How to improve your procurement spending

One of the biggest areas of business expenditure is buying the goods and services your company needs to operate. Whether these are raw materials, wholesale goods or cloud services, you need someone to be managing this process to keep your business cost-effective and competitive in the market. If you’re overspending on materials, or overpaying your delivery partner, this can start to have a significant impact on your bottom line.

If your procurement costs are high, it will be difficult to maintain a positive cash position, so reducing your costs and negotiating better terms is all part of the procurement process. How do you go about reducing your costs?

Here are 5 key ideas to focus on:

  1. Reduce your base cost per item – what is your basic cost per unit. This price can be difficult to alter, but it can be reduced. Obtaining quotes from a range of suppliers and look for a supplier that offers the best mix of value, quality and reliability, at an economical price. Negotiating with competing suppliers can help reduce your costs further, which helps to cut that initial base cost.
  2. Cut your logistics and delivery costs – transport costs are unavoidable, but can be reduced. Shop around and see if a competing carrier/logistics provider can reduce your overall costs. Enquire about discounts for faster payment or if they have a loyalty programme.
  3. Nurture the best supplier relationships –building solid relationships with your suppliers is important. 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. This will make it easier to renegotiate prices in the future.
  4. Reduce tax and duty costs – depending on which goods and services you’re selling, if dealing with overseas markets, 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 ensures that you’re paying the correct duty on all your imports and exports.
  5. Using tech to get in control of procurement – investigate some of the many cloud-based procurement management solutions. Being able to access your procurement information in one place, from anywhere, has huge advantages. It also enables you to streamline internal processes, manage risk more effectively and regularly check your spending against budgets, cashflow and expected expenditure. You’ll know about any variances quickly and be able to take action to reduce the problem.

Talk to us about your procurement management

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

Getting in control of your budgets, expenditure and overall spend management is a big part of the procurement process, and an area where we can help guide you in the right direction.

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