How to improve your procurement spending

One of your biggest areas of business expenditure will be buying the goods and services that are needed for the company to operate. Whether these are raw materials, wholesale goods or cloud services, you need someone to be in control of this procurement process. This article outlines 5 key ways you can improve your procurement spending.

Managing your procurement spending is a vital part of keeping the business cost-effective and competitive in the market. If you’re overspending on materials, or paying over the odds to your delivery partner, this can start to have a significant impact on your bottom line.

How, then, do you get on top of this procurement spending and start becoming more efficient?

5 key ways to enhance your procurement spending

Managing cashflow is all about balancing out your cash inflows against your cash outflows. If your procurement costs are high, it will be very difficult to maintain a positive cash position, so reducing your costs and agreeing better terms is all part of the procurement process.

In short, the less cash that’s burnt up in procurement costs, the better the company’s overall financial position will be. So, how do you go about reducing these costs?

Here are 5 key ideas to focus on:

Reduce your base cost per item

When you’re buying in goods, one of the most important costs to consider is your basic cost per unit. This price is probably the most difficult cost to alter, but there are ways to reduce it. Get quotes from a variety of suppliers and look for the supplier that offers the best mix of value, quality and reliability, at an economical price. Negotiating with competing suppliers can help to knock the price down further, helping you cut that initial base cost and reduce your everyday spending.

Cut your logistics and delivery costs

When dealing with physical goods, these items will need to be transported to your premises and/or delivered to your end customers. These transport costs are unavoidable, but can be reduced as part of the procurement process. Look for well-priced carriers and logistics providers and see if their base prices can be negotiated down. Ask about discounts for faster payment, or options for joining a preferred customer program to help reduce prices. If you can offer a long-term relationship with the carrier, this can result in greater trust and openness over time, and more potential for negotiating price reductions.

Nurture the best supplier relationships

The foundation for good procurement management is building solid relationships with your suppliers. 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. When renegotiating prices to cut costs, this will be far easier to do with solid foundations supporting your business relationship.

Reduce tax and duty costs

Depending on which goods and services you’re selling, 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.

Using tech to get in control of procurement

In the modern digital world, there are plenty of cloud-based procurement solutions to help enhance the management of your processes. Having all your procurement information in one place, accessible 24/7 in the cloud, has huge advantages. You can streamline your internal processes, manage risk more effectively and regularly check your spending against budgets, cashflow and expected expenditure. Where there are big variances, or instances of overspending, you can quickly take action to reduce the problem – by putting caps on spending, or switching to new suppliers that offer a more cost-effective option.

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 about your current procurement issues to see where we can lend a hand.

Book a Complimentary 1 Hour Consult

What our clients say

It’s not so big that you feel like just another number, but it’s also big enough that they can cover everything I need.  I feel comfortable with the fact that as my business grows, DFK OGC will be able to handle the demands that come with it.

Lee Chang Woo

We have been dealing with the team at DFKOGC since last 10 years and we have always found them to be very professional and supportive to all our accounting needs.They do have full range of professionals available in the team to cater for all the accounting related Services and very responsive to all the client requirements.

Munish Singla

Brilliant team. Extremely helpful and professional business attitude.

Mehernosh Kotwal

Extremely professional and astute business advisors. Our businesses has benefitted and elevated to new horizons with DFK OGC by our side. Even when going gets challenging, they are open to seek subject matter experts. Anit Patel and his entire team are great highly recommended.

Sanjai Bagia

Very efficient and has a personal touch. If you have questions, they respond in a timely manner and even visits you to explain things face to face.

Marlo Camacho

DFK have supported us for many years and the service has been great across various partners.

MAHA Australia & New Zealand