Keep Track of Purchase Orders
This is where the trusted purchase order (PO) comes into play. Once you’ve agreed on a price with a vendor, raising a PO (i.e. a formal request to a supplier to deliver materials at an agreed price and terms) will help you stay on top of your purchases when delivered and invoiced. Cross check items that arrive with your PO, and again when the invoice arrives. This is the time to spot check quality and quantity.
Negotiate Contracts Discounts
If you are making repeat purchases from a supplier, use a contract instead of a PO. You may be able to negotiate quantity discounts or simply streamline the process of ordering recurring items. However, you’ll still be invoiced on a monthly basis.
Keep an Eye on Market Fluctuations
It’s likely that market prices for purchases will fluctuate. But what should you do if the price keeps going up? It may seem logical to buy in bulk before the price increases, but instead consider buying smaller quantities more often and adjust what you charge your customer accordingly rather than holding a large quantity of inventory. Then keep buying small quantities until prices go down.
Establish a Basis for Vendor Selection, Beyond Price
Don’t just compare prices among a short list of vendors, be sure to dig deeper before you place an order. Look at their credit and payment terms. What about their reputation?
Likewise, don’t throw all of your eggs in one basket. It’s very important to have at least one supplier “in reserve” who you can turn to if your preferred supplier lets you down. Having a few suppliers on your books will also put more pressure on your primary vendor to add value (i.e. discounts or better terms). Furthermore, working with several suppliers also gives you the opportunity to build good business credit.
Know When it’s Time to Hire Help
If your company’s purchasing process has become too complex or it’s too much for you or team to handle, it may be time to hire a dedicated purchasing manager.
Where to Find Specialist Help
If you can’t afford to hire a specialist, you can call on the services of SCORE – a government-sponsored network of small business mentors who specialize in helping businesses with business functions from sales and marketing to operations and finance. Alternatively, organizations such as the American Purchasing Society also offers consulting services to members in need of assistance with their purchasing processes.
Fundbox is a technology company disrupting the small business payments market. Fundbox is helping SMBs, freelancers and home offices grow by managing their cash flow better and by overcoming short term cash flow gaps. What practices have you put in place to streamline your small business purchasing process? Share with us your feedback on our Facebook or Twitter pages.
© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.