiate a better deal with your suppliers.
There are often deeper discounts available for bulk orders and you have more negotiating strength when you can work out how much stock you need and when you need it by.
You can approach various suppliers and try to drive the price down if you place a larger order right now. Provided your cash flow is robust enough to order stock a few months in advance that you know you will need, it should ensure you get a good deal and it means your ordering process is a lot more streamlined and cost-effective than just ordering on an ad hoc basis.
Create an ordering system
It is often a good idea to delegate the responsibility of ordering to one specific person, who becomes the purchasing manager.
Whether it is you that takes that role or someone else, the main advantage remains the same, which is to having a person solely responsible for purchasing decisions, giving you greater control.
Once you have that sorted you can then set about creating an ordering system.
This is simply a format that the purchasing manager follows from receiving an internal request for goods, through to finding the right supplier and placing the order, and updating your inventory.
Having a purchasing manager also allows you the chance to build a better relationship with suppliers when there is one point of contact. It also means that you have created a system and a chain of command that should give you greater stock control and just as importantly, tighter control over your cash flow.
You don’t have to be a large business to benefit from creating a more formal purchasing program as it is a process that can be adapted to your own needs and business structure, but you will soon notice that it is a strategy that works.
Finley James works as a retail buyer and shares some of his top tips for businesses regarding suppliers, inventory and the technology to make this easier.