Top 6 Best Practices for Effective Purchasing Management

Without strong controls over how much each area spends and what the company buys, many problems can arise. Spending that isn’t covered by a contract gets out of hand. Businesses take on more IT risk than they need to. The people in charge of procurement can’t see what they’re buying in real time or from above. The best finance and procurement teams use good buying management techniques to deal with these problems. Find out what purchasing management is and the six best ways to buy things that will save you money and lower your risk.

What does purchase management mean?

Purchasing management is the job of keeping an eye on and managing everything that has to do with getting goods and services for your business.

It includes everything that has to do with buying, such as:

• Rules and policies for buying
• Workflows for approval
• Making purchase orders and purchase requisitions and getting them approved
• Comparing prices and studying the market
• Finding and checking out new sources in a strategic way
• Processes for managing and reducing risk
• Talking about contracts
• Making sure that quality standards and contracts are followed

Focusing on building and keeping ties with vendors is an especially important part of a good purchasing and procurement process.

Better ties with your suppliers make your business more stable in the long term, help you get better terms, and lower some types of vendor risk, such as market risk.

Why structured purchase management is important?

Better protection from risk

A well-thought-out purchasing plan helps buying teams protect their companies from the many risks that come with working with outside suppliers.

This plan starts with the decision step and goes on through the whole buying process.

By giving buying agents a way to evaluate each vendor, supplier selection policies help them make objective decisions about which suppliers are the most risky.

Contract compliance and performance review meetings are an important part of purchasing management because they make sure that vendors follow the terms of the deal and give the purchasing department a chance to tell vendors what they need to do to improve.

Better tracking of spending

Procurement leaders can see more clearly how the company is spending its money by setting up a strict system for purchasing management.

One of the best ways to handle purchasing is to use specialised software to keep an eye on and control how much the company spends.

In real time, these powerful platforms show how much money is being spent by department, area, and employee. The best ones also let you guess how much money will be spent in the next fiscal period.

Better handling of relationships with vendors

One important goal of purchasing management is to improve the partnership between your business and its suppliers.

It’s not enough to just become friendly with the account manager at your supplier’s business.

Figuring out how the partnership could be good for both sides is important for making sure that the deal helps both businesses reach their goals.

A good process for managing relationships with vendors should include regular check-in meetings (every three months is a good time to do this) to talk about how the suppliers are doing and find ways to make things better.

Less expensive goods

A structured purchasing management method lowers costs in many ways, such as by comparing prices, setting rules for risk management, and focusing on building long-term strategic relationships.

Powerful software for managing purchases gives you information on price comparisons and tips for spending that overlaps, which helps you get better deals and look for ways to combine SaaS licences.

Putting an emphasis on ties with suppliers means that contracts last longer, which lowers the costs of finding and starting up new suppliers.

When you use risk management procedures and purchasing workflows, it’s less likely that your company will be sued or have to pay to fix security holes caused by a vendor’s bad data management policies.

Six of the best ways to handle purchases

Use these best techniques to make the process of managing purchases easier.

1. Write down and hand out rules for buying things

To manage purchases well, you must first be clear on the rules and steps that each of your buying managers needs to follow.

These rules should make it clear:

• Who has the power to decide what to buy?
• When a manager or top leader has to sign off on a purchase
• How people should ask for permission and what details they need to give so the person in charge can make an informed choice
• How to find sellers who are already on the list of “approved to buy from”
• Who is in charge of managing ties with vendors once they’re set up?

Once your purchasing policies are clear, make sure they are generally known and easy for everyone who needs them to find.

It is best to use an office wiki tool like Notion or Slite for this, but you can also use a document storage service like Box or Google Drive. With Vendr, you can also centralise control of SaaS to make everything run more smoothly.

2. Speed up the review process by automating tasks.

According to the rules you made in the previous step, you should get approval for purchases at certain times and in certain ways.

Set up automated approval workflows in your purchasing management system to speed up the process of making decisions and getting things signed off on.

In this case, the approval workflow method might look like this:

1. The area head or purchasing manager sends in a purchase request with all the necessary paperwork to back it up.
2. An automated message tells the right top leader that a purchase request is ready to be looked over.
3. They will get another automated warning if they don’t do it by a certain date.
4. The boss looks over the request and either says yes or no, or sends it back with a question for more information.
5. Based on the answer from the senior leader, the department head or purchasing manager gets the right automated message.

This kind of automated approval workflow gets rid of the need for follow-up talks like “Hey, did you see my email about the new CRM purchase?” and speeds up the buying process.

3. Look for places where software licences combine.

Buying SaaS is often decentralised, which means that department heads buy software without consulting anyone else.

This often causes software licences to cross, which are great chances to save money and lower risk.

For instance, both your sales and operations teams have paid for project management tools. The operations team, on the other hand, uses ClickUp, while the sales team uses Monday.com.

The best thing to do in this situation is to look at what both teams need, compare prices and features, and then choose a single platform for both.

Then you can renegotiate your contract with the seller you want, and since you have more users, you should get a better price.

4. Use price comparison to get better deals.

It’s not all about the bottom line in purchasing management, but it is important to look for ways to get the best price on a buy.

Use price comparisons to help you get a better deal when you’re buying software.

Price comparison gives you an idea of how much other people in your industry charge for a certain product.

When there are a lot of orders, especially at the business level, prices are almost always negotiable. You can use the fact that your SaaS buying tool tells you what other people are actually paying (Vendr does this) as leverage when negotiating the terms of your contract.

5. Pay attention to long-term ties with vendors

Strategic vendors are those who are very important to the day-to-day processes of your business. It would be impossible to keep doing business without them.

This could be shown very well by your sales CRM. You have a lot of choices on the market, but moving would require a major change in how things are run.

Purchasing managers should work on building good relationships with these key suppliers. This helps you understand how they work on the inside and points out any possible risks.

For example, if you find out that they don’t want to support a certain feature that’s important to your processes, you can start making plans to switch vendors early.

6. Use specialised tools to make sure your purchases go well

Procurement management software helps you organise and get the most out of every step of the buying process, from choosing a seller to keeping track of relationships and renewing software.

You can do everything related to purchasing management in one place, and if you choose the right tool, it can save you a lot of money on SaaS costs.

Some important things to look for are:

• Benchmarking prices with a large set of data
• customised help from a group of buying pros
• Notifications of contract renewal
• Spend alerts that overlap
• Automated approvals for work flows
• Reporting screens that can be changed