Purchasing is a key budget item. Likewise, budget controls should be a key element in your purchasing system. Integrate budget controls into your purchasing process with software that can enforce preset rules. These rules often establish limits for spend by employee and department. You can also set spending caps for specific vendors and categories. MINISO USA
, a Japan-based designer brand, struggled to know how much of the overall budget their departments were spending since there was no spend visibility. Through a single purchasing platform, the company set budget limits for each of their stores that were all easily visible in the purchasing dashboard.
As a result, the operations team can now see the amounts being spent by department, control the overall budget, and have a solid answer for accounting every month.
Whether it’s incorrect quantities, wrong part numbers, duplicate orders, or some other error, accidental orders
remain a common purchasing mistake. It may sound odd that a software platform can prevent typos in the purchasing process or eliminate duplicate magazine subscriptions for a single waiting room, but it can.
Any worthwhile purchasing process will automate checks and balances. You should be able to set up hierarchies of purchasing approvals. Let’s say you want your IT department to approve every department-related purchase. Employees should shop for every IT purchase, from mobile apps to new computers, through a single catalog.
Then, each purchase request should be funneled to the IT department for approval. Maybe you want to set up different thresholds within this IT approval process (e.g., an IT manager can approve purchases under $100, whereas IT purchases $100+ require approval from the VP of IT). Your system should allow this as well.
That same system should also allow you to audit purchases to check for errors, such as duplicate orders or overcharging. If your platform does nothing but eliminate accidental orders, you’ll have bested one of the most common culprits of wasted money in purchasing. Be Relax
, a global spa with 40 locations across 11 countries, adopted a software platform to bring control to a chaotic purchasing process. Before implementing the platform, managers bought supplies as needed and used company credit cards for purchases above a certain dollar amount. The company couldn’t enforce budgets, approve or deny purchase requests, or implement spending policies per location. Now, the platform enforces programmatic rules to ensure that each location stays within budget, purchases from approved vendors, and doesn’t place orders for unapproved items. It’s now impossible to make a non-compliant purchase.
A BCG study
found that nine out of the top 20 Fortune 500 companies listed digital technologies as a critical element of their purchasing process. That’s because digital purchasing systems eliminate many problems that can arise from manual processes.
Manual processes are error-prone, time-consuming, and difficult to repeat. If you want to scale your business, your purchasing process must scale, too.
Digital purchasing platforms eliminate problems caused by manual purchasing processes. Human error is replaced with rules-based, automated systems. Time spent calling vendors, tracking down approvers, and gathering receipts is unnecessary when all purchasing is consolidated in a single, end-to-end system. And instead of following a different ordering procedure for every unique supplier, a single platform means a single, repeatable purchasing process. Zenergy
, a cycling workout company, was looking to scale its business, and manual processes were holding it back. When it ditched pen-and-paper purchasing and switched to a software-based solution, Zenergy reduced its purchasing time from 8 hours to 20 minutes.
Zenergy founder and CEO Nick Staples recalls
: “It was nearly impossible to keep up with the growth we [had] planned, and the status quo wasn’t feasible.” By removing manual processes, Zenergy was able to expand from 4 locations to 19—an impossibility without an effective purchasing platform.
Could purchasing be your secret weapon?
For businesses reopening in the wake of COVID-19, a purchasing platform should be a top priority. [solidcore]
is a health and wellness company that recently scaled from 25 to 50 locations. To double its footprint, regional manager Artemis Benedetti recalled that a streamlined purchasing platform was necessary
“[Purchasing] was a mess. We had multiple user accounts on Amazon and also used Wayfair and many third party vendors for wipes, cubbies, sweatbags, etc. We were logging into accounts one at a time, shared logins, and had issues with passwords. . . . Without . . . consolidated ordering we wouldn’t have been able to open the number of studios we have today.”
Stop thinking of purchasing as an unwelcome overhead expense, and adopt a platform that will propel your business to the next level.
If you're ready to plug your leaky cash flow with a new purchasing platform, sign up for a Negotiatus demo