As a small or medium enterprise, making your resources go as far as possible counts and procurement plays an integral part in this. In this blog we review why robust procurement is so crucial for SMEs.
Procurement creates consistency and transparency as the business grows
A good procurement strategy that addresses contract management, supplier selection and supplier management can deliver consistency and transparency as the business grows. In the longer term, it will be easier to document operations in these aspects of procurement and follow them. The company will have more control over the process and be able to ensure consistent quality and accountability from its suppliers.
Procurement saves you time and money
One of the aims of procurement is to achieve efficiency in the procurement process so that the business can place orders on time and receive the goods or services it needs on time. Procurement, especially when a process is automated, can spare employees admin-heavy tasks and allow them to concentrate on more productive tasks that foster profitability.
Procurement encourages you to review the supply chain and explore alternative suppliers
Procurement encourages you to monitor and review the performance of suppliers and, in the event of a market disruption, to explore alternative suppliers. You can mitigate the risk of a supplier letting you down and of the knock-on risk of failing your own customers or clients who are depending on you for a good or service.
Procurement can reduce your capital requirements
How much money do you need to achieve your business goals? Cost reduction is a significant part of procurement, and a good procurement strategy can help you reduce your capital requirements.
Procurement can also free up working capital and preserve liquidity by creating consistent payment terms and reducing errors that may affect supplier relationships. Additionally, procurement entails monitoring supplier performance, which you can use to negotiate better payment terms. The wrong payment terms could see you pay too early, which isn’t good news for your working capital.
Procurement protects your profit margins
The lower you can keep the cost of purchases and still receive the same quality, the better. A significant part of procurement involves negotiating favourable contract terms and conditions with suppliers. Another is tracking metrics to ensure the procurement strategy is effective. Procurement helps you protect your profit margins by keeping your costs as low as possible and allowing your business to be profitable in the short and long term.
Procurement helps SMEs to stop adverse events before they occur
Some businesses only introduce a more professional approach to procurement after a negative company event has occurred or if something external has affected the business. They may only do it when they reach a certain level of turnover or have achieved a certain number of contracts (and are struggling to procure everything they need). A good procurement plan enables SMEs to put in place the proper procedures to stop negative situations from happening before they even materialise.
Procurement makes spending more visible
Procurement can help to achieve spend visibility. Not all employees may know the budgets and whether it’s possible to make a spend when invoices come through. No employee wants to guess and then worry about facing the consequences of being responsible for an overspend. A more visible process empowers them to spend correctly and within budgets.
We’re experienced procurement consultants who can help you if you’re an SME who would like to enjoy the benefits a solid procurement strategy and process can afford you. Contact us to discuss our SME Procurement services.