Before you begin any business, procurement should have its place as one of your priorities. Procurement management ensures that each product or service you will be creating is properly acquired and efficiently purchased. Oftentimes, this process can be difficult, as it involves communicating with various vendors and running a span of responsibilities. Procurement processes involve tedious workloads, such as compliance checks, payment channels, and logistics systems. To make matters more understandable, here are the common procurement mistakes made by businesses and how you can go through them more effectively.
1. Duplicates and Excess
OpenEnvoy conducted a study that found a significant number of businesses risk millions to procurement duplicates and excess. The study concluded that 8.5% of businesses’ invoices had received duplicates due to faulty procurement processes. OpenEnvoy identified worth of over $42 million in duplicate billings for procurement excess. Without a thorough look through the procurement process, you could cost your company more than what you make in profit. When this happens, a bulk of time and effort gets lost in translation. These inefficiencies negatively impact your business, especially in the long run.
Here’s how you can fix this challenge…
You can avoid experiencing duplicate invoices and supply errors by using a procurement platform. With technologies dominating different industries, you can better cope with the challenges of procurement. Platforms these days make it easier for businesses like yours to work and conduct business transactions securely and more efficiently. In turn, you can lessen product costs and labor time.
Some platforms, such as Shoppable, for example, offer business-to-business procurement through its marketplace. You can set up shop within the platform and conduct your B2B transactions conveniently. Secure your invoices and manage your orders without worrying about experiencing duplicate payments or acquiring excess purchases.
2. Poor Supplier Relationships
Some businesses have middlemen they work with to acquire goods and services. While this isn’t entirely a negative trait for a business, it consumes more time and money than you can bargain for. One of the mistakes businesses make is acquiring services for procurement from third-party vendors. This makes prices higher than their wholesale value, and it takes more time for ordered products or services to arrive when they’re needed. Due to this series of indirect product and service acquisitions, businesses fall to the losing end.
Here’s how you can fix this challenge…
Building relationships with suppliers is essential for the success of a business. Understanding the dynamics of supplier relationships is vital to ensure a smooth-flowing procurement process. With good communication, you can also conduct negotiations with suppliers easily. Working with direct suppliers can lessen your expenditures and expand your business capability. With this, a streamlined process of business-to-business transactions can be established.
3. Lacking Innovation Opportunities
Some businesses stick with the traditional scheme of procurement. While there’s nothing wrong with this process, it may still take more time for your business to acquire the products and services you need. Part of the procurement process is acquiring the needs a company requires to cope with ongoing economic and technological advances. Some of the things that companies often miss out on are the exploration of new products or services that they can offer. These items or services can be in the form of promotions or products that can be used to amplify the brand’s image.
Here’s how you can fix this challenge…
One of the ways you can address this challenge is by conducting an audit of your current supply chain management. With countless happenings going on around in your business, sometimes companies forget to look at their businesses from a bird’s eye view. Doing so can eliminate the unnecessary expenditures a business has and can be replaced with new products or services that will aid in growing your business. This is accomplished by connecting with your ongoing suppliers or communicating with new suppliers that can provide the materials or services your business needs.
4. Neglecting Technical Compliances
Businesses are often focused on raising their numbers. Good numbers are important for all businesses; however, it isn’t the last straw of priority. Working on papers such as invoices and compliance conditions is integral to making a business function. Without these documents, you might be looking at a hefty fine for non-compliance. Both suppliers and businesses are required to provide these documents. Doing so can require more attention from business owners, as there must be a dedicated team to work on these technical matters.
Here’s how you can fix this challenge…
When working on technical compliance papers and taxation, your business needs a dedicated team to work on these documents. While you can hire a pool of people for this area of expertise, you can also work on these challenges through a platform that can help you. Some of the perks you can get when using a procurement platform are the centralized system that allows you to acquire and sell products and services while working on these technical documents. In line with this, you can patch your numbers up easier in your after-sales process. There’ll be less hassle thinking about the documents you haven’t filed yet and the compliances you would need to work on for procurement. This way, you can organize your documents and receive the compliances you need to fulfill your procurement process.
5. Fraudulent Transactions
We know how difficult it is to acquire goods and services from an authentic and authorized source. Some businesses online that sell on major marketplaces are not legally registered companies. Others who sell on these platforms are groups that sell counterfeit goods or substandard items, and it pays to be cautious towards these brands. According to the Association of Certified Fraud Examiners (ACFE), $3.6 billion are lost to fraudulent transactions each year globally. In Asia alone, there is a whopping $500,000 loss to online brands that sell counterfeit and inauthentic goods and services. Fraudulent transactions can cost companies as much as 5% of their revenue.
Here’s how you can fix this challenge…
Be vigilant against counterfeit and fraudulent transactions. Receiving multiple invoices for purchase orders or acquiring goods above market price may be a sign to evaluate your current source. Notice that something is wrong when you pay more than what you originally agreed. Verify each payment and ensure that each invoice you receive is valid. Before making any payment for your corporate orders, you must also review which products or services you receive. Generally, it would be easier if you could use a platform to work on these matters since procurement platforms have a way to spot fraudulent transactions more than regular employees can. Security and profit are interconnected, and procurement platforms can guide you through each purchase without flaw.
6. Not Having an Agreed KPI
Key Performance Indicators (KPIs) are vital to creating the best practice for procurement. Not agreeing on a key performance indicator for your procurement process would mean compromising the outcome of your future products or services. Many experts in procurement still miss out on this area of the process. Factors such as variation, delivery, and percent reduction on wholesale units are not readily available unless agreed upon. While this can be tricky, especially for businesses that are just starting out, it is important to note these specifics with suppliers. You need to have an agreed after-sales arrangement also.
Here’s how you can fix this challenge…
Agree on your key performance indicators with your suppliers through each transaction. With this in mind, you can ensure a regular supply review for your supply chain management. Establishing your goals with your suppliers can aid in creating a sound balance among cost, delivery speed, customer value, and quality of items purchased. Plus, it pays to look at the details. Letting your suppliers know about what you want in the specifics will lessen mistakes and wrong orders once your purchased products or services are delivered to your business.
The best way to avoid falling into any of these common procurement pitfalls is to educate yourself on how these mistakes happen. Following the tips and advice in this article can guide you to ensure the best contracts for your business. Since procurement is a challenging but essential task, it is necessary to address its challenges as quickly as possible. It’s akin to a domino effect where your business’ regulations and requirements also involve your vendors’ legalities and permissions. In other words, identifying your weak points in procurement would help you in later years as your business progress.
Making it a priority to get your procurement operation up and running will be one of the best decisions you can make. Procurement poses many challenges, but it remains a vital part of your business’ success. Overall, it is crucial to consider the technologies that aid in helping procurement processes run more efficiently. These include platforms like Shoppable. Such systems will make business strategies easier to follow and more connected with your business-to-business transactions on a daily basis. With a working platform that centralizes what you need in procurement, you can automatically optimize results.
